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Corporate Responsibility in Countries in Conflict

With businesses constantly expanding their operations to new countries, many are likely to find themselves based in high-risk countries or countries in conflict, either because their activities require them to operate in the region, or because they are caught there when the conflict breaks out. Many regions of the world continue to be in turmoil, with peace treaties like the Abram Accords being signed as recently as December 2020. Issues in countries in conflict are unique, and may involve aspects of human rights abuses, exploitation, poor distribution of resources, ethnic violence, corruption, etc. The question then arises, what obligations do these companies owe under corporate social responsibility norms?

 

Interactions Between Businesses and their Environment

Through their CSR activities, businesses in conflict zones are in a position to improve social conditions in their host countries through community involvement, employment, economic incentives, track-two diplomacy, etc. However, it is possible for business interactions to have negative consequences. Financing of natural resource extraction in Myanmar by private Chinese investors has long funded armed groups in Myanmar. Chinese State Owned Enterprises have also been involved in establishing the  China-Myanmar Economic Corridor as part of China’s Belt and Road Initiative. The corridor fuels further conflict between ethnic armed groups and the military, which, in February, staged a coup led by a man who has received international condemnation and sanctions for his alleged role in the military’s attacks on ethnic minorities.

Such consequences are not new. Investment in the Democratic Republic of the Congo and neighbouring countries that were rich in natural resources took place under the assumption that the minerals trade would alleviate the economy. Instead, it facilitated the funding of armed wars and corrupt government activities. Similarly, the purchasing of diamonds in rebel controlled regions financed a brutal civil war in Angola, and illegal trade in diamonds, conflict commodities, and drugs financed the civil war in Sierra Leone. Unintended negative consequences are also likely in these circumstances. For instance, there have been cases where companies have hired security services to protect staff and equipment, which have inadvertently caused injury to local protesting communities, or even resulted in the death of civilians. At a macro level, businesses could be supporting repressive governments through taxes and other payments. What becomes apparent in these instances is how such developments also affect State policies outside the host country.

To curb businesses that directly or indirectly funded conflict or utilized force labour, the US enacted the Dodd Frank Act. These regulations not only affected US businesses dealing with oil, gas, and minerals, but also suppliers in other countries as a result of strict disclosure laws that also applied to supply chains. The EU adopted a similar Accounting Directive that requires companies in the oil, gas, minerals, and forestry sectors to disclose payments above certain thresholds in countries where they have operations. The EU has also passed the Conflict Minerals Regulation, the requirements for which began to apply to importers of covered minerals on 1st January 2021. Similar domestic laws exist around the world that seek to govern business investments and activities overseas, especially in countries that may be deemed high risk.

 

Obligations of Businesses

CSR obligations arise primarily from international law and are facilitated and implemented by domestic laws enacted by States.  The UN’s Guiding Principles on Business and Human Rights, released in 2011, operationalizes the UN’s ‘Protect, Respect, and Remedy’ Framework, and was the first instance of clarity provided with regard to the scope of corporate social responsibility towards human rights. The Guiding Principles recognize that business activities in these conflict-affected areas or high-risk areas could also increase the likelihood of them fueling conflict or contributing to human rights violations, in pursuance of which, it specifies that businesses must not be involved in such rights abuses. In addition, the UN Global Compact principles provide a starting point for companies’ CSR and sustainability activities. The ten Global Compact principles deal with obligations relating to human rights, labour, environment, and anti-corruption. Similar risks are also highlighted in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas  and its Supplement on Gold, and the UN Global Compact Guidance on Responsible Business in Conflict-Affected and High Risk Areas.

The OECD’s Guidelines for Multinational Enterprises are among the most widely recognized applicable standards, setting out the parameters of responsible corporate behaviour and  providing guidance on dispute resolution in instances where corporate activities clash with the interests of communities. However, these guidelines do not have provisions specific to the unique circumstances that prevail in States in conflict.

Other more industry specific initiatives covering aspects of business in fragile States and weak governance zones include the Kimberly Process, which aims to remove conflict diamonds from the global supply chain, special initiatives on security providers (the Montreux Document on Pertinent International Legal Obligations and Good Practices for States related to Operations of Private Military and Security Companies during Armed Conflict, the International Code of Conduct for Private Security Service Providers, the Voluntary Principles on Security and Human Rights), and special initiatives on transparency, such as the Extractive Industries Transparency Initiative.

 

Limitations to Corporate Responsibility

Awareness of the environment in which a company operates, and acknowledging, assessing, and addressing the impact of its interactions and interventions is the primary premise upon which the framework of guidelines and tools functions.

The voluntary nature of the guidances and initiatives makes success dependent on participation and commitment on the part of companies and States towards the shared goal of ethical business practices. The most important aspect of corporate responsibility in conflict stricken regions remains conflict sensitivity. Furthermore, while basic compliance with international human rights law and humanitarian law is expected, along with due diligence, it remains unclear what can be expected of companies beyond such requirements.