Proposing Benchmarks for Corporations in Burma

Published by MAC on 2012-09-18
Source: US Campaign for Burma

Are they sufficient - or even appropriate?

Civil Society Organizations and Shareholders Addressing Corporations in Burma

From: Simon Billenness, US Campaign for Burma

Re: Guidelines for Corporations Operating in Burma (3rd Draft)

10 September 2012

Background

Following the crackdown on the 1988 pro-democracy demonstrations in Burma, the Burmese military regime opened up parts of the economy to foreign investment as a means of obtaining the hard currency it required to stay in power. By the mid-1990s, the military regime succeeded in attracting investment in resource extraction, tourism infrastructure, and light manufacturing, particularly apparel. The Burmese democracy highlighted the support that this investment provided the military and tacitly supported corporate campaigns and economic sanctions designed to press companies to withdraw from Burma.

The corporate campaigns included successful consumer boycotts against PepsiCo and brands (such as Eddie Bauer, Macy's, and Children's Place) sourcing Burmese-made apparel. Until such laws were struck down by the US Supreme Court in 2000, Massachusetts and over 20 US cities restricted state or municipal purchasing contracts with companies that did business in Burma.

Starting in 1993, the campaigns also included significant shareholder pressure with the filing of shareholder resolutions, primarily with oil companies. Since then, shareholder pressure by union pension funds, social investment firms, and religious investors has continued each year with a resolution on Burma filed at Chevron and several shareholder dialogues with companies invested in Burma.

With the enactment of a number of investment and trade sanctions by the U.S. government and the European Union, the need for corporate campaigns dwindled along with the number of corporate targets. However with the lifting of economic sanctions on Burma by Western governments, American and European companies are already lining up to do business again in Burma.

Need For Benchmarks

The purpose of this memo is to outline clearly the benchmarks of disclosure and conduct for corporations in Burma as developed by the human rights and responsible investment community.

These benchmarks are based on our deep research and experience in other countries and regions and our recommendations on how corporations can respect universal human rights in those contexts and regions.

These benchmarks are also informed by input from organizations with experience on the ground inside Burma and, most importantly, affected communities inside Burma. Organizations that have currently input on these benchmarks include Amnesty International, Human Rights Watch, US Campaign for Burma, AFL-CIO, International Trade Union Congress (ITUC), Freedom House, Asia Foundation, Open Society, and the Conflict Risk Network of United to End Genocide.

By developing these benchmarks for corporations, NGOs, shareholders, and affected parties inside Burma will be able in future to better provide input and speak out on a number of recent initiatives around corporate investment in Burma, including:

• U.S. Government reporting guidelines for U.S. companies in Burma and other government regulations
• World Bank/IFC consultation on its Interim Strategy Note and other IFI initiatives in Burma
• Direct NGO, shareholder, affected community engagement of corporations in Burma
• Corporate campaigns by NGOs and affected communities targeting specific corporations in Burma
• Outreach to media regarding stories on corporations and human rights in Burma

Benchmarks for Corporations in Burma

As a country that has only made its first steps away from the arbitrary authority of military rule, Burma lacks at present a clear "rule of law." Establishment of a core legal framework and institutions would benefit all key players in Burma: people, government, communities, and corporations (both local and foreign.)

Given the lack of the rule of law in Burma, effective regulation of corporations in Burma is also similarly absent. Lack of a clear rule of law poses considerable legal, operational, and reputational risks for corporations. It is this absence of law governing the behavior of corporations in Burma that also makes it imperative that NGOs, shareholders, and affected parties inside Burma develop a position regarding what companies in Burma should do in order to operate responsibly.

In countries and regions lacking effective rule of law and regulation of business around human rights, one can point to the United Nations Guiding Principles on Business and Human Rights and other company sector-specific documents as a starting point and floor for it positions and recommendations of how corporations can fully respect human rights.

Lack of a clear rule of law poses considerable legal and reputational risks for corporations. Unocal settled a case in U.S. court for an undisclosed multi-million dollar amount that included evidence of the company's complicity in the Burmese army's use of forced labor and forcible relocation of people connected with the company's Yadana pipeline. Many foreign corporations have suffered damage to their reputation and brands from connection to human rights abuses and business links to military-connected companies.

This position paper on Burma covers a number of key issues that affect corporate behavior in Burma. This position includes two aspects:

• Performance Recommendations: that require specific action such as adoption and implementation of a policy
• Disclosure Recommendations: that require disclosure of information, preferably publicly

These recommendations are informed by input from organizations, including Amnesty International, Human Rights Watch, US Campaign for Burma, AFL-CIO, International Trade Union Congress (ITUC), Freedom House, Asia Foundation, Open Society, and the Conflict Risk Network of United to End Genocide.

These positions are grouped into a number of key areas, including:

I. Due Diligence

II. Revenue Transparency

III. Security and Human Rights

IV. Labor Rights

V. Community Rights and Relations

VI. Local Business Partners

VII. Freedom of Information

VIII. Public Reporting

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I. Due Diligence

Corporations doing business in Burma need to perform adequate and public due diligence on the impact of their business on human rights. This due diligence will also help corporations to evaluate and manage the risks to their business in Burma.

According to the United Nations Guiding Principles on Business and Human Rights, corporations:

In order to identify, prevent, mitigate and account for how they address their adverse human rights impacts, business enterprises should carry out human rights due diligence. The process should include assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses, and communicating how impacts are addressed.

Performance recommendation

Where appropriate, companies should prepare impact assessment reports on proposed projects in Burma that include impact assessments in the areas of human rights, the environment, gender equality, and poverty. These reports should be prepared according to international standards and be designed to establish baseline data against which to gauge the impact of the corporation's operations over time.

Disclosure recommendation

Public reporting of the company's impact assessment reports on proposed projects in Burma that include impact assessments in the areas of human rights, the environment, gender equality, and poverty.

II. Revenue Transparency

The Burmese regime has traditionally failed to book properly the country's revenues from natural gas sales leaving millions of dollars unaccounted for and likely misappropriated. Under pressure from the International Monetary Fund and foreign governments, the Burmese government is starting to improve the transparency of its accounts. Corporations have a responsibility to be transparent in their own payments to the Burmese government and to publicly call on the Burmese regime to adopt laws and policies requiring revenue transparency.

In addition, in the absence of effective laws and culture to counter corruption, corporations require a rigorous policy and practices to avoid paying bribes and exerting undue influence. With the emergence of organizations, claiming to be NGOs or charities but still with clear connections to the government or private companies, corporate charitable donations also require appropriate disclosure and scrutiny.

Performance recommendation

Adopt - and fully implement in Burma - a policy of revenue transparency with regard to operations in Burma that fully encompasses, but is not limited to, all of the provisions of the revenue transparency rule adopted by the U.S. Securities and Exchange Commission for resource extraction companies trading on U.S. stock exchanges

Adopt - and fully implement in Burma - a policy against corruption that fully encompasses, but is not limited to, the provisions of the U.S. Foreign Corrupt Practices Act and the OECD Guidelines for Multinational Enterprises.

Engage the Burmese authorities, industry, and civil society to promote the importance of transparency in the management of natural resource wealth, and encourage those stakeholders inside Burma to move towards adoption of the Extractive Industries Transparency Initiative (EITI)

Disclosure recommendation

Disclose publicly payments made to the Burmese authorities and NGOs - including but not limited to taxes, fees, royalties, bonuses, social benefits, and charitable donations (both cash and in-kind) - in a manner that meets or exceeds the provisions of the revenue transparency rule adopted by the U.S. Securities and Exchange Commission for resource extraction companies trading on U.S. stock exchanges

III. Security and Human Rights

Corporations have built and are currently constructing extractive operations and transportation pipelines through areas of conflict between the Burmese regime and ethnic minorities, such as the Karen (Yadana and Yetagun pipelines) and the Kachin (Shwe pipeline). These corporations are predominantly - but not limited to - resource extraction companies. Corporations need to adopt a policy and practices to avoid the practice of and complicity in human rights abuses by security forces connected to their operations.

Performance recommendation

Adopt a policy to fully implement and arrange for independent monitoring of the Voluntary Principles on Security and Human Rights with regard to operations in Burma

For private military security contractors (PMSCs), adopt and implement the International Code of Conduct for Private Security Services Providers convened by the Government of Switzerland.

Disclosure recommendation

Report publicly on implementation of the Voluntary Principles on Security and Human Rights including an independent monitoring report

Report publicly on implementation of the International Code of Conduct for Private Security Services Providers including an independent monitoring report

IV. Labor Rights

For most of the period of military rule in Burma, the regime has violated the core labor standards of the International Labor Organization (ILO).

The Burmese regime has an extensive record of using forced labor. Child labor and discrimination against women and ethnic minorities is endemic and widely documented. The regime has only recently begun to recognize the rights of workers to organize and engage in collective bargaining.

The ILO Core Labor Standards comprise:

• Elimination of all forms of forced or compulsory labor
• Effective abolition of child labor
• Equality of opportunity and treatment
• Freedom of association
• Right to collective bargaining

These abuses of human and labor rights create legal risks and liabilities for corporations in Burma. For instance, evidence of forced labor to build infrastructure for the Yadana pipeline was used in a case against the U.S. oil company Unocal, later settled for an undisclosed multi-million dollar amount.

Performance recommendation

Adopt and implement a policy of respecting the ILO Core Labor Standards in the company's own operations and requiring its suppliers to abide by the same standard

Disclosure recommendation

Public reporting on policies and procedures to ensure that the company - and its suppliers - fully respect and implement the ILO Core Labor Standards

V. Community Rights and Relations

In Burma, land is legally owned by the national government giving communities and individuals no right to the land on which they have lived and derived their livelihood often for generations. This lack of a legal individual and community right to land has been exacerbated by the Burmese regime's practice of forcible relocation of communities to make way for the infrastructure and operations of foreign corporations.

Performance recommendation

Adopt a policy of respecting the right of communities to free, prior, and informed consent to corporate operations on the land on which they live and derive their livelihood

Adopt a policy of due diligence around land acquisition that includes research and identification of the traditional users of that land

Adopt a policy of opposing involuntary resettlement and providing adequate and fairly-negotiated compensation to communities for land acquired by the corporation

Adopt a policy of outreach and engagement of a representative cross-section of any affected community, including traditionally marginalized groups such as women, ethnic minorities, and youth

Adopt a policy of facilitating the access of affected communities to the resources required to build their capacity to negotiate with corporations

Adopt a policy of negotiating community benefits and revenue sharing with communities affected by the company's operations

Create an effective community grievance mechanism that includes explicitly recognizing complainants' right to remedy and their option to seek legal recourse, such as making a contractual agreement with communities that provides for legal redress against the corporation in the company's home country

Publicly call for the Burmese government to develop laws and practices to address the issue of land titling

Disclosure recommendation

Report on land acquired above a certain threshold and compensation provided to the communities

Report on the implementation of policies and practices on community relations, including the benefits and revenue sharing provided to communities affected by the company's operations

VI. Local Business Partners

The Burmese regime has long required - or steered - corporations operating in Burma into partnerships with companies owned or controlled by the government, military, or business cronies of the regime. Many of these companies have reported ties to the military, the drug trade, and/or have records of irresponsible and unethical business practices. The U.S. government has targeted a number of these companies and individuals for targeted sanctions and inclusion in its Specially Designated Nationals (SDN) list.

Two key examples of such companies have been the Union of Myanmar Economic Holdings (owned by the army and top military officers) and Myanma Oil and Gas Enterprise (MOGE). Others includes those listed on the U.S. government's Specially Designated Nationals (SDN) list.

Performance recommendation

Adopt a policy that requires the corporation, wherever possible, to seek business partners without connections to the military, drug trade, or questionable human rights practices

Promote responsible and ethical business standards by local companies in Burma

Disclosure recommendation

Public reporting of the company's business partners: both equity partners and non-equity partners, including - but not limited to - licensees and/or distributors

VII. Freedom of Information

Corporations in the information communications technology (ICT) industry have a responsibility to ensure that they do not provide the Burmese government the technology and services that facilitate surveillance and other abuses of human rights.

Performance recommendation

Adopt a policy of protecting the human rights of users rights to freedom of expression and privacy with reference to the Principles of the Global Network Initiative

Disclosure recommendation

Report on implementation of policy regarding the protection of the human rights of users to freedom of expression and privacy

VIII. Reporting

After decades of military repression, media and civil society in Burma is under-developed but growing, albeit from a very low baseline. Government regulation of business is at a similar stage of very early development. As a result, scrutiny and reporting of corporate behavior is rudimentary. To aid in its development, corporations need to provide reports to the public - and their own shareholders - on the challenges of operating in Burma and how the corporation is managing those risks.

Performance recommendation

Adopt a policy of providing information on a regular timeline about its business in Burma - in the categories I. through VII. outlined in this memo - in its existing public reports, such as its annual shareholder report and required regulatory filings where appropriate, and in a stand-alone report specifically on its operations in Burma

Disclosure recommendation

Publicly report on a regular timeline on its business in Burma - in the categories I. through VII. outlined in this memo - in its existing public reports, such as its annual shareholder report and required regulatory filings where appropriate, and in a stand-alone report specifically on its operations in Burma

Resources

Burma Environmental Working Group, "Burma's Environment: People, Problems, Policies," June 2011

http://www.bewg.org/en/pubs/finish/4/34

EarthRights International, "The Burma-China Pipelines: Human Rights Violations, Applicable Law, and Revenue Transparency," March 2011

http://www.earthrights.org/sites/default/files/documents/the-burma-china-pipelines.pdf

United to End Genocide, "Not Open For Business," April 2012

http://endgenocide.org/images/uploads/downloads/burma-not-open-for-business.pdf

Documents Cited

United Nations Guiding Principles on Business and Human Rights - http://www.business-humanrights.org/media/documents/ruggie/ruggie-guiding-principles-21-mar-2011.pdf

Voluntary Principles on Security and Human Rights - http://www.voluntaryprinciples.org/files/voluntary_principles_english.pdf

International Code of Conduct for Private Security Services Providers - http://www.icoc-psp.org/

International Labor Organization: Core Labor Standards Handbook - http://www.ilo.org/manila/info/public/nl/WCMS_126253/lang--en/index.htm

Global Network Initiative: Principles on Freedom of Expression and Privacy - http://globalnetworkinitiative.org/principles/index.php