Responsible business in an era of disruption and uncertainty.
TrustWorks enables business and investors to engage responsibly in conflict-affected areas, a topic currently in the spot-light due to increasingly volatile markets and increasing levels of violence conflict. To what extent is this a “new” issue for businesses?
The topic is certainly not new but it has been gaining increasing visibility and, therefore, traction in legal, regulatory and normative spheres over the past decade or so. Most notably in recent years we have seen the emergence of the concept of ‘heightened human rights due diligence’ (hHRDD). Rather than being a ‘new’ area of work, hHRDD expands upon core concepts that are anchored in the UN Guiding Principles on Business and Human Rights, and combines them with established practices from the field of ‘conflict-sensitivity’.
Notably, the UNGPs articulated the notion of proportionality i.e. due diligence practices should be proportional to the risks that companies face; since risks are higher in conflict-affected and high-risk areas are higher, the risk mitigation measures used should also be “higher”. Conflict-sensitivity, meanwhile, is considered best practice among many humanitarian and development actors operating in conflict settings. The approach has been adapted to private sector operations, particularly within the extractive industries. At the heart of the concept of conflict-sensitivity is the practice of conflict analysis, and ensuring that responsible business practices are grounded in an in-depth understanding of the interaction effects between the conflict and specific operational practices.
Over the last few years the practice of proportionality and conflict analysis have emerged as the cornerstones of responsible business in conflict-affected and high-risks areas. In 2020, the UN Working Group on business and human rights expanded on the idea of proportionality by clarifying what hHRDD means, noting that businesses have a responsibility to understand and address their impacts on both human rights and on the conflict itself. Then in 2022, UNDP published a Guidance Note on hHRDD for companies, in 2023 the OECD updated their Guidelines for Multinational Enterprises to reflect the notion of “enhanced due diligence” in CAHRAs, and in 2024 the EU Corporate Sustainability Due Diligence Directive (EU-CSDDD) was adopted with clear expectations for companies in CAHRAs.
The rise in violent conflict and increasing instability makes the need for such legislation ever more pressing. The EU-CSDDD outlines specific expectations for companies with business activities in CAHRAs because in such contexts the risks of doing harm are even greater; indeed, in these contexts there are risks that companies may inadvertently cause, contribute or be linked to both serious violations of human rights and to violent conflict. This creates important risks for affected stakeholders and companies alike, risks that can be mitigated through the practice of ‘heightened human rights due diligence’, which involves identifying risks and impacts on both human rights and on conflict, and elaborating appropriate mitigation measures to address these risks.
Irrespective of the EU-CSDDD and the wealth of related norms and standards, operating responsibly and effectively in conflict-affected areas is, quite simply, good for business. These approaches not only minimise legal, operational and security risks (and costs), they enable companies to build sustainable relationships with a wide range of local and national counterparts in a manner that enables businesses to flourish and simultaneously contribute to a more stable operating environment. Regardless of whether a company is operating in, sourcing from or supplying to conflict-affected areas there are opportunities to both minimise negative impacts on conflict and violence and, under the right conditions, to also contribute to peace and stability. In our opinion and given the current context, these are opportunities worth seizing.
From your perspective, why is it so challenging to do business in conflict-affected and high-risk areas? What are the types of risks companies face and what role do companies have in addressing systemic inequality, including gender inequality?
Due to the specific characteristics of CAHRAs (poor governance, failing law and order and high security stakes), company activities are likely to have severe adverse impacts on human rights and conflict. Indeed, business activities in CAHRAs are never neutral: they are either contributing to conflict and fragility at one end of the spectrum or to peace and stability on the other.
From this perspective, it is evident that corporate practices that do not take proper care of their human rights impacts are likely to contribute to exacerbating inequalities. Looking specifically at gender inequality for instance, ‘human rights agnostic’ corporate practices are prone to blindly hire only male employees, or under-pay their female workforce, or ignore sexual harassment at the workplace, etc, whether in the context of their own operations or in their supply chains.
When transposed into conflict-affected areas, unchecked corporate practices can trigger additional impacts. A company that is paying insufficient attention to conflict dynamics may – through its business activities – inadvertently empower one group over another; it may fuel conflict through the provision of goods or services to one group to the detriment of another; it may use land or water resources that are already contested; it may seek to protect operations or supply chains by engaging security forces that violate IHL; it may finance armed groups responsible for serious violations of human rights, financing which perpetuates the conflict, etc. These are all issues that are intricately linked with issues of inequality, because inequality – whether related to gender, ethnicity, religion, class, etc. – is often at the very heart of violent conflict.
On the other side, companies that are able to operate according to the norms and practices of responsible business in conflict-affected areas will be able to flourish even in the most challenging of contexts, while simultaneously having positive impacts on some of the world’s most pressing challenges, including inequality.
Should companies leave or avoid investing in conflict-affected and high-risk areas? You mention that companies can contribute to peace and stability “under the right conditions”. Can you say more?
It is our firm belief that companies have a truly critical role to play in conflict-affected and high-risk areas. If responsible companies – and, indeed, investors – were to leave conflict-affected and high-risk areas this would have devastating impact on lives and livelihoods, as well as on peace and security; at the same time, if responsible companies with business activities in these areas were to consistently and meaningfully implement the relevant norms and standards, it would contribute to a substantive reduction in levels of violence and armed conflict, with evident implications for inequality.
We believe there are only very limited contexts where it is a priori not possible to invest responsibly in conflict-affected areas. Generally speaking, we advocate for “responsible entry” and “responsible remain”, and only ever for “responsible exit” in the rare cases where it is simply not possible to continue business activities while respecting International Humanitarian Law and the principles/practices of hHRDD.
It is certainly possible and desirable for companies to maximise their positive impacts on lives and livelihoods in conflict-affected and high-risk areas. They can do so through the provision of rights-respecting jobs, living wages, the provision of essential goods and services, etc. Contributions to peace and stability are possible but more challenging and entirely context-dependent i.e. what may contribute to peace and stability in one context, may actually drive conflict in another. Companies can often contribute to peace and stability through the manner in which jobs, services, goods and intangible benefits (prestige, power, etc) are distributed, provided it is done so in a manner that is “conflict-sensitive”, which again, is entirely context-dependent.
Consequently, it is less about what companies do and much more about how they do so when it comes to business activities in conflict-affected areas. An in-depth conflict analysis in the areas where business activities occur will provide insights into both how companies can minimise their negative impacts, as well as how they can maximise their positives ones, including on peace and stability when possible.
What role do you believe multi-stakeholder initiatives and action platforms, such as the WJI 2030, can play in supporting companies on issues related to responsible business in conflict-affected areas?
Multi-stakeholder initiatives and action platforms can play a very important role with regards to the role of companies in conflict-affected and high-risk areas in particular.
First, they can help raise the profile of this pressing issue, and of the associated normative and legal expectations that companies need to be taking into account.
Second, they can help companies understand what the various expectations and requirements mean concretely for a specific sector of activity, and how the sector can address them in a meaningful manner.
Third, they can provide a safe space to identify common challenges, share experiences, discuss real-life cases and create virtuous synergies amongst companies that may be at different stages in their journey on this pressing and timely issue.
