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Beyond voluntary towards mandatory | Vanisha H. Sukdeo

Thursday, April 27, 2023 @ 9:20 AM | By Vanisha H. Sukdeo

Vanisha H. Sukdeo %>
Vanisha H. Sukdeo
Corporate accountability is increasingly becoming a topic among not just business leaders but the lawyers who act to advise them about the operations of their businesses.

The movement from soft law, comprised of voluntary mechanisms like codes of conduct and certification schemes, towards hard law which indicates legislation and other binding agreements compels corporations to become more socially responsible. Corporate social responsibility (CSR) is used to describe the notion that corporations have obligations to stakeholders beyond just their shareholders.

From the model of CSR promulgated in the 1970s towards to the anti-sweatshop movement in the 1990s the pressure felt on corporations to become more accountable is growing. This can be described as a backlash against globalization in the 1990s and the outsourcing of manufacturing to foreign shores outside Canadian borders and outside Canadian control.

The offspring of CSR include both environmental, social and governance (ESG) and mandatory human rights due diligence (mHRDD) of which both lead to more binding forms of the original incarnation of CSR. ESG is measurable, and we know that what gets measured matters. Mandatory human rights due diligence is also more concrete than the first wave of CSR in that the legislation created in nations like Germany and Norway bind those corporations throughout the world.

A German corporation will be bound by mHRDD obligations codified in German law when it operates all over the world. We see this progress of binding corporations on domestic soil expand to foreign soil.

Looking at mHRDD there are now calls to include environmental protections so that mHRDD would become mandatory human rights and environmental due diligence (mHREDD). Is this necessary or are we piling on too many duties in a sphere that was not intended to carry such weight? Binding corporations through purely corporate law overlooks the power of separate legislation that would focus solely on workers’ rights or environmental protections and inadvertently bind the corporation as a result. There is an Indigenous philosophy that states that current generations do not own land but instead hold land in trust for future generations, known as the “seventh generation principle.” Should corporations also have to think and plan for seven generations in the future?

This actually raises issues surrounding sovereignty of nations in that why should the global north dictate the terms and conditions to the global south? Even when that control is benevolent it can be rife with problems. The key for multinational corporations in the current day is to ensure that there is accountability without interference — a form of regulation that is arm’s length in the best meaning of that phrase. Nation states have to hold accountable their own corporations as those corporations traverse the world. There has always been an interconnection and interdependence between corporations and their home nations from the East India Tea Company to the role of Tim Hortons and the Hudson’s Bay Company as part of the Canadian identity.

To downplay and disregard the power of the corporation and the connections to its home nation is to commit a wrong and only serves to deny the obligations that the home nation truly owes to the broader society that the multinational corporation exists within.    

Looking to the Canadian plans to incorporate mHRDD or mHREDD seems rather unhopeful. The newest bill being tabled in Canada would be akin to the Modern Slavery Act in the U.K. which was enacted in 2015. This bill is too outdated compared to the strides being made by nations like Germany and Norway. Canada needs to keep pace and should focus on bringing mHRDD to Canadian soil and beyond.

Vanisha H. Sukdeo, BA, LL.B., LL.M., Ph.D. is a lawyer and adjunct professor at Osgoode Hall Law School. Her fourth book titled Mandatory Human Rights Due Diligence: From Legal Custom to Lawful Concern was published by LexisNexis in February 2023.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. 

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