Annual Report 2022

On 1 July 2022, a pioneer law on business and human rights entered into force in Norway, the Transparency Act, making human rights due diligence and transparency concerning production lines mandatory. However, even for resourceful Norwegian companies like Yara, Hydro, and Telenor, aiming at abiding by human rights is sometimes hard, resulting in difficult dilemmas.

Based on extensive engagement with Yara on its business relationships in Belarus, where it was a big buyer of potash from the state-owned company Belaruskali for its fertilizer production, the NHC presented a range of viewpoints and arguments on whether Yara should end relations due to the disastrous human rights situation in the country. In newspaper articles and public debates, the NHC aimed at nuancing debates, pointing to the pros-et-cons of both staying and leaving.

Yara managed to improve the work conditions of employees of its business partner in Belarus and confronted the Lukashenko regime’s appalling human rights practices publicly. At the same time however, it did remain a source of finance for the repressive Lukashenko regime.

In an effort to understand and formulate the intricacies of Yara’s position related to its Belarus engagement, the NHC started a comprehensive project to interview and discuss the inherent dilemmas of operating in authoritarian states with representatives of Yara, Hydro (related to Brazil), and Telenor (related to Myanmar).

The resulting report was published in September 2022 and presented at a Civita breakfast event. The report outlines dilemmas facing international companies operating in authoritarian states or states with weak institutions and low levels of popular trust. They may react to such dilemmas in different ways, either by withdrawing or staying while making efforts to respect human rights as far as possible.

If they choose to stay, there is a range of risks such as negative regime reactions, protests from democracy activists who think the company should either signal disapproval of the regime’s dismal human rights records by leaving or working harder to promote human rights, or dissatisfied staff that either thinks the company is doing too much or too little for human rights.

The report describes the current international consensus on the responsibilities of business companies to respect human rights, as well as the main tenants of national laws on business and human rights, including the Norwegian Transparency Act. While business enterprises also have to respect human rights, states have much broader responsibilities. Under international law, they must respect, protect, and fulfil human rights within their borders.

The challenge is that while companies based in democratic countries increasingly make efforts to oversee their operations and supply chains to ensure respect for human rights, recent trends when it comes to states’ compliance with their human rights obligations, show the opposite pattern. Respect for human rights is on the decline, while authoritarian forms of government are getting more traction.

Running business operations in authoritarian states creates a range of dilemmas for companies that wish to respect human rights. Even companies with the best of intentions and policies may find themselves in situations where they face nothing but difficult choices.

According to the report, this does not mean that companies must categorically stay away from such states. Instead, it argues that they should step up their support for human rights within their spheres of influence and publicly state their values and principles. Companies struggling to be faithful to their values due to government pressure and persecution need to be supported by democratic states, which i.a. should introduce targeted sanctions against corrupt and brutal political leaders and their enablers who trample on human rights. In designing sanctions, the role of international companies should be considered.

Instead of companies leaving, they could remain and search for ways to improve the safety and rights of workers and support communities affected by their operations. In some situations, however, upholding respect for human rights can become so difficult that companies must leave to avoid compromising their values. However, this should only happen after careful consideration of the costs and benefits of the alternatives.

Should they leave or should they stay? According to the report, there were no easy answers. But it points to better ways of doing both.