Doing Business in Authoritarian States: Tackling Dilemmas While Preserving Integrity

A common feature of the cases presented above is that the companies try to tackle dilemmas while preserving their human rights integrity. They present themselves as companies respecting human rights while simultaneously communicating that there are no easy solutions to the human rights problems they face under the circumstances. They struggle with dilemmas where there are no good choices or easy fixes.

This is particularly true for Yara and Telenor, while Hydro is in a somewhat better position since time may be on its side. Investing in measures to better inform the local communities about its operations and helping develop communities in Barcarena may, over time, improve relations and trust.

The complicating authoritarian factors which the two other companies struggled with, i.e., centralised authorities that repress opposition and violate human rights, are not fully present in Brazil. True, environmental human rights defenders are attacked and killed. The country is among the worst in the world regarding the killings of environmental human rights defenders. However, the main failing of the government is a lack of will and/or ability to provide effective protection.²¹⁸ In authoritarian states, the authorities may be ordering the killings.

All three companies experienced difficulties convincing democracy activists, political opposition, local communities, and media that they were serious about human rights and not only after money. At the same time, perhaps paradoxically, the companies were welcome by locals and staff, who recognized that they represent principled approaches to human rights and the environment. The governments tolerated them because they represented investments and know-how.

There may be some ways to strengthen the position of struggling international companies.

International and national guidelines or laws requesting or obliging the companies to respect human rights, and conduct due diligence, contain little concrete guidance on manoeuvring in authoritarian playing fields. The companies must therefore strive to learn from experience, each other, and stakeholder dialogues. This learning can never end, however, as new situations that differ significantly from previous ones require fresh thinking. There will never be a blueprint which can be implemented anywhere.

There is also a need for human rights and democracy activists to learn more about the roles companies can play in authoritarian states. There may be mistrust towards big international companies based on ideology, reputation, and other factors. But there may also be misunderstandings about the role of business companies in respecting human rights and expectations that they in addition should protect and even fulfil human rights. Companies are neither states nor human rights activists but can nevertheless play essential roles within their sphere of influence. Employees and communities affected by their operations come first, but good examples of treating employees and communities well can spread and have broader effects on society.

States have much broader human rights obligations than companies. They can support international companies dealing with dilemmas. One idea would be for the US, the EU, Norway, and other like-minded states to design targeted sanctions (entry denial, freezing of assets, forfeiture of financial services, etc.) against businesspersons responsible for human rights violations in states where international companies are struggling to find a moral way to conduct their business. Human rights sanctions, or Magnitsky sanctions as they are called, can be designed to address the companies’ human rights problems. For instance, a business leader, who actively supports the repressive regime and puts pressure on staff in companies in the supply chain of an international company, can be sanctioned. The sanctions may weaken his or her negative influence as well as business opportunities.²¹⁹

Well-designed targeted sanctions can work in concert with the efforts of international non-governmental organisations, domestic activists, and the numerous tools at the disposal of democratic governments wishing to influence a repressive and violent situation in authoritarian states. Business companies, including Norwegian ones, who are invested in authoritarian states may play essential roles along with such actors within their spheres of influence.

While withdrawing may send a strong moral message from business companies, leaving a challenging situation may not always be the best option if the goal is to strengthen human rights. Company measures to ensure respect for human rights throughout its sphere of influence accompanied by targeted sanctions by democratic states against those responsible for the same human rights violations the company aims to address (imprisonments, torture, denial of fundamental freedoms) may prove more effective than leaving.

Another problem with leaving is that some high-demand natural resources tend to be found only or primarily in authoritarian states. A Western company leaving may mean that a non-Western company without a principled approach to human rights will take over, as is the case in Myanmar after Telenor withdrew. However, in some circumstances, withdrawing is necessary to avoid compromising the company’s principles and adherence to international norms, particularly if the company has very little leverage.

After reading about Yara and Telenor in this report, a possible conclusion could be that their biggest mistake was to engage in Belarus and Myanmar in the first place. Hydro was a bit luckier in Brazil. There are, however, strong reasons to resist such conclusions. Not because trade and business relations automatically, over time, lead to democratisation in authoritarian states. But because international companies that respect human rights in words and deeds can be a force for good.

When entering the authoritarian playing field, companies should step up support for human rights within their spheres of influence and publicly state their values and principles. When they struggle to uphold their human rights integrity due to government pressure and persecution, democratic states should support them. They can act bilaterally and in multilateral human rights forums. They can introduce targeted sanctions, as in Belarus and Myanmar.

In the end, the companies may still have to leave. But they may have left a human rights legacy that remains important for many individuals and can become a positive factor when better days come.