Consumer rights

Future perspectives on the challenges of 2022

Growing concerns for human rights around the world underscore the risks for businesses and the need for them to address related challenges. Here are five key developments that may require attention in 2022:

Regulate the distribution of harmful content on social media and tackle threats to privacy in the cloud

Growing frustration over the role of the social media industry in polarizing and spreading lies about elections and public health will bring the European Union closer to enacting new regulations designed to curb the way Meta (formerly Facebook), YouTube, Twitter and other tech companies are working. Prospects for meaningful action have improved in recent months following revelations from Facebook whistleblower Frances Haugen, who leaked thousands of pages of internal documents, sparking intense media coverage and new calls for some sort of regulation. . But as the U.S. Congress examines dozens of bills meant to hold social media platforms accountable, it’s far less clear that U.S. lawmakers will overcome partisan differences – magnified by online vitriol – to pass real reform.

One way Congress could solve this problem is to empower the Federal Trade Commission to use its consumer protection authority to exercise more rigorous oversight. Working with colleagues at Harvard Kennedy School and others, the NYU Stern Center for Business and Human Rights made this idea the centerpiece of the recommendations to the Biden administration and lawmakers that we released last March. Boosting the FTC, if done wisely to have regulators keep companies on their promises and demand greater transparency, without making decisions on content, would provide a solid foundation for regulators to keep pace with changes in the world. rapidly changing technology industry.

On another front, companies providing cloud computing services will come under increased pressure to protect user privacy under international human rights law. While governments have legitimate law enforcement and national security interests, there is a risk that officials, especially in autocratic countries, will abuse the ever-growing storehouses of personal data in the cloud. Recognizing this potential harm, Microsoft, Google, Amazon and five other cloud service companies have collectively released a set of principles they have committed to follow in responding to data requests from governments around the world. These companies are committed to challenging overly broad government access demands and working collectively to reform laws in countries where legal privacy protections are inadequate. Over the next year, these companies, along with democratic governments, will need to devote time and resources to making this commitment a reality.

Make the mandatory “due diligence” requirements of companies effective

Mandates for companies to exercise “due diligence” in accordance with human rights principles will continue to spread, particularly in Europe. Under these laws, companies are required to identify human rights risks, take action to mitigate potential problems, assess the effectiveness of their prevention efforts, and publicly report on their actions. In 2021, Germany and Norway enacted such laws, as France had done several years earlier. Similar proposals are being debated in Austria, Belgium and Luxembourg. In 2022, the European Commission will likely pass a much-anticipated directive calling on member states to pass mandatory due diligence laws. Due diligence laws have not been advanced in the United States, reflecting almost certain opposition from the industry.

As mandatory due diligence laws come into force, a key question for courts and regulators is how to define and enforce new requirements consistently and in a way that will improve business conduct. One approach, proposed by my colleagues Dorothée Baumann-Pauly and Isabelle Glimcher, would build on the standards, measures and assessment systems used by multi-stakeholder organizations such as the Fair Labor Association, which I currently chair. For 20 years, the FLA has subjected global apparel companies to a rigorous accreditation process assessing working conditions throughout their global supply chains. Governments should judge companies by their performance, not just if internal management systems are in place.

Responding to the deteriorating human rights conditions in China

The Chinese government continued to violate human rights in 2021, as illustrated by its withdrawal of democratic guarantees in Hong Kong and the mass detention of more than one million Uyghurs in Xinjiang. Companies need to further assess whether elements of their operations directly contribute to human rights violations and, if so, reform or suspend these operations as quickly as possible.

Many global companies have significant business interests in China, reflecting the country’s growing economic power, both as a manufacturing hub and as a massive market for goods and services. In order to do business there, companies must navigate a stifling environment where Chinese government officials are increasingly intolerant of companies or others who dare to challenge government conduct. This hostility to criticism is expected to manifest itself in the run-up to the February 2022 Winter Olympics in Beijing. The governments of the United States and several other countries recently announced that they would not send diplomatic delegations to the Winter Olympics, in response to ongoing serious human rights violations. Businesses and investors should send a similar message to Chinese leaders. One example is the pledges made by a number of Western garment companies to seek alternatives to Xinjiang cotton.

Refine ESG investment strategies to have a social impact

More than $ 35 trillion is invested worldwide in funds that assess environmental, social and governance (ESG) factors. According to one estimate, ESG investments will soon represent a third of all global assets under management. While considerable attention is paid to developing useful metrics for environmental and governance issues, measures of corporate social performance – the “S” in ESG – fail. In almost all cases, S-factor analysis focuses on business promises and processes, rather than performance and results. This weakness means companies are praised for their environmental progress even as they continue to treat workers poorly and avoid necessary reform of manufacturing supply chains and other aspects of their operations.

There is a growing demand to standardize ESG measures and improve the collection of relevant data. This year, the Security and Exchange Commission announced that it is reviewing mandatory reporting requirements for ESG risk information. As part of its ongoing review of what “human capital” data companies should be required to disclose, the SEC should demand information on working conditions in global supply chains.

When deciding whether or not to invest in companies, asset owners and investment managers should broaden and deepen their analysis to include factors such as the treatment of factory workers in developing countries who manufacture actually the products sold by western brands. The US government can exert additional leverage for improvement by incorporating human rights criteria into its own procurement practices. As heavy consumers of most goods and services, government agencies should make their purchases conditional on meeting these standards, making compliance a cost of doing business.

Improve racial and gender diversity in business management and the investment sector

The murder of George Floyd in the summer of 2020 became a catalyst for renewed national attention to racial inequalities and led to calls for greater diversity in many institutions. In the coming year, business leaders must build on these commitments and apply them to senior executives and boards of directors. While more and more black Americans are going to college and earned graduate degrees over the past decade, relatively few have made it to the top rungs of the corporate ladder. There are only five African-American CEOs of Fortune 500 companies, and a third of those companies do not have black members on the board. Meaningful change must come from above.

Less than 2% of US investment firms, with a total of $ 82 trillion in assets under management, are owned by women or under-represented minorities. Yet studies show that companies with more diverse workers and management teams perform better in the long run. Business leaders committed to promoting diversity and inclusion need to establish specific plans and concrete performance measures to make diversity a reality throughout their business.