AC Calls for New U.S. National Action Plan on Responsible Business Conduct to Champion Accountability and Remedy
Given increasing attention to the impacts of business activities around the world, several governments develop “national action plans” (NAPs) that state their commitments to responsible business conduct (RBC). Containing commitments for both the public and private sector, NAPs have the potential to dramatically shift the approach of businesses and institutions towards effectively preventing and addressing human rights impacts. In 2016, the U.S. released its first NAP for this purpose. Although the 2016 NAP promoted the implementation of the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises, the guiding international standards on RBC, it failed to include concrete commitments to ensure accountability and remedy despite calls from Accountability Counsel and other stakeholders, including the International Corporate Accountability Roundtable.
In June 2021, the Biden-Harris Administration announced its plans to update U.S. NAP. As a part of the corresponding consultation process, we and our partner Inclusive Development International, recommended that the new NAP require that an accountability framework govern all U.S. investments that could result in environmental or social harm.
All U.S. Money That Might Cause Harm Requires a Mandatory Accountability Framework
Effective accountability frameworks for responsible business conduct include an independent accountability mechanism (IAM), a non-judicial office housed at an institution or business that finances or advances a project. These mechanisms, which are common features at international financial institutions, are led by independent staff of the institution with the capacity to address community complaints regarding investments or projects through investigations (to see if environmental and social standards were followed) or dispute resolution processes (which offer mediation and other tools to resolve grievances). IAMs are meant to close the gap between communities and institutions by allowing project-affected individuals to raise concerns about impacts directly to the highest decision makers.
For example, farmers displaced by the Caracol Industrial Park in Haiti, financed by the Inter-American Development Bank (IDB) and USAID, filed a complaint with the IDB’s accountability mechanism and were able to negotiate an agreement with the IDB and Haitian government to address livelihoods impacts. Unfortunately, because USAID does not have an accountability mechanism, concerns about USAID’s support of the project are yet to be fully addressed.
Per the UNGPs, functioning IAMs require legitimacy, transparency, accessibility, predictability, equitability, and rights-compatibility to be useful for all communities. Additionally, IAMs should incorporate best practices that have emerged over decades of practice. Moreover, institutions should establish remedy frameworks to ensure that resources are available to fully remediate harm and ensure implementation of remedial actions in its responses to IAM findings of noncompliance and dispute resolution agreements.
Our recommendations to the US Government for the new NAP include:
Strengthening Accountability and Remedy for U.S. Government Financiers
- Finalize procedures for the IAMs at the U.S. International Development Finance Corporation (DFC) and USAID: Congress has required both DFC and USAID to create IAMs, but stakeholders are still waiting on procedures to guide these mechanisms. This affects the ability of project-affected communities to understand how they can use these offices to seek justice. Both agencies should launch public consultations to shape the mechanisms immediately.
- Create an IAM for the S. Export-Import Bank (EXIM): Though EXIM created a portal for project concerns in 2016, it does not include the necessary features of an effective accountability mechanism, including a dispute resolution process. As such, the NAP should obtain commitment from EXIM to hold public consultations on its current process, with the objective of creating a mechanism that is in line with international best practices.
- Require Power Africa to establish an IAM: It is crucial for the U.S. government’s flagship electrification program in Africa to have an effective office to address concerns from communities given that energy projects are the second-most complained about sector in Africa at existing IAMs. As with EXIM, the NAP should include a commitment to create an IAM at Power Africa.
Additionally, these agencies should establish remedy frameworks to ensure that resources are available to fully address harm.
Supporting Effective Accountability Frameworks for International Financial Institutions (IFIs)
- Ensure IFIs have adequate resources in place for remedy: The NAP should require the Treasury department to advocate for the International Finance Corporation (IFC) and other IFIs in which the U.S. participates to establish mechanisms for remedy that include reserve funds. As IAMs undergo reviews in the near future, Treasury should ensure that these reviews strengthen the performance of IAMs.
Fortifying Corporate Accountability Frameworks
- Bolster the U.S. National Contact Point (NCP): As the only available path to communities raising human rights concerns tied to U.S. companies, the NCP needs to be dependable. Still, it struggles to facilitate remedy. The NAP should include commitments to revise the NCP’s procedures giving it more tools to bring companies to the mediation table and negotiate in good faith with affected communities.
- Regulate Environmental and Social Governance and Impact Investing Labels: To prevent the mislabeling of ESG investments for companies implicated in serious human rights abuses, the NAP should include commitments for the regulation and reform of the ESG ratings industry to end false labeling and ensure that ESG ratings, and the investment products tied to them, are aligned with international human rights standards. Moreover, ESG and impact fund managers should be required to establish grievance mechanisms to remedy human rights abuses caused by companies in their portfolios.