Human rights implications of bioethanol production ... - IBP Web viewOf the focus rights in this chapter, ... about-land-grabbing-by-european-companies-in-colombia.html. ... occurring

Exam, Business Responsibilities for Human Rights – June 2014, 2 weeks to write exam, exam description at the bottom of this document

MSc International Business and Politics

Human rights implications of bioethanol production in Brazil and Columbia

Business Responsibilities for Human Rights

Hand-in date: June 10 - 2014Number of pages and characters: 14 pages (excluding the front page and bibliography) and 34,082 charactersCopenhagen Business School 2014

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Table of contents:

Question 1 – Selection of focus rights in Columbia………………………………………… Page 3

Right to physical and mental healthRight to an adequate standard of livingRight to life, liberty, and security of the person

Question 2.a – The scope of INVEST’s responsibility for SugarCo’s violations………….. Page 7

Question 2.b – Potential human rights issues and impact of BrazSugar.....……………….Page 8

Question 3 – Potential risks to INVEST of their relationship with SugarCo………...……Page 11

Question 4 –Three suggested concrete steps to avoid repetition of Columbian mistakes…Page 14

Bibliography………………………………………………………………………………...…Page 16

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Question 1. Invest would like to look further into the possible human rights violations stemming

from SugarCo’s activities in Colombia.

Selection criteria and presentation of focus rights

In the following, three priority human rights appear as part of a preliminary human rights due

diligence for Invest in relation to the company’s investment in SugarCo. The prioritization uses as

guideline article 24 of the operational principles under the Corporate Responsibility to Respect

Human Rights of the United Nations Guiding Principles. Article 24 clearly states that where it is

necessary to prioritize action, the company must seek first to prevent and mitigate those actual or

potential adverse human rights impacts ‘that are most severe or where delayed response would make

them irremediable’. (UNGP, article 24)

Hence, in line with the UNGP, I focus on the following three human rights, because they represent

severe and acute threats to the human rights situation surrounding SugarCo’s Columbian operations,

and because these rights are– or may potentially be – adversely impacted by the operations of

SugarCo.

A) right to physical and mental health; access to medical services (article 25 UDHR, article 12

ESCR)

B) right to an adequate standard of living (Article 25 of the UDHR and Article 11 of the ESCR)

C) right to life, liberty, and security of the person (article 3 UDHR as well as articles 6 and 9 of

the CCPR)

Note: Why the rights of indigenous people are not included among the focus human rights

Two reasons explain why the rights against discrimination based on ethnicity was not among the three

focus rights: First, because the marginalization of indigenous people described in the brief is likely to

manifest itself in violations of the three above-mentioned rights. Note for instance that a major

problem for indigenous Columbians is displacement, as more than a quarter of indigenous

Columbians are suffering from displacement1. Furthermore, the universality of human rights serves as

a cornerstone that should ensure that any human rights analysis or due diligence would need to

consider the potential discrimination of the rights against discrimination of particular ethnic groups.

1 Source: http://upsidedownworld.org/main/news-briefs-archives-68/4633-one-quarter-of-colombias-indians-displaced-report

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A) Right to physical and mental health; access to medical services (article 25 UDHR, article 12

ESCR)

The brief describes that the indigenous people suffer from health risks related to the operations of the

company, as they are exposed to smoke from the burning sugar cane straw, pollution, pesticides, and

intense vehicle traffic that transports sugar cane.

This is a priority issue, because it clearly interferes with the right to physical and mental health (from

here on: right to health), and is a health hazard with potential severe and irremediable impact on the

health of the affected individuals. For as long as the affected individuals find themselves exposed to

toxic fuels there will be an incremental risk of an adverse impact on the right to health.

Furthermore, the impact follows directly from SugarCo’s operations and therefore SugarCo can take

action to mitigate the impact through its operating procedures.

Note on the democratic prioritization of rights in light of economic realities:

The CESCR allows governments of ratifying states to limit the protection of human rights included in

the covenant, in the face of economic realities not allowing governments to realize the full scale of

rights included in the CESCR. In that case the CESCR clearly states that such a limitation must only

be done ‘for the purpose of promoting the general welfare in a democratic society’ (Article 4,

CESCR).

Of the focus rights in this chapter, the right to physical and mental health and the right to an adequate

standard of living pertain to the CESCR. Therefore, the prioritization of rights within the CESCR

could potentially justify a violation of these rights under circumstances highlighted above. However,

it does not appear that the risk to the health and/or adequate housing (just below) can be justified from

the perspective general welfare in a democratic society, since the harm done to the affected

communities is simply too severe.

B) right to an adequate standard of living (adequate food, clothing and housing) (Article 25 of

the UDHR and Article 11 of the ESCR)

Direct impact on the right to an adequate standard of living related to pollution described in part

1.A)

Since the violation of the right to health described above occurs at the homes of the indigenous

people, there is a basis for claiming that the right to an adequate standard of living is impacted as a

direct consequence of the operations of SugarCo, simply because the indigenous people find

themselves living in a polluted environment.

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Moreover, due to the special context of land grabbing in Columbia, SugarCo needs to consider

whether its operations may impact the right to an adequate standard of living in other ways, in

particular whether its operations may exacerbate Columbia’s national problem with displaced people.

Note on context: History of Land grabbing in Columbia

Columbia has the greatest number of displaced people in the world after Sudan2. A long lasting issue

with land grabbing is one of the key reasons for this, according to various observers. For example, in

November 2013, 25 Members of the European parliament signed a public letter3 expressing their

concern with land grabbing by European companies in Columbia, wherein one of the concerns dealt

with its impact on the removal of communities from their original territories.

The indigenous people risk displacement due to the Agricultural Reform

It appears the indigenous people risk displacement, since their various health risks related to the

operations of the company may eventually force them to leave their homes. Should that become

reality, the fact that Columbia has an enormous problem with millions of individuals already suffering

displacement, would make it difficult to provide the indigenous communities with adequate

alternative housing. Therefore it represents a potentially severe situation that would be difficult to

remedy.

Adequate food does not appear to be threatened by land acquisitions in Columbia

Land grabbing has also lead to food crises at some occasions. This is particularly critical in regions

where there is already a shortage of food, including Sub-Saharan Africa and South Asian countries4.

In my research I was not able to find any documentation of land grabbing leading to food crisis in

South America, and neither is food security mentioned in the brief on SugarCo, Therefore, although

changing agricultural composition in Columbia may lead to a lower overall food production at the

global scale it is unlikely that it will be directly related to food security issues.

How SugarCo’s operations may threaten the right to an adequate standard of living

Although it is the responsibility of the Columbian government to protect the right to an adequate

standard of living of its citizens, SugarCo may be complicit in the violation of the right to an adequate

standard of living, if their land acquisitions result in the displacement of the indigenous people. This

depends mainly on the extent to which SugarCo is or is not regarded to be taking adequate measures

to avoid such human rights violations.

2 Between 3.4-4.9 million people. Source: http://www.theguardian.com/global-development/poverty-matters/2011/jan/31/colombia-land-grab-displaced-poor3 http://www.juergen-klute.eu/en/article/759.meps-concerned-about-land-grabbing-by-european-companies-in-colombia.html4 www.fao.org/docrep/005/ac911e/ac911e05.htm

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C) Right to life, liberty, and security of the person (article 3 UDHR as well as articles 6 and 9 of

the CCPR)

It should be the highest priority to avoid the potential arising of violent conflict surrounding the

operations of the company. A violent conflict would endanger the right to life, liberty and security of

the person, and thereby represent the potentially most severe and irremediable human rights violation

surrounding SugarCo’s operations in Columbia.

Note on context: History of Columbian civil war makes the operating environment hazardous for

businesses wishing to avoid complicity in human rights abuses

As underlined by the UNGP, some operating environments may increase the risks of enterprises being

complicit in gross human rights abuses committed by other actors (GP, Issues of Context, Article 23,

Commentary). In relation to that, Columbia’s decades-long recent history of civil war – largely

responsible also for national problem with displaced people – means that operating in Columbia

entails such increased risks of complicity in gross human rights abuses. In this regard, there are recent

examples of violations of the right to life related to land acquisitions in Columbia, where for example

promoters of land restitutions have received death threats5, a clear violation of the right to life, liberty

and security of the person.

How SugarCo’s operations may adversely impact the right to life, liberty, and security of the person

It is the primary responsibility of SugarCo to avoid any involvement in violations of the right to life,

liberty and security, in the event that violent conflict arises in relation to its operations. Complicity in

gross human rights abuses would occur if employees of Columbian Sugar somehow became involved

in the facilitation or encouragement of acts that violate the right to life, security and liberty of the

person.

Furthermore, to be line with recommendations from the Guiding Principles SugarCo should draw on

expertise within the organization as well as from independent experts outside the organization in order

to respond in ways that preempt exacerbating current disputes (GP, Issues of Context, Article 23,

Commentary)

Note regarding high priority of potential human rights breaches related to adequate housing and the

right to life: A potential breakdown of social order

Both the displacement of people as well as the violation of the right to life would lead to a disturbance

to the social order that would make it difficult to materialize human rights in general. 6 Therefore, both

5 Columbian leaders and promoters of land restitutions, according to members of the European parliament received death threats when they complained about the operations of European companies. (see: http://www.juergen-klute.eu/en/article/759.meps-concerned-about-land-grabbing-by-european-companies-in-colombia.html)6 This could be in violation with Article 28, UDHR, which states: ‘Everyone is entitled to a social and international order in which the rights and freedoms set forth in this declaration can be fully materialized’.

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these two potential outcomes would have severe and irremediable human rights consequences – aside

from the violations of these rights in themselves – in case of delayed response. Furthermore, conflict

situations tend to have an incremental effect on those at the margin of society, in particular women

and children.7

Question 2:

A. The Scope of INVEST’s responsibilities regarding human rights violations of SugarCo in

Columbia

Introduction to the Protect, Respect and Remedy framework

By its signing of the UN Global Compact INVEST has made a voluntary non-binding commitment to

‘respect and support the protection of international human rights standards and ensure they are not

complicit in human rights abuses’8.

The Guiding Principles and the two first principles of the Global Compact, are all in line with the

“Protect, Respect and Remedy” framework9 presented by Ruggie and adopted by the Human Rights

Council in 2008. Herein, it is the duty of states to protect human rights, while businesses have the in

legal terms non-binding responsibility to respect human right, and states again have the duty to

establish effective and just court systems to provide access to remedy for violations of human rights.

The United Nations Guiding Principles

According to UNGP, the corporate responsibility to respect human rights entails that businesses

‘should avoid infringing on the human rights of others and should address adverse human rights

impacts with which they are involved’ (Article 11, UNGP). The commentary to the same article

explains that companies are required to prevent and mitigate adverse human rights impacts and

remediate for harm done. Furthermore, in cases where responsible states are unable to live up to

international standards of human rights, companies still need to respect human rights by following the

recommendations of the Guiding Principles.

Note also that while states have duties companies are required to take adequate measures to live up to

their responsibilities. What is adequate action on behalf of the company is dependent on context,

meaning national differences and points in time matter. Due to the complexity and subjectivity of

such an analysis companies need to depend on internal and independent external expert advice, with

7 Examples of rights that could be vulnerable to a lack of social order include access to primary education (article 26, UDHR), health services (article 25, UDHR), and the right to work (article 23, UDHR). 8 The formulation belongs to the Human Rights and Business Dilemmas Forum, established by the UN Global Compact (human-rights.unglobalcompact.org) and it combines the first two principles of the UN Global Compact. They are: Principle One: Businesses should support and respect the protection of internationally proclaimed human rights, and Principle Two: Global Compact Principle Two: Businesses should ensure they are not complicit in human rights abuses9 http://www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf

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external experts representative of the relevant stakeholders. The instrument for determining adequate

measures is presented in article 17 as ongoing Human Rights Due Diligence.

Since INVEST benefits from the profits resulting from SugarCo’s Columbian venture, it is

INVEST’s responsibility to take adequate measures to improve the human rights situation

surrounding Columbian Sugar

In order to determine the scope of INVEST’s responsibility regarding human rights violations of

SugarCo in Columbia it is necessary to establish the relationship between the two parties, and how

that relates to SugarCo’s venture in Columbia. Regarding this particular question, it is necessary to

determine whether or not SugarCo’s human rights violations violations are directly linked to

INVEST’s operations, products or services (Article 17, a), UNGP).

Since INVEST is not directly involved in Columbian Sugar, INVEST is not from a legal point of view

liable for human rights violations by Columbian Sugar. However, there are different standards for

legal and nonlegal complicity in such crimes, and the argument can be made that INVEST are

benefitting from a non-legal complicity, because 55 percent of the funding for BrazSugar – a venture

from which INVEST expects to earn profits by investing in – comes from Columbian Sugar’s

earnings. On the basis of article 17 of the UNGP which speaks on human rights through business

relationships, INVEST will by entering into such a business partnership arguably have to take on

partial responsibility for ensuring that the human rights situation surrounding Columbian Sugar will

change for the better.

Although INVEST will not be legally accountable for such a responsibility, this is an area where there

are measures available for INVEST that may mitigate adverse human rights impacts done by SugarCo

which is a part of their extended operations. If INVEST fails to take adequate measures that improve

the human rights performance of Columbian sugar, it may be argued on the basis of the GP that

INVEST is not fulfilling its responsibility to respect human rights.

However, in these cases it will be up to the public opinion and INVEST’s stakeholders to judge what

are considered to be adequate measures by a company, since there will be no legal responsibility for

INVEST with regards to the operations of Columbian Sugar.

2. B. The potential human rights issues and impact of the new BrazSugar venture

In order to determine the potential human rights issues and potential adverse impact of the BrazSugar

venture, the following empirical investigation looks into whether there are differences in context

between Brazil and Columbia that may alter which human rights issues and impacts can be expected

from the BrazSugar venture. Since the investigation in question 1 took starting point in the GP, the

conclusions will be inferred directly as point of departure for answering question 2.b; the criteria that

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are being examined in the determination of human rights issues is the severity and potential

irremediable effects of a lack of action.

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Similarities of operations: Product, market and relationship with SugarCo

The similarities between the two operations are apparent: BrazSugar will produce the same product

due to soaring demand for alternative energy that cannot be met by Columbian Sugar alone, therefore

it is fair to say they are operating in the same market and with similar production methods.

Furthermore, although there is a difference in ownership structure, SugarCo is the initiator and main

company behind both ventures. Therefore, it is likely that potential human rights issues and impacts

of the new BrazSugar venture can be derived by looking towards Columbia, since SugarCo like any

other organization will impact the operations of its subsidiaries to some extent.

Finally, it is clear that in order to operate, BrazSugar will need to acquire large areas of land and that

doing so may require a government mandate to evict unwilling locals. In addition, the operations will

likely produce the same sort of air and noise pollution as what occurred in Columbia.

Differences in context at a glance:

Concerning the discrimination of Indigenous people in Brazil – overall less likely than in Columbia

Like Columbia, Brazil has a high amount of indigenous people however, some important distinctions

suggest that issues with human rights concerning marginalization of indigenous people are less likely

to occur because of sugar cane production in Brazil than in Columbia.

First of all, although the total number of indigenous Brazilians is about half the number of indigenous

Columbians, it is only about 0.4 percent of the population in Brazil and 3.4 percent in Columbia10;.

Furthermore, while around half of the indigenous Brazilians live in urban areas11, the majority of land

controlled by indigenous Brazilians lies in the Amazon forest, where cane sugar does not grow well12.

Out of the total share of 13.56 per cent of Brazil’s entire land mass which is declared ‘indigenous

lands’, only 1.39 per cent is divided between areas outside the Amazon. (see footnote 11)

Some important concerns related to the land rights of indigenous people

Concerns remain, however, related to the potential effect that growing of sugar cane in one location

may have on those crops previously harvested there. Crops such as soy beans that can be cultivated in

the tropical forests may move to the Amazon and hence pose an indirect threat to the Amazon forest

and the land rights of indigenous Brazilians (see footnote 12).

10 According to International Work Group for International Affairs, the 2005 census in Columbia counted that 3,4 percent of the population was indigenous Columbians, a total of 1,378,884 was counted. Source: http://www.iwgia.org/regions/latin-america/colombia/ According to World Directory of Minorities and Indigenous People, in the 2000 census for Brazil, about 730,000 people who identified themselves as native Brazilians, equal to 0.4 percent. Source: http://www.minorityrights.org/?lid=528911 http://www.iwgia.org/regions/latin-america/brazil12 http://news.nationalgeographic.com/news/2007/02/070208-ethanol_2.html

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http://www.iwgia.org/regions/latin-america/colombia/


Furthermore, there have been controversies in Brazil regarding fact that only a small share of land

outside the Amazon was declared ‘indigenous land’. This has reportedly lead to violent clashes

between the Brazilian agro business and indigenous people claiming rights over lands that resulted in

killings as late as in 2013. 13

Brazil is not as infested by conflict and does not have as many displaced people as Columbia

Unlike Columbia, Brazil has not been plagued with a

long lasting civil war and does not suffer from a national

problem with millions of displaced people (see figure

114).

Therefore, the potential human rights violation of the

right to life, liberty and security of the person does not

appear as likely to occur in the same scale or with the

same arbitrariness in Brazil as it does in Columbia, since

conflict prone zones are more likely to experience that

type of human rights violations.

Furthermore, the risk to an adequate standard of living in

terms of lack of adequate housing in the event that a

family or community loses its homes because of ‘land

grabbing’ appears to be easier to remedy, since the

country / region will not already have a significant

problem with displacement to handle first.

Brazil has its instances of own human rights violations.

Example of FIFA World Cup, the Olympics and the Belo Monte Dam

While the right to life, liberty and security of the person and the right to an adequate standard of living

appear generally less threatened in Brazil than in Columbia, there are examples of gross human rights

violations occurring in particular circumstances and places. For example, as Brazil is preparing to host

the FIFA World Cup in June and July 2014 and the Olympics in 2016, the Brazilian police is under

accusations for excessive use of force and disregard of human rights in favelas15. Extreme cases

13 Source: http://www.theguardian.com/world/2013/aug/08/brazil-land-indigenous-people-killings14 Interactive map made using: http://education.nationalgeographic.com/education/mapping/interactive-map/15 In a recent press release Amnesty International considers the freedom of expression and the right to peaceful assembly to be under threat and expresses concern concerning the excessive use of force by the police in Rio de Janeiro’s favelas and relating to ‘the total disregard for human rights’ related to evictions in Rio de Janeiro. Source: https://www.amnesty.org/en/for-media/press-releases/brazil-human-rights-under-threat-ahead-world-cup-2014-04-11

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Figure 1: This map illustrates average numbers of displaced people in each country in the period 2006-2010. Columbia has between 100.000-1.000.000 displaced people on average per year in this period, while Brazil’s average lies between 100-1.000 – a relatively low figure for the region, taking into account Brazil’s large population. Data from UNHCR.

http://education.nationalgeographic.com/education/mapping/interactive-map/

http://www.theguardian.com/world/2013/aug/08/brazil-land-indigenous-people-killings


mentioned in the media involve accusations of disappearances of persons killed by the Brazilian

police.16

Another important case is the treatment of indigenous people in relation to the building of electric

dams – in particular the Belo Monte dam – in the Amazon, where there has been criticism concerning

the displacement of up to 20,000 indigenous people.17

What does this entail for the rest of the country?

The present picture demonstrates that both the right to life, liberty and security of the person, and the

right to an adequate standard of living is still potentially under threat in Brazil. By inference, it

represents a potential human rights issue to the BrazSugar venture depending on the contextual

developments, and the situation needs careful monitoring.

Working conditions for the Brazilian sugar cane cutter under critique

A paper written in 2008 that looked into environmental and social consequences of the expansion of

sugarcane ethanol production in Brazil18 highlighted fair working conditions at sugarcane production

sites and banning of sugarcane burning practices as the two most important human-rights related

recommendations.

Concerning the exploitation of cane cutters, however, the debate is twofold. As it is often the case in

such situations where tough labor conditions are involved, the job as a cane cutter may also carry

benefits for the worker such as simple being paid. Another argument in favor of sugarcane production

is that it generates employment in itself.

3. The potential risks to INVEST of their business relationship with SugarCo via BrazSugar –

nature and likelihood of risks, and how INVEST can reduce or eliminate each risk

There are numerous ways to categorize the various types of human rights related risks that INVEST

are facing through their business relationship with SugarCo. Here I will discuss the different risks of

legal and non-legal complicity that INVEST face in the BrazSugar venture.

General remarks concerning the risk of complicity in human rights abuses, including an

evaluation of extraterritorial jurisdictions

Different types of complicity in the UN Global Compact

16 One example: http://www.dailymail.co.uk/news/article-2619722/Brazil-police-accused-cleansing-favelas-World-Cup-football-carnival-rolls-town.html17 Source: http://abcnews.go.com/blogs/headlines/2012/06/brazils-belo-monte-dam-to-displace-thousands-in-amazon/18 Luiz A. Martinelli and Solange Filoso 2008. EXPANSION OF SUGARCANE ETHANOL PRODUCTION IN BRAZIL: ENVIRONMENTAL AND SOCIAL CHALLENGES. Ecological Applications 885. http://dx.doi.org/10.1890/07-1813.1

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http://dx.doi.org/10.1890/07-1813.1


Questions of complicity have already featured throughout the paper, because it analytically helps

distinguish between why and how firms become accountable for human rights abuses. In the UN

Global Compact, the second principle simply states that firms must not be complicit in human rights

abuses, and it is key concept in the way the Global Compact relates to human rights.

The threefold distinguishing between types of complicity associated with the UNGC (direct,

beneficial, and silent complicity) has a critical problem, because it can be difficult to establish the

criteria for silent and beneficial complicity.

Complicity in the UNGP – distinguishing legal and non-legal complicity

The UNGP mentions complicity only in the commentaries to two articles, Article 17, regarding

human rights due diligence and Article 23, regarding issues of context.

First, in article 17, the commentary mentions the existence of differences between legal and non-legal

complicity, mentioning beneficial complicity as an example of non-legal complicity. Having

mentioned that most national courts prohibit complicity in a crime, the GP explain that in

international law ‘the relevant standard for aiding and abetting is knowingly providing practical

assistance or encouragement that has a substantial effect on the commission of a crime’ (commentary

to article 17, UNGP).

Second, in relation to the issues of context (Article 23, UNGP), the GP mentions the existence of

increased risk of complicity in gross human rights violations in conflict-affected areas. The

recommendation of the GP is that companies should treat the increased risk of complicity in such

contexts as a legal-compliance issue, ‘given the expanding web of potential corporate legal liability

arising from extraterritorial civil claims’ (Commentary, Article 23, UNGP).

In other words, the GP advices companies wanting to avoid risks of complicity to bring their

processes in line with the GP and other relevant standards such as those pertaining to the ILO, OECD,

UN, various multi-stakeholder initiatives, etcetera. This would also be the recommendation for

INVEST regarding its investments in BrazSugar.

The Alien Tort Statute and extraterritorial jurisdiction

With the dispersion of global economic networks the questions of extraterritorial jurisdiction has

become increasingly relevant. The Alien Tort Statute has – since it was ‘re-discovered’ – presented a

looming threat to corporations as it was unclear whether it gave the US courts system jurisdiction over

any violation of International Laws ratified by the US. However, the ruling by the US supreme court

in Kiobel v. Royal Dutch Petroleum Co. firmly established that the Alien Tort Statute would not

provide jurisdiction for conduct by anyone, whether individual or corporate, that occurs solely outside

the United States19.

19 Source: http://www.mondaq.com/unitedstates/x/236870/Securities/United+States+Supreme+Court+

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Given this distinction, the Alien Tort Statute entails that for instance a company such as INVEST

operating out of Denmark will not face a risk of legal accountability for violations of international law

(including human rights) as long as the company’s conduct takes place in Denmark and/or Brazil, as

appears to be the case in the BrazSugar Venture. On the other hand, if SugarCo participates in

breaches of human rights in Brazil via managerial decisions in the US, the company could face

charges that fall within the jurisdiction of the US courts system under the Alien Tort Statute.

The Alien Tort Statute in fact is just one example of a law that enables so-called extraterritorial claims

of potential legal liability for corporations. Some of the extraterritorial legal claims originate in single

statutes such as the Alien Tort Statue or, or the UK Bribing Act with each bill providing different

guidelines for different court systems. The is a broad agreement within the EU that it is necessary to

expand the extraterritorial jurisdiction in order to tackle the issues of globalization.

Concerning specific risk via the business relationship with SugarCo:

Risks for INVEST concerning the link to Columbian Sugar: No legal risk, only non-legal complicity at

stake

It was established in section 2.b that INVEST has no legal risk, but only a risk of non-legal

complicity, and here I will briefly suggest how to reduce such a risk: INVEST should in its ongoing

human rights due diligence consider whether SugarCo is taking adequate measures to improve its

human rights performance in Columbia. If INVEST is not able to document firmly that Columbian

Sugar is taking adequate measures to improve its human rights performance, INVEST could as a final

resort consider selling its shares in BrazSugar in order to avoid non-legal complicity in human rights

violations.

Risks for INVEST via the BrazSugar venture

Potential legal liability

The fact that INVEST holds a 15 % share of BrazSugar means that the question of complicity

potentially has implications of legal liability, as also mentioned above.

Based on the risk assessment in part 2.b the human rights risks in Brazil are similar to those in

Columbia, but the evaluation concludes that the general human rights situation in Brazil appears to be

less threatened than it is in Columbia. This is both in the sense that the severity of human rights

breaches would be expected to be lower than in Columbia, and that it is less likely that human rights

violations will occur. The most likely risks to human rights appear to be in the area of labor rights and

threats to the right to health affecting again workers and residents living nearby the cane cutting.

Decides+Question+Of+Corporate+Liability+Under+Alien+Tort+Statute+On+Broader+Grounds

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Furthermore, there is a limited risk that more severe violations of the right to life, liberty, and security

of the person could occur, if BrazSugar ends up in a dispute with some of the marginalized groups of

Brazil, in particular indigenous people.

Unless INVEST is an active party in such disputes, and knowingly supports rights violations by

BrazSugar staff, there should not be a basis for INVEST to risk legal liability in Brazil, or via

extraterritorial claims.

Unless these human rights issues become overly systematic and/or some of the more severe threats to

the right to life for instance become threatened, it is however, unlikely that such issues could not be

solved via so-called alternative dispute mechanisms. Therefore INVEST should put pressure on

BrazSugar to beyond merely working to prevent and mitigate adverse human rights impacts, to take a

proactive role in providing access to remedy for affected individuals. This would also avoid

exacerbating the issue and prevent minor grievances from turning into larger issues of human rights

violations.

Non-legal liability

Meanwhile, there is also for Invest a greater risk from a point of view of potential claims of non-legal

complicity related to potential adverse human rights impacts surrounding the operations in Brazil than

there is in relation to the operations of Columbian Sugar. This is simply because INVEST will have

better access to take adequate measures to ensure that operations that it is funding will be in

accordance with existing best practices and in line with INVEST’s commitment to respect human

rights. One example of such action could be to take a proactive role in promoting best practices within

corporate human rights governance, a few recommendations for how to do so will appear in the

following:

4. Conclusion: What concrete steps should INVEST take in its role as an investor to ensure that the violations in Colombia are not repeated in the new venture?

Three suggested steps that INVEST should take three immediate steps as an investor to ensure that the

operations of BrazSugar are done in accordance with the responsibility of companies to respect

human rights:

1) INVEST should commit to the ABC of the operational principles in the UNGP and

encourage the leadership of SugarCo and BrazSugar to do so as well:

- Articulate commitment to respect human rights

- Be proactive in anticipating and mitigating adverse impacts

- Correct & compensate adverse human rights impacts

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2) INVEST should furthermore make their continued involvement as an investor contingent

on that BrazSugar commits itself to bring its operational processes in line with relevant

best practices in the area of business responsibilities for human rights. As such,

BrazSugar should consider this a legal compliance issue and strive to stay updated on and

adjust their operations in accordance to international human rights instruments and

guidelines for best practices, whether they come from relevant international treaties, the

ILO, the OECD, the EU, or from multi-stakeholder coalitions. Doing so would also form

a defense against potential extraterritorial civil claims.

3) Finally, INVEST should as a part of its public commitment to respect human rights,

demonstrate this commitment by on an ongoing basis performing human rights due

diligence of its own corporate governance of human rights issues with the help from

external experts.

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Bibliography:

Textbooks:

Ruggie, John Gerard, Just Business: Multinational Corporations and Human Rights (New York and London: W.W. Norton, 2013)

Tomuschat, Christian, Human Rights: Between Idealism and Realism (Oxford: Oxford University Press, 2nd edition, 2008)

Instruments and guidelines:

CCPR: The International Covenant on Civil and Political Rights (1966)Adopted and opened for signature, ratification and accession by General Assembly resolution 2200A (XXI) of 16 December 1966

CESCR: The International Covenant on Economic, Social and Cultural Rights (1966) Adopted and opened for signature, ratification and accession by General Assembly resolution 2200A (XXI) of 16 December 1966

UDHR: The Universal Declaration of Human Rights (1948) http://www.un.org/en/documents/udhr/index.shtml

UNGC: The United Nations Global Compact (2000)

UNGP: Guiding Principles on Business and Human Rights Implementing the United Nations “Protect, Respect and Remedy” Framework (2011) by United Nations New York and Geneva and the United Nations Human Rights Office to the High Commissioner

Other references appear in footnotes

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http://www.un.org/en/documents/udhr/index.shtml


Study program: M.Sc. IBP

Course: Business Responsibilities for Human Rights

Final Exam 2014

Instructions

The following text describes a case involving fictitious companies: SugarCO, INVESTinc, People Pension, and BrazSugar. You must analyze the case in accordance with the questions and additional instructions included at the end of this document under the heading “The Assignment”.

Please read the questions and additional instructions after the case description carefully. Be especially careful about reading and answering the questions. You may answer them in whatever way you think is best, but it should be clear from your paper that you have answered all of them. Failing to respond to a question will lower your grade. Failing to respond to a question in the manner specified in the instructions will also lower your grade. If you want to divide up your paper with headings that match the questions, that is fine, but if you want to do it another way, that is fine also. Just be sure that you answer all the questions according to the instructions.

Please also refer to the learning objectives for the course to make sure that you have demonstrated your fulfillment of the learning objectives. Failing to do so will also lower your grade.

Please do not exceed the 15-page limit. Please refer to legal sources and literature as necessary with complete bibliographical references.

You must hand in your exam at the study secretariat by 12:00 noon on June 10. This document was handed out May 28.

SugarCO

SugarCo is a global producer, processor, and trader of sugar and bioenergy products headquartered in Buffalo, NY. SugarCo employs over 22,000 people in facilities located in 16 different countries. For the past few years, SugarCo has been mired in human rights controversy related to 3 sugarcane mills it operates in Colombia. The Colombian sugarcane mills have been in production since 2006 and fall under the authority of Colombian Sugar, a wholly owned subsidiary of SugarCo. The controversy has centred around a program of large scale land acquisitions “land grabs,” in which almost 1 million hectares of land passed from indigenous communities to SugarCo under an “agricultural development” initiative sponsored by the Colombian government. In addition to losing their land, at least 80 families now find themselves living on the border of sugar plantations supplying SugarCo, where they are exposed to smoke from the burning of sugar cane straw, pollution, pesticides, and intense vehicle traffic that transports sugar cane.

In September 2009, the Inter-American Commission on Human rights (IACHR) demanded that the Colombian government return the land to the indigenous communities. The IACHR stated that the land acquisitions were illegal and subsequent mill operations violated a number of rights of fifteen

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indigenous communities living in the area. After conducting a study, the Colombian government informed the IACHR that they considered the land sales and subsequent mill operations to be in accordance with the law and their human rights obligations and saw no reason to return the purchased land to the indigenous communities. The IACHR responded in 2010 by withdrawing the claim with respect to land grabs and harmful operations.

In 2011, under pressure from NGOs, residents, and investors, SugarCo commissioned an independent Audit of the Colombian sugarcane mills. The primary objective of the audit was to assess the impact of the presence and the activities of the sugarcane mills on human rights. Following the published audit, SugarCo acknowledged that the human rights performance of the company in the Colombian sugarcane mill was not in line with its own ambitions in this field and the expectations of its stakeholders. In 2012 SugarCo published on its website how the company has given substance to the recommendations in the audit. Despite this, the protests have not stopped. Many claim that the audit and subsequent changes are insufficient to correct the human rights violations or compensate the victims. The director of Indigenous International, an NGO that campaigns for indigenous rights, called the SugarCo land grabs ‘undoubtedly the most flagrant example of exploitation of indigenous lands on record.’

Despite these ongoing controversies, SugarCo has also received considerable praise from some NGO’s for its pioneering work in renewable energy and its commitment to supporting development in chronically underdeveloped regions.

From investors, there are different opinions on the current human rights policy of SugarCo towards the indigenous populations. Several investors view the proactive approach of SugarCo following the audit as a positive example and have continued their engagement with SugarCo. On the other hand, several investors have sold their shares due to the environmental pollution and human rights violations and have called on all responsible investors to do the same. As recently as 2013, SugarCo was excluded from investment by the Danish pension fund PeoplePension.

SugarCo maintains an impressively strong balance sheet. In the financial year 2012/13, SugarCo had revenues of US$18.4 billion, and in the first quarter of 2014 it published revenues of US$7.5 billion.

Due to soaring demand for alternative energy, SugarCo is in the process of expanding its ethanol production operations into Brazil via a new venture called BrazSugar. Over half of the financing for BrazSugar came from revenue from the existing Colombian operations. The remaining capital for the new venture was raised by issuing € 3 billion in private stock20 to a few select institutional investors. With financing secured, the Brazilian ethanol venture is scheduled to begin operations in the final quarter of 2014.

INVEST

20 Issuance of Private Stock: Private stock offerings, also known as equity financing is the issuance of share ownership of a corporation through the offering of stocks through private sale to a small number of chosen investors. Private stocks are attractive to many investors because they offer more control than if the owners sold stock to the general public through a public offering

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INVEST, Inc. is a Danish based investment management company21. At the close of 2013, INVEST managed € 89 billion in assets for institutional investors (pension funds) in government, education, construction, housing, and farm industries. All of INVEST’s assets are discretionarily managed. Discretionary management means that INVEST makes the buy-sell decisions without referring to the client for each transaction.

INVEST is one of three institutional investors that purchased private stock in the new BrazSugar venture. INVEST currently holds 15% of the shares of the BrazSugar venture. A German insurance company and an American asset management company each hold 15% of the shares of BrazSugar. The remaining 55% is held by SugarCo.

Additional Facts

The Danish pension fund PeoplePension, which excluded SugarCo from investment, is not a client of INVEST.

INVEST currently does not have a human rights policy, but they do have an environmental responsibility policy. INVEST makes a number of investments in alternative energy projects in keeping with this policy.

INVEST is a member of the Global Compact.

The Assignment

Recently, the INVEST management team attended a seminar on socially responsible investing and as a result have committed to bringing their investment operations in line with the UN Guiding Principles. They have hired you to assist them with this process, particularly as it relates to their relationship with SugarCo. You are being asked to respond to the following concerns and questions:

A. INVEST would like to look further into the possible human rights violations stemming from SugarCo’s activities in Colombia. Identify three priority human rights that should be the focus of INVEST’s assessment of SugarCo. For each of the human rights identified, clearly explain why it is a priority issue and how it is impacted by SugarCo’s activities. These should be based on rights contained in the International Bill of Human Rights instruments.

B. Using the guiding principles, analyse & explain:a. the scope of INVEST’s responsibilities regarding the human rights violations

of SugarCo. in Colombia and b. the potential human rights issues and impact of the new BrazSugar venture.

C. Discuss the potential risks to INVEST of their business relationship with SugarCo via BrazSugar. For the risks identified, explain the source of the risk, the nature and the likelihood of the risk, and how INVEST can reduce or eliminate the risk. Within this

21 Asset management includes all business activities related to the creation and management of investment funds, property or credit portfolios, investments managed on behalf of clients as well as other assets held on a financial institution’s own account. Ownership rights for these funds lie with the asset management clients who often specify strict investment guidelines; however, investment decisions may be taken for them by the asset management business within specific client instructions or general portfolio management constraints.

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risk assessment, briefly address whether there is a risk of liability for SugarCo. or INVEST under the Alien Tort Statute? Why or why not?

D. What concrete steps should INVEST take in its role as an investor to ensure that the violations in Colombia are not repeated in the new venture?

* Please note, you are being asked to prepare this report from a general human rights perspective. You are not being asked to evaluate this as an investment. It is not necessary to rely on specific investment related international agreements or documents that do not appear in the human rights instruments we have reviewed in class.

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Documents

Human rights implications of bioethanol production ... - IBP Web viewOf the focus rights in this chapter, ... about-land-grabbing-by-european-companies-in-colombia.html. ... occurring