32/45 Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises
Document Type: Final Report
Date: 2016 May
Session: 32nd Regular Session (2016 Jun)
Agenda Item: Item3: Promotion and protection of all human rights, civil, political, economic, social and cultural rights, including the right to development
GE.16-07306(E)
Human Rights Council Thirty-second session
Agenda item 3
Promotion and protection of all human rights, civil,
political, economic, social and cultural rights,
including the right to development
Report of the Working Group on the issue of human rights
and transnational corporations and other business
enterprises
Note by the Secretariat
The Secretariat has the honour to transmit to the Human Rights Council the report of
the Working Group on the issue of human rights and transnational corporations and other
business enterprises, prepared pursuant to Council resolutions 17/4 and 26/22. In the report,
the Working Group examines the duty of States to protect against human rights abuses
involving those business enterprises that they own or control, which are generally referred
to as State-owned enterprises. Many States the world over manage large State-owned
enterprise portfolios and those enterprises have emerged as significant actors in the global
economy. State-owned enterprises can have important human rights impacts, both positive
and negative. Yet, not enough attention has been paid to their human rights responsibilities
and impacts, nor to the duties of States in this regard.
The report calls attention to and clarifies what States are expected to do in their role
as owners of enterprises and why. The starting point is principle 4 of the Guiding Principles
on Business and Human Rights, which provides that States should take “additional” steps to protect against human rights abuses by business enterprises that are owned or controlled by
the State. The report highlights the persuasive reasons for additional action to be taken by
States in this regard, including policy coherence, legal obligations, reputation and
credibility.
The Guiding Principles do not specify what steps States should take. In the present
report, the Working Group suggests a range of measures that States could take to
operationalize the call to take additional steps with regard to State-owned enterprises, by
building on existing international guidance and national practices related to the corporate
governance of those enterprises.
In working to ensure that all business enterprises respect human rights, there are
compelling reasons for States to lead by example and to do their utmost to ensure that the
enterprises under their ownership or control fully respect human rights. The Working
Group calls on States to demonstrate that leadership.
Contents
Page
I. Introduction ...................................................................................................................................... 3
A. Background, aims and outline of the report ............................................................................ 3
B. Defining State-owned enterprises ........................................................................................... 4
C. State-owned enterprises: state of play ..................................................................................... 4
D. Scope and limits of the report ................................................................................................. 6
II. Normative and policy framework underpinning State action
in relation to State-owned enterprises ............................................................................................. 7
A. State duty to protect against abuse by State-owned enterprises .............................................. 7
B. State-owned enterprises as business enterprises: the corporate responsibility
to respect human rights ........................................................................................................... 9
C. Link between corporate governance and human rights ........................................................... 10
III. Leading by example: operationalizing the requirement to take additional steps ............................. 12
A. Setting expectations ................................................................................................................ 12
B. Mechanisms to set and manage expectations: ownership arrangements ................................. 14
C. Relationship between the State and company boards ............................................................. 15
D. Oversight and follow-up mechanisms .................................................................................... 16
E. Capacity-building ................................................................................................................... 17
F. Requirements of human rights due diligence .......................................................................... 17
G. Requirements of disclosure, transparency and reporting ........................................................ 18
H. Ensure effective remedy ......................................................................................................... 19
IV. Conclusions and recommendations ................................................................................................. 20
A. Conclusions ............................................................................................................................ 20
B. Recommendations ................................................................................................................... 21
I. Introduction
A. Background, aims and outline of the report
1. In the present report, the Working Group on the issue of human rights and
transnational corporations and other business enterprises examines the duty of States to
protect against human rights abuses involving those business enterprises that they own or
control, which are generally referred to as State-owned enterprises.
2. The starting point for the present discussion is the Guiding Principles on Business
and Human Rights: Implementing the United Nations “Protect, Respect and Remedy”
Framework.1 Since their unanimous endorsement by the Human Rights Council in 2011,
the Guiding Principles have become the authoritative global reference for preventing and
addressing adverse human rights impacts arising from business-related activity, including
by State-owned enterprises. Guiding principle 4 provides that States should take
“additional” steps to protect against human rights abuses by business enterprises that are
owned or controlled by the State, as well as by other entities such as export credit agencies
that are seen as being closely associated with the State. Guiding principle 4 does not,
however, clarify what these steps might be.
3. Why are States explicitly expected to take additional action to protect against human
rights abuses by State-owned enterprises? Is it not sufficient that States are required to take
appropriate steps to ensure that all companies, irrespective of structure and ownership,
respect human rights? And what are the normative, policy and practical implications of
guiding principle 4? These are some of the questions that the present report will address.
4. The Working Group considers that it is important to clarify the particular duties of
States with respect to the enterprises that they own or control. This goes to the core of how
a State should behave in its role as owner of companies and the ways in which its
ownership model is aligned with its international human rights obligations. In the present
report, the Working Group will highlight the compelling reasons why States should take
additional action in this regard, including policy coherence, legal obligations, reputation
and credibility.
5. The Working Group notes a general lack of attention, in practice, on the part of
States and other actors to the implications of guiding principle 4 with respect to State-
owned enterprises. Policies, guidelines and good practices are lacking at both the national
and international levels. Governance and protection gaps exist, which must be addressed.
6. Thus, the present report has two objectives: first, to call attention to and clarify what
States are expected to do under the Guiding Principles regarding the enterprises that they
own or control and why; and second, to help States to better implement the Guiding
Principles by suggesting a range of measures that they could take to operationalize the
requirement of additional steps to ensure that State-owned enterprises respect human rights.
7. Section I of the report discusses the state of play of State-owned enterprises, their
definitions and the scope of the report. Section II discusses the normative and policy
implications of guiding principle 4 and the reasons behind the call on States to take
additional steps. Section III highlights a range of measures that States could and should take
to operationalize the call to take additional steps. The report ends with concrete
recommendations to States and other stakeholders.
1 See A/HRC/17/31, annex.
8. The Working Group would like to thank the States that responded to its
questionnaire on the role of States as economic actors.2 Their responses, when relevant to
State-owned enterprises, have been used to inform the present report. Not many States
responded to the questionnaire, thus the geographic scope of information available for the
report is limited. However, efforts have been made to expand the geographic scope of the
report (see section III) and the Working Group welcomes information from the States that
have relevant practices not referred to in the present report. The Working Group intends to
follow up on these issues, including at the fifth annual Forum on Business and Human
Rights to be held in Geneva in November 2016. It looks forward to cooperating further on
these issues with States, State-owned enterprises and other interested partners.
B. Defining State-owned enterprises
9. Countries differ greatly with respect to the range of entities that they consider as
State-owned enterprises. For the purposes of the present report, the Working Group uses the
definition contained in the OECD Guidelines on Corporate Governance of State-Owned
Enterprises,3 which reads as follows:
Any corporate entity recognized by national law as an enterprise, and in which the
State exercises ownership, should be considered as a State-owned enterprise. This
includes joint stock companies, limited liability companies and partnerships limited
by shares. Moreover statutory corporations, with their legal personality established
through specific legislation, should be considered as State-owned enterprises if their
purpose and activities, or parts of their activities, are of a largely economic nature (p.
15).
10. The OECD Guidelines on Corporate Governance of State-Owned Enterprises
clarifies the relationship between ownership and control and places emphasis on effective
control:
the Guidelines apply to enterprises that are under the control of the State, either by
the State being the ultimate beneficiary owner of the majority of voting shares or
otherwise exercising an equivalent degree of control. Examples of an equivalent
degree of control would include, for instance, cases where legal stipulations or
corporate articles of association ensure continued State control over an enterprise or
its board of directors in which it holds a minority stake (ibid.).
11. Thus, there might be cases where a State, as a minority shareholder, does exercise
effective control and, as a result, the OECD Guidelines on Corporate Governance of State-
Owned Enterprises and principle 4 of the Guiding Principles would apply.
C. State-owned enterprises: state of play
12. State-owned enterprises are important players in domestic markets and increasingly
so in the global economy. Despite waves of privatization in the 1980s and 1990s, many
States still manage large State-owned enterprises portfolios. Over the past decade, the
2 They are: Brazil, Chile, Colombia, Cuba, Cyprus, Denmark, France, Georgia, Ghana, Italy, Kenya,
Norway, Republic of Korea, Sweden, Switzerland, Kyrgyzstan, Netherlands, Russian Federation,
United Kingdom of Great Britain and Northern Ireland, United States of America. All responses are
available as received at www.ohchr.org/EN/Issues/Business/Pages/ImplementationGP.aspx.
3 Organization for Economic Cooperation and Development, OECD Guidelines on Corporate
Governance of State-Owned Enterprises, 2015 Edition (Paris, 2015).
influence of State-owned enterprises has also been on the rise in the global economy. The
proportion of State-owned enterprises among the Fortune Global 500 companies is
estimated to have grown from 9.8 per cent in 2005 to 22.8 per cent in 2014, with US$ 389.3
billion in profits and US$ 28.4 trillion in assets. This rise is driven primarily by developing
economies, in particular China.4 These figures only comprise publicly listed companies,
thus, the overall share of State-owned enterprises in the global economy is likely to be
greater.
13. Traditionally, State-owned enterprises have had a solely national focus on sectors
considered of national importance, such as energy, infrastructure and public utilities.
Nowadays, State-owned enterprises, while still present in these sectors, are also active in a
large range of sectors, such as finance.5 They also increasingly operate globally. In 2014,
for instance, there were at least 550 State-owned transnational corporations, both listed and
unlisted, from developed and developing countries. While the number is relatively small,
the number of their foreign affiliates and the scale of their foreign assets are significant,
with over 15,000 foreign affiliates and estimated foreign assets of over US$ 2 trillion.6 In
addition, State-owned enterprises are increasingly active in mergers and acquisitions of
companies worldwide.7
14. The rationale for State ownership has varied over time and is multifaceted, with
reasons including providing public goods, fostering industries that would not be developed
through private investment, generating government revenue and functioning as a crisis
response tool.8 In addition to their commercial activities, some State-owned enterprises are
also tasked with fulfilling specific public policy outcomes. State-owned enterprises are
owned not only by central or federal Governments, but also by local and sub-regional
governments.
15. Concerns have been raised that the advantages enjoyed by such enterprises owing to
their relationship with State agencies, such as direct subsidies, preferential regulatory
treatment and State-backed guarantees, lead to their being less transparent, accountable or
efficient, enjoying a position of market domination and operating with higher levels of
impunity.9 Against this backdrop, there has been a trend to reform the sector and encourage
4 Only entities in which the Government held 50 per cent or more shares were considered. See G.
Kwiatkowski and P. Augustynowicz, “State-owned enterprises in the global economy – analysis
based on Fortune Global 500 list”, Managing Intellectual Capital and Innovation for Sustainable and
Inclusive Society: Proceedings of the MakeLearn and TIIM International Conference, (Bari, Italy, 27-
29 May 2015), pp. 1739-1747); and Przemyslaw.Kowalski and others, “State-owned enterprises:
trade effects and policy implications”, OECD Trade Policy Paper No. 147 (22 March 2013), pp. 5
and 188.
5 Kwiatkowski and Augustynowicz, “State-owned enterprises in the global economy”, p. 1744 (see
footnote 4).
6 United Nations Conference on Trade and Development (UNCTAD), World Investment Report:
Investing in the SDGs: An Action Plan (New York and Geneva, 2014), pp. 20-21. State-owned
transnational corporations are defined here as corporations that are at least 10 per cent owned by the
State or public entities, or in which the State or public entity is the largest shareholder or has a
“golden share” (p. 34).
7 For instance, in the European Union, State-owned enterprises accounted for 70 per cent of the total
Chinese investment in 2015. Thilo Hanemann and Mikko Huotari, “A new record year for Chinese
outbound investment in Europe” (Mercator Institute for China Studies, February 2016), p. 5.
8 Kowalski and others, “State-owned enterprises”, pp. 11-13 (see footnote 4).
9 See for example, Kowalski and others, “State-owned enterprises”, p. 4; Arief Budiman, Diaan-Yi Lin
and Seelan Singham, “Improving performance at state-owned enterprises”, (McKinsey & Company,
May 2009), available at www.mckinsey.com/industries/public-sector/our-insights/improving-
performance-at-state-owned-enterprises; and Institute for Human Rights and Business, “Human rights
the efficient, transparent and accountable performance of State-owned enterprises.
International guidelines on corporate governance have been developed to that end (see
section II below).
16. Concerns have also been raised about the apparent lack of awareness of many State-
owned enterprises of their responsibility to respect human rights and their poor
performance in this regard. A study by the Business and Human Rights Resource Centre on
the human rights commitments of companies showed that, of the 180 companies contacted
between 2014 and 2015, State-owned enterprises were the least responsive.10 Although the
picture is mixed, with a number of State-owned enterprises having made commitments on
human rights,11 allegations of human rights abuses by such enterprises in their home
countries and in their operations abroad have been documented, including labour-related
abuses, environmental damage, land rights violations and intimidation and defamation of
human rights defenders.12
17. Reports of human rights abuses, and companies’ listings of human rights or
environmental, social and corporate governance performance, tend not to differentiate
between private companies and State-owned enterprises, which makes it difficult to
ascertain the human rights performance of those enterprises overall. Also, State-owned
enterprises’ respect for human rights can depend on varying degrees of both State
requirements and other incentives, such as industry standards.
D. Scope and limits of the report
18. In addition to State-owned enterprises, guiding principle 4 explicitly mentions
entities that are closely associated with the State, such as export credit agencies and official
investment insurance or guarantee agencies as well as development agencies and
development finance institutions. However, discussion of these entities is not within the
scope of the present report.
19. The report focuses only on State-owned enterprises, in the traditional sense. It does
not include sovereign wealth funds,13 which, although not explicitly mentioned in guiding
principle 4, fall under the category of businesses that are owned or controlled by the State.
Sometimes considered a special type of State-owned enterprise, what matters is that they
are owned or controlled by the State, regardless of their precise corporate form. Sovereign
wealth funds have emerged as a significant force in global finance, managing assets
estimated to be close to US$ 6.4 trillion in 2014.14
in the political economy of states: avenues for application”, State of Play series No. 3 (March 2014),
p. 51.
10 See Business and Human Rights Resource Centre, “Action on business and human rights: Where are
we now? - Key findings from our Action Platforms (March 2015), p. 4.
11 By 1 April 2016, 242 State-owned enterprises out of around 8,700 self-reported business participants
had joined the United Nations Global Compact initiative (actual number may differ slightly as this is
based on self-reporting of State-owned status). Database available at unglobalcompact.org.
12 See Human Rights and Business Dilemmas Forum, “Working with SOEs”, available at www.hrbdf.org/dilemmas/working-soe/#.Vp-yFU3bLIU; and information on the Business and
Human Rights Resource Centre website, www.business-humanrights.org/.
13 See the Santiago Principles, available at: http www.iwg-swf.org/pubs/eng/santiagoprinciples.pdf.
14 UNCTAD, World Investment Report 2014 pp. xvii-xviii (see footnote 6).
20. Given the potential impacts and leverage that all of the above-mentioned enterprises
have on human rights,15 the Working Group encourages stakeholders to give priority to
their human rights responsibilities and those of the associated States.
21. In the same vein, it is worth recalling that guiding principle 4 is part of what the
Guiding Principles call the “State-business nexus”, which also encompasses Principles 5
and 6. The State-business nexus includes situations where the State is an economic actor in
its own right, when it contracts or otherwise engages with companies to provide services
that may impact on human rights, or when it conducts commercial transactions
(procurement) with companies. These issues are beyond the scope of the present report, but
deserve more attention.
II. Normative and policy framework underpinning State action in relation to State-owned enterprises
A. State duty to protect against abuse by State-owned enterprises
1. Requirement to take “additional” steps
22. The Guiding Principles make it clear that, in relation to the State duty to protect,
States should do more than simply treat State-owned enterprises as any other business
enterprise. Guiding principle 4 requires that “States should take additional steps to protect
against human rights abuses by business enterprises that are owned or controlled by the
State, ... including, where appropriate, by requiring human rights due diligence”. However,
the Guiding Principles do not specify what those steps should be. The Working Group
makes suggestions to that effect in section III of the present report.
23. The additional steps to be taken can be understood as measures in addition to those
outlined in Principles 1 to 3, which are applicable to all companies. These principles require
States to take appropriate steps to prevent, investigate, punish and redress human rights
abuses by businesses, as well as clearly set expectations with regard to respect for human
rights and discharge their obligations through various regulatory and policy actions.
24. The international policy framework is moving towards reinforcing the call made in
principle 4. In a recent recommendation, the Council of Europe Committee of Ministers
recommended that “Member States should apply additional measures to require business
enterprises to respect human rights, including, where appropriate, by carrying out human
rights due diligence, that may be integrated into existing due diligence procedures, when
member States … own or control business enterprises”.16
25. However, the requirement to take additional steps does not mean that States should
be any less concerned about protecting against abuses by private enterprises. The ultimate
goal is to achieve full respect for human rights by all enterprises, irrespective of ownership.
The requirement emphasizes that States, as owners of enterprises, should use the additional
means at their disposal to protect against abuse.
15 Note recent positive developments in this regard with the adoption in March 2016 by Norges Bank
Investment Management, which manages Norway’s Pension Fund, of “Human rights: expectations
towards companies”, available at www.nbim.no/en/responsibility/risk-management/human-rights.
16 See recommendation CM/Rec(2016)3 on human rights and business, para. 22.
2. Policy rationale
26. The Guiding Principles and their commentaries explicitly set out the reasons why
greater expectations are placed on States in relation to enterprises that they own or control.
These relate to the close relationship between the State and the enterprise, the means at the
disposal of the State for monitoring and ensuring respect for human rights and leverage.
The commentary to principle 4 recalls that, the closer a business enterprise is to the State,
or the more it relies on statutory authority or taxpayer support, the stronger the State’s
policy rationale becomes for ensuring that the enterprise respects human rights. Where
States own or control business enterprises, they have greatest means within their power to
ensure that relevant policies, legislation and regulations regarding respect for human rights
are implemented. Senior management typically reports to State agencies and associated
government departments have greater scope for scrutiny and oversight, including ensuring
that effective human rights due diligence is implemented.
27. It is thus a matter of policy coherence. Governmental departments and entities
tasked with exercising State ownership — often the Ministries of Finance or of Economy
— need to be able to act in a manner that is compatible with the overall human rights
obligations of the State. The commentary to principle 8 of the Guiding Principles calls on
Governments to support and equip departments and agencies that shape business practices
to be informed of and act in a manner compatible with these obligations.
28. It is also a matter of legitimacy and credibility. The State should not ask less of
companies that are closely associated with it than it asks of private businesses. The human
rights record of a State-owned enterprise is often associated with that of the State and vice-
versa. There are significant expectations for States to “get their own house in order”. In
turn, businesses are much more likely to accept directives from the State if they consider
that the State is leading by example and ensuring that the entities closest to, if not directly
associated with, it respect human rights.
3. International law implications
29. Additional reasons for greater action on the part of States with regard to State-owned
enterprises relate to State obligations under international human rights law and general
international law.
30. United Nations human rights treaty bodies suggest that States may breach the duty
to respect or to protect under international human rights law owing to human rights abuses
by State-owned enterprises.17
31. Treaty bodies usually refer to the duty to protect against abuse by third parties,
including private and State-owned business enterprises. The State could be held responsible
for not taking all reasonable steps to prevent, mitigate and remediate the abuse.
32. At times, treaty bodies have also associated the human rights impacts of State-
owned enterprises with the State duty to respect, considering such enterprises as quasi-State
organs or agents and assuming that they are wholly owned or controlled by the State. The
Committee on Economic, Social and Cultural Rights provides that the duty to respect
requires the State to refrain from unlawfully polluting air, water and soil, for example
through industrial waste from State-owned facilities.18 The Committee on the Elimination
of Discrimination against Women has often called on States to increase the number of
17 See A/HRC/4/35/Add.1; and the Universal Human Rights Index available at www.uhri.ohchr.org/en.
18 See the Committee’s general comments No.14 (2000) on the right to the highest attainable standard of
health, para. 34; No. 15 (2002) on the right to water, para. 21; and No. 23 (2016) on the right to just
and favourable conditions of work, para. 58.
women in decision-making positions in State-owned enterprises, equating them to other
governmental bodies.19
33. There are situations in which the acts of a State-owned enterprise or the nature of its
relationship to the State are more clearly associated with the State duty to respect. This is
the case when such an enterprise performs public functions — such as managing a prison
— or has delegated authority or is contracted to provide public services. In such cases, the
State must exercise adequate oversight in order to meet its human rights obligations and
ensure respect.20 All these considerations have particular resonance in the context of the
Sustainable Development Goals and national plans to achieve them, given the important
role that businesses, including State-owned enterprises, are expected to play.
34. The commentary to guiding principle 4 states that a human rights abuse by a State-
owned enterprise may also constitute a violation of the State’s own international law
obligations when the acts of the enterprise can be attributed to the State. Public
international law envisages specific conditions under which private persons or entities
which are not State organs according to the internal law of the State concerned may engage
the responsibility of the State.21 Under these rules, abuse by enterprises owned or controlled
by the State may be attributable to the State in question. Here, the issue of whether
particular business entities are State-owned or not is, however, of less importance in
deciding whether their acts are attributable to the State. What matters is whether the
business entity is completely dependent on the State, is empowered by law to exercise
elements of government function and acts under those powers, or acts under the
instructions, direction or control of the State.22 Nevertheless, given the nature of
relationships between State-owned enterprises and States, it is more likely that abuses by a
State-owned enterprise could lead to attribution of State responsibility than those by private
businesses.
B. State-owned enterprises as business enterprises: the corporate
responsibility to respect human rights
35. Although the present report focuses primarily on States’ duties with respect to State-
owned enterprises, it is important to recall that such enterprises are commercial entities that
should respect human rights like any other private enterprise. Guiding principle 14 provides
that “the responsibility of business enterprises to respect human rights applies to all
enterprises regardless of their size, sector, operational context, ownership and structure”
(emphasis added). The same reasoning can be found in the OECD Guidelines for
Multinational Enterprises,23 which are aligned with the Guiding Principles, and the
International Labour Organization Tripartite Declaration of Principles concerning
Multinational Enterprises and Social Policy. Thus, it is clear that Principles 11 to 24, applicable to pillar II of the Guiding Principles, and Principles 29 to 31 under pillar III fully
and equally apply to State-owned enterprises.
19 See CEDAW/C/MAR/CO/5; CEDAW/C/BIH/CO/3; A/56/38, para. 171 (Uzbekistan); and A/57/38,
paras. 104 (Estonia) and 150 (Trinidad and Tobago).
20 See also A/HRC/15/31.
21 See A/56/10 and Corr. 1 and 2, para. 77; and Olivier de Schutter, “The responsibility of states”, in
Simon Chesterman and Angelina Fisher, eds., Private Security, Public Order: The outsourcing of
Public Services and Its Limits (Oxford, Oxford University Press, 2009), pp. 17-37.
22 See A/56/10 and Corr. 1 and 2, para. 77, arts. 5 and 8.
23 OECD, OECD Guidelines for Multinational Enterprises (Paris, 2011).
36. In addition to the responsibility of State-owned enterprises to respect human rights
in the same manner as any private business, they are expected to observe the highest
standard of responsible business conduct on par with listed companies. The OECD
Guidelines for Multinational Enterprises suggest that public expectation is often higher for
multinational State-owned enterprises than for fully private companies: “State-owned
multinational enterprises are subject to the same recommendations as privately owned
enterprises, but public scrutiny is often magnified when a State is the final owner” (p. 22).
The OECD Guidelines on Corporate Governance of State-Owned Enterprises note that
State-owned enterprises should observe high standards of transparency and be subject to the
same high quality accounting, disclosure, compliance and auditing standards as listed
companies (p. 24). Such heightened expectations are reflected in a number of State policies
(see section III below).
37. It is important to note that respect for human rights is required for all operations of
State-owned enterprises, regardless of whether they are purely commercial or related to
specific public purposes. The Guiding Principles are concerned about preventing and
addressing adverse human rights impacts throughout all the operations of businesses,
including those of State-owned enterprises.
C. Link between corporate governance and human rights
38. In order to ensure international policy coherence and effectiveness, the Working
Group considers it essential to build on existing guidelines and models for better
governance and accountability of State-owned enterprises in order to enhance the
management of their human rights impacts. The OECD Guidelines on Corporate
Governance of State-Owned Enterprises and the G20/OECD Principles of Corporate
Governance24 are the most relevant documents to the present discussion. They provide a
robust template for governance of State-owned enterprises. They are also closely linked to
existing guidance on responsible business conduct and human rights, in particular the
OECD Guidelines for Multinational Enterprises and the Guiding Principles on Business
and Human Rights. Although approved by OECD member States only, the OECD Guidelines on Corporate Governance of State-Owned Enterprises and the G20/OECD
Principles of Corporate Governance, which have also been approved by the Group of 20
(G20), have achieved the rank of an international benchmark and are implemented and
promoted beyond OECD member States.25
39. The Working Group notes the conceptual and normative links between corporate
governance, on the one hand, and responsible business conduct and human rights, on the
other. At a fundamental level, all the instruments cover the governance of business. The
OECD Guidelines on Corporate Governance of State-owned Enterprises are
“recommendations to governments on how to ensure that SOEs operate efficiently,
transparently and in an accountable manner” (Foreword). This is very much in line with the
aims of guiding principle 4 (with accountability being understood here with reference to
human rights impacts).
40. The OECD Guidelines on Corporate Governance of State-Owned Enterprises and
the OECD Guidelines for Multinational Enterprises acknowledge their mutual relevance
and each suggests that States take into account the other. The Guidelines for Multinational
24 See OECD, G20/OECD Principles of Corporate Governance (Paris, 2015).
25 Three non-OECD countries — Colombia, Latvia and Russian Federation — have formally associated
themselves with the Guidelines; see also World Bank, Corporate Governance of State-owned
Enterprises: A Toolkit (Washington D.C., 2014).
Enterprises, for instance, consider corporate governance important for the implementation
of responsible business conduct principles and standards. The recommendations on
disclosure and transparency are very similar in both guidelines and explicitly aligned in
relation to stakeholder relations. The OECD Guidelines on Corporate Governance of State-
Owned Enterprises provide that: “State ownership policy should fully recognize SOEs’
(State-owned enterprises) responsibilities towards stakeholders …. It should make clear any
expectations the State has in respect of responsible business conduct by SOEs. … SOEs
should observe high standards of responsible business conduct” (chap. V).
41. From an operational perspective, the corporate governance framework offers a
useful anchor for implementing human rights requirements and is often already available at
the national level. Corporate governance involves a set of relationships between a
company’s management, its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives of the company are set,
and the means of attaining those objectives and monitoring performance are determined.26
Several States are using the mechanisms set up for corporate governance to spell out and
implement their expectations that State-owned enterprises respect human rights (see section
III below).
42. The OECD Guidelines on Corporate Governance of State-Owned Enterprises also
help to clarify the role and responsibilities of the State as owner. Active ownership is at the
core of these guidelines. The guidelines constitute the “internationally agreed standard for
how governments should exercise the State ownership function to avoid the pitfalls of both
passive ownership and excessive State intervention” (p. 3). States are expected to act as “an
informed and active owner, ensuring that the governance of SOEs is carried out in a
transparent and accountable manner, with a high degree of professionalism and
effectiveness” (chap. II).
43. Such aims are fully compatible with and necessary for the respect of human rights.27
There is thus no tension between respecting the autonomy of the enterprise’s management,
on the one hand, and ensuring that State-owned enterprises respect human rights and
responsible business conduct standards, on the other. In the same vein, the Working Group
notes that setting up regulations to ensure that State-owned enterprises observe responsible
business conduct and respect human rights is no obstacle to their achievement of economic
targets. Better business conduct, including respect for human rights, leads to sustainable
value creation,28 while the contrary leads to reputational and material risks and costs.29
44. Therefore, the Working Group encourages States to build on the corporate
governance framework to ensure their enterprises respect human rights. This does not mean
that a State cannot choose other mechanisms and tools to do so. However, given the
conceptual and practical proximity between the Guiding Principles on Business and Human
Rights and the Guidelines for Multinational Enterprises, on the one hand, and the
Guidelines on Corporate Governance of State-Owned Enterprises and the Principles of
26 See OECD, G20/OECD Principles of Corporate Governance, p. 9.
27 See report of Human Rights Council Advisory Committee on the issue of the negative impact of corruption on the enjoyment of human rights, A/HRC/2/8/73.
28 OECD Policy Framework for Investment 2015 Edition (Paris,2015), chap. 7; and John Evans and
Dinusha Peiris, “The relationship between environmental social governance factors and stock
returns”, Australian School of Business Research Paper No. 2010ACTL02.
29 See for example, Rachel Davis, Daniel Franks, “The costs of conflict with local communities in the
extractive industry”, paper presented at the First Seminar on Social Responsibility in Mining,
(Santiago, 19-20 October 2011); and Goldman Sachs Global Investment Research, “Top 190 projects
to change the world” (April 2008), cited in A/HRC/14/27.
Corporate Governance, on the other, States may find it easier to implement them in a
mutually reinforcing manner. The following section offers suggestions in this regard.
III. Leading by example: operationalizing the requirement to take additional steps
45. Guiding principle 4 recommends that States take additional steps to ensure that
State-owned enterprises respect human rights, but it does not spell out what those steps
should be. In this section, the Working Group suggests a range of measures that States, as
owners of companies, could take to operationalize their obligations under principle 4. These
suggestions do not exhaustively reflect national practices...Rather, they are based on
selected practices, in particular those of States that responded to the Working Group’s
questionnaire, and on relevant international guidelines on State-owned enterprises,
corporate governance and human rights.30
A. Setting expectations
46. Guiding principle 2 provides that States should set out clearly the expectation that all
business enterprises (including State-owned ones) domiciled in their territory and/or
jurisdiction respect human rights throughout their operations. A similar recommendation
can be found in the OECD Guidelines on Corporate Governance of State-Owned
Enterprises, which provide that the State has a responsibility to communicate to State-
owned enterprises its expectations with regard to their financial and non-financial
performance. With respect to responsible business conduct, it is expected that “SOEs
should observe high standards of responsible business conduct” (p. 25).
47. Several States have issued corporate social responsibility guidelines to their
enterprises, with no mention of human rights. This is the case of India (Guidelines on
Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises31)
and China (Guidelines to the State-owned Enterprises Directly under the Central
Government on Fulfilling Corporate Social Responsibilities32). Only a minority of States
today have set specific human rights expectations of State-owned enterprises. This is not
surprising as many States have yet to adopt policies explicitly requiring businesses in
general to respect human rights.
48. States that have set expectations regarding respect for human rights by State-owned
enterprises generally refer to the Guiding Principles on Business and Human Rights.33
30 Additional criteria for information were: existence of a National Action Plan (NAP) on business and
human rights; countries which the Working Group officially visited; and relevant country practices
showcased at Annual Forums on business and human rights. Unless specified otherwise, all national
policies and practices cited in this section are derived from States’ answers to the Working Group
questionnaire, available at www.ohchr.org/EN/Issues/Business/Pages/ImplementationGP.aspx
All National Action Plans cited are also available at www.ohchr.org/EN/Issues/Business/Pages/
NationalActionPlans.aspx.
31 Available at www.dpemou.nic.in/MOUFiles/Revised_CSR_Guidelines.pdf.
32 These were developed by the State-owned Assets Supervision and Administration Commission of the
State Council (SASAC). See www.en.sasac.gov.cn/n1408035/c1477196/
content.html.
33 See, for example, the Danish National Action Plan – implementation of the UN Guiding Principles on
Business and Human Rights (2014); and the Chilean Principles of Corporate Governance of Public
49. Some States specify particular areas of implementation, for instance requiring State-
owned enterprises to take action to prevent abuse of human rights abroad and through their
business relationships. This is in line with the commentary to guiding principle 2, which
states that “there are strong policy reasons for home States to set out clearly the expectation
that businesses respect human rights abroad, especially where the State is involved in or
supports those businesses.” Norway’s White Paper on “Diverse and value-creating
ownership” requires Norwegian companies to be familiar with the Guiding Principles and
to “respect universal human rights as they are defined in international conventions, in all
their undertakings, and in their dealings with suppliers and business partners.” The Finnish
National Action Plan on Business and Human Rights states that, “in State ownership
steering, companies are required to observe human rights responsibly and transparently
both in their own organizations and in subcontractor chains, in full accordance with the
Guiding Principles.” Ghana requires “business enterprises controlled by the State … to
comply with provisions for human rights due diligence relating to their activities in other
jurisdictions where they operate.”
50. State expectations can be focused on specific areas of human rights to which the
State wishes to give greater impetus. For instance, Portugal requires State-owned
enterprises to adopt gender equality plans.34
51. More importantly, several States require their enterprises to act as role models for
sustainability and human rights. Sweden’s Ownership Policy states that “State-owned
enterprises shall act as role models with regard to sustainable business,” which
encompasses the requirement to comply with relevant guidelines, including the Guiding
Principles and the OECD Guidelines for Multinational Enterprises. In Norway, State-
owned enterprises are expected to work systematically on their corporate social
responsibility and be exemplary in their respective fields. The definition of corporate social
responsibility includes human rights and makes explicit reference to the Guiding Principles.
Switzerland recognizes that it is the special responsibility of the State to safeguard human
rights through State-owned enterprises and notes in particular that “federal enterprises are
required to play an exemplary role”. Although France does not distinguish between the
human rights obligations of private and State-owned enterprises, it expects State-owned
enterprises to “set an example”.
52. All the above examples are consistent with the strong policy rationale of
guiding principle 4 that States should lead by example. Therefore, a logical additional
step that States could take would be to require State-owned enterprises to lead by
example in relation to human rights.
53. A key reason for setting high expectations is linked to the ultimate rationale for State
ownership, namely that “the State exercises the ownership of SOEs in the interest of the
general public”.35 For the Swedish Government, State-owned enterprises are owned
collectively by the Swedish people and are therefore important assets for the entire country.
Governing State-owned companies is a task that imposes considerable responsibility, which
must be performed in an active and professional manner with value creation as an
overarching objective.
54. A further driver for States is managing reputational risk, especially when State-
owned enterprises are globalized companies involved in complex value chains and
Companies (p. 25), which apply to the 22 State-owned companies under the Chilean Public
Companies System.
34 Portugal, Council of Ministers resolution 49/2007.
35 See OECD, Guidelines on Corporate Governance of State-Owned Enterprises, p. 19.
operating in high-risk contexts. For China, fulfilling corporate social responsibility is
important so as “to spread an image as a responsible nation”.36
B. Mechanisms to set and manage expectations: ownership arrangements
55. The OECD Guidelines on Corporate Governance of State-Owned Enterprises
emphasize that expectations established by the Government with regard to responsible
business conduct should be publicly disclosed and mechanisms for their implementation be
clearly established (p. 25). Practices in this regard vary. States can set human rights
expectations for State-owned enterprises in different documents, such as national action
plans on business and human rights or on responsible business conduct, or a State
ownership policy. When it comes to ensuring that expectations set are implemented, models
for exercising ownership offer a particularly useful avenue as they include functions and
tools for implementing the State’s requirements of State-owned enterprises.
56. According to international guidelines and good practices, shareholders should not
interfere with the management and daily operations of enterprises in which they have
holdings. The same applies to States in the exercise of ownership of State-owned
enterprises. The OECD Guidelines on Corporate Governance of State-Owned Enterprises
provide that “the Government should allow SOEs full operational autonomy to achieve
their defined objectives and refrain from intervening in SOE management” (p. 34).
Norway’s Ownership Policy states that “companies in which the State has a holding are …
subject to regulatory and supervisory authorities in the same way as companies in which the
State has no holdings”. The same practice can be found in the Swedish Ownership Policy.
These safeguards are in place to prevent the instrumentalization of State-owned enterprises
for political or private gain and ensure a level playing field with private companies.
57. There are various models for managing ownership.37 Ownership arrangements have
evolved towards greater centralization, which is seen as a guarantee for effectiveness and
ensuring clear distinctions between the roles of the State. Centralized arrangements
delegate ownership functions to one designated entity — the ownership entity —, as is the
case in Finland, France, Mozambique or South Africa. Some countries, such as Chile,
Norway and Sweden, share ownership functions between one main ownership entity and
other ministries, which are often in charge of specific sectors, while other countries, such as
Bhutan and Malaysia, centralize ownership through a company-type structure.
58. Regardless of the model chosen, all government entities and departments in
charge of exercising ownership rights for either all or some State-owned enterprises
should take the steps necessary to ensure that they respect human rights.
59. While this is not yet the case in most countries, there are, nonetheless, practices to
learn from. As examples in this section show, several States, such as Chile, Finland,
Norway and Sweden, unequivocally use their ownership model to ensure that State-owned
enterprises respect human rights, by explicitly stating their expectations in ownership
policies or principles and the tasks that the ownership entity will commit to in order to
ensure respect for human rights.
36 See SASAC Guidelines, guideline 1(4) (see para. 47 above).
37 All examples are from The World Bank Toolkit and answers to the questionnaire.
C. Relationship between the State and company boards
60. In the light of the importance of preventing interference by the State in the
management of enterprises, boards of directors constitute key vehicles for States, in their
role as owners, to manage their relationship with State-owned enterprises. Relations with
the board are also used to express State expectations that human rights be included in the
enterprise’s strategy and objectives.
61. In the Working Group’s view, it is important to establish explicit mandates for
boards to ensure and monitor the implementation by State-owned enterprises of
human rights standards and to account for it. Norway’s National Action Plan on
Business and Human Rights states that “greater involvement by company boards [in human
rights] will improve risk management and thereby help to maintain shareholder value.”
States could formally establish a code of conduct or principles on corporate governance for
State-owned enterprises, as has been done in Chile, Norway and Switzerland. States can
also apply a common code of conduct for both private and state-owned enterprises.38 All of
these codes or principles follow a “comply-or-explain” approach, which means that boards
are expected to account for any deviation from the State’s expectations, which in some
cases may be justifiable.
62. Supervisory and support mechanisms to boards can be set up, which, in addition to
monitoring compliance with State expectations, introduce expert knowledge on issues
relevant to responsible business conduct or human rights. In Sweden, an investment team is
envisaged for each State-owned company, which includes specialists in sustainable
business. Each team analyses the operations, markets and sustainable business practices of
the State-owned enterprises. Various aspects of ownership are addressed, including
strategic objectives, board changes and target fulfilment.
63. Board nomination and evaluation is a useful mechanism for introducing State
expectations into the board agenda and ensuring that expectations are embedded in the
strategy of the enterprise. Board members can be evaluated in relation to the enterprise’s
overall performance with respect to responsible business conduct and human rights. This is
done in Chile, Norway and Sweden.
64. Finally, States should ensure gender equality in the recruitment and membership of
the boards of State-owned enterprises — a measure called for in the OECD Guidelines on
Corporate Governance of State-Owned Enterprises and by United Nations human rights
treaty bodies.39 In its resolution on State ownership policy, the Finnish Government
provides that “the State, in its capacity as owner, complies with the Gender Equality Act
when making appointments to boards of directors”. With regard to enterprises that are
fully/majority owned by the State, it requires that steps be taken to ensure that both women
and men have equal opportunities for advancement and appointment to managerial posts,
including senior management, management teams and other executive positions.40
38 This is the case in Sweden (see the Swedish Code of Corporate Governance) and in South Africa (see
King Report on Governance for South Africa, and King Code of Governance Principles (King III),
2009.
39 See OECD Guidelines on Corporate Governance of State-Owned Enterprises, chap. II.F.2;
CEDAW/C/POL/CO/7-8; CEDAW/C/FIN/CO/6.
40 Finnish Government resolution on State Ownership Policy (2011), p. 9.
D. Oversight and follow-up mechanisms
65. Guiding principle 4 provides that States must ensure that relevant regulations
regarding respect for human rights are implemented by State-owned enterprises and that
they exercise their authority for scrutiny and oversight accordingly. The Council of Europe
Committee of Ministers recommends that States should evaluate measures taken and
respond to any deficiencies as necessary, including by providing adequate consequences.41
66. States can exercise effective oversight in various ways. A first step is to define clear
and achievable targets to measure an enterprise’s performance. Some States set
sustainability targets for their enterprises, alongside financial and public policy targets
(when applicable), while others expect the enterprises to set such targets themselves. In
Switzerland, the Federal Council issues strategic goals every four years for all State-owned
enterprises, which stipulate the expectation of “a corporate strategy committed to
sustainable and ethical principles.” In Chile, a set of targets and indicators involving
financial, management and sustainability elements are defined. For Sweden, the financial
targets and public policy targets (set by the State) and the monitoring of the strategic
sustainability targets (set by the State-owned enterprise) are said to be important tools efor
the State to communicate its expectations as owner. All sustainability targets, including
human rights targets, that are formulated by the company are monitored in the same manner
and through the same mechanisms.42
67. Hence a useful additional step would be for States to set up — or, at a
minimum, require that State-owned enterprises adopt — explicit human rights
targets, and monitor their achievement in the same manner and with the same
mechanisms used for sustainability targets.
68. It is important that targets be balanced with regard to the different purposes of State-
owned enterprises and their overall aim to maximize value to society, including respect for
human rights. Ownership policies in Sweden and Norway contain guidelines on how to
manage the balance between commercial targets, public policy assignment targets, when
applicable, and long-term sustainability targets. In Sweden, the investment teams for
company holdings, which are comprised of specialists in the area of sustainable business,
monitor the sustainability targets of the companies and work on sustainable business. The
evaluation is then integrated into the development of new financial targets and the overall
evaluation of the companies.
69. States can also set up regular dialogues, or ownership meetings, with the boards of
State-owned enterprises to track and assess compliance with targets, including human
rights-related targets. This can be done at the annual general meeting if the State-owned
enterprise operates as a company. Some States, such as Norway, hold additional meetings
dedicated to discussing corporate social responsibility.
70. States could also use assessment tools with more detailed human rights-related
criteria. For instance, in Sweden, a business analysis tool that includes human rights criteria
has been developed for State-owned enterprises. It serves to increase the owner’s awareness
of companies’ risks and opportunities and how they can be managed. The result of the
analysis is taken into account in the ownership dialogue, in monitoring the company’s
development and in the recruitment and nomination of board members. Chile has a similar
41 See recommendation CM/Rec(2016)3, para. 22.
42 Communication with Swedish Ministry of Economy and Innovation in follow-up to Sweden’s answer
to questionnaire.
tool that evaluates performance in relation to key indicators related to corporate social
responsibility, including impact and risk assessments of sustainability issues.
71. The State could also use independent review and audit mechanisms to review
corporate social responsibility or human rights performance. In Sweden and Chile, the State
appoints auditors to review the fulfilment of corporate social responsibility goals by the
board and the chief executive officer of the company.
E. Capacity-building
72. Capacity-building can play an important role in helping State-owned enterprises
fulfil State requirements on human rights. States should promote awareness-raising and
training for members of the boards and management of companies on relevant international
standards. States should also promote the sharing of experience among companies on best
practices and challenges with regard to human rights. For instance, in its National Action
Plan on Business and Human Rights, the Swedish Government commits to increasing
knowledge about the Guiding Principles, due diligence and redress mechanisms in State-
owned enterprises through a series of workshops.
73. States should encourage the participation of State-owned enterprises in relevant
multi-stakeholder and multilateral initiatives related to responsible business conduct and
human rights. In Brazil for instance, 25 State-owned enterprises are taking part in a
business and human rights initiative launched by the National Secretariat for the Promotion
and Defence of Human Rights. At the global level, just under 250 State-owned enterprises
are members of the United Nations Global Compact.43 Given the number of State-owned
enterprises that are active in the extractive and energy sectors, they should be encouraged to
join the Voluntary Principles on Security and Human Rights.44
F. Requirements of human rights due diligence
74. According to guiding principle 4, States should, “where appropriate”, require that
State-owned enterprises conduct human rights due diligence. State-owned enterprises are
also subject to the corporate responsibility to respect (pillar II of the Guiding Principles),
which includes conducting due diligence.
75. The requirement for State-owned enterprises to implement a full due diligence cycle
is not yet common practice. However, several States require State-owned enterprises to
conduct human rights due diligence in line with the Guiding Principles in a general
manner.45 The sector-specific Chinese Due Diligence Guidelines for Responsible Mineral
Supply Chains require enterprises to “observe the Guiding Principles on Business and
Human Rights during the entire life-cycle of the mining project”, including operations
abroad.46
43 Available at www.unglobalcompact.org.
44 Only two State-owned enterprises are currently participating. Available at
www.voluntaryprinciples.org/
45 See for example, the Chilean Principles on Corporate Governance, the Danish National Action Plan
and the Norwegian Ownership Policy.
46 See China Chamber of Commerce of Metals, Minerals and Chemical Importers and Exporters, “Due
Diligence Guidelines for Responsible Mineral Supply Chains”, p. 8. While the Chamber is a business
association, it includes a large number of State-owned enterprises. The Guidelines were developed
76. The Swedish National Action Plan on Business and Human Rights provides that the
State will ensure that State-owned companies, where appropriate, conduct human rights due
diligence in order to assess and address any significant risk to human rights.
77. In cases where due diligence is not mandatory for all State-owned enterprises
and under all circumstances, the Working Group suggests that States define the
criteria under which they will require State-owned enterprises to conduct human
rights due diligence, such as the size of the enterprise, the type of enterprise and its
operations, the political and human rights context and the industry sector in which it
operates.
G. Requirements of disclosure, transparency and reporting
78. Guiding principle 21 emphasizes the importance for businesses to communicate
externally to account for how they address their human rights impacts. Similarly, the OECD
Guidelines on Corporate Governance of State-Owned Enterprises recommend that “SOEs
should report material financial and non-financial information on the enterprise in line with
corporate disclosure standards, and including areas of significant concern for the state as an
owner and the general public” (see sect. VI).
79. The corporate reporting trend is for increased requirements for report on non-
financial information and performance, including human rights. The trend seems clearer
with respect to large and State-owned companies.47 States can, and already do, require
State-owned enterprises to report annually to their owners, including on how they have
achieved the objectives related to sustainability and human rights. Data from the Global
Reporting Initiative shows that, in 2013, 13 out of 45 countries48 had policies or initiatives
for reporting on non-financial information, including on issues related to human rights, that
specifically targeted State-owned enterprises.49 In China, half of the over 1,600
sustainability reports published in 2012 were issued by large State-owned enterprises and
listed companies.50
80. Given those trends and the fact that transparency and accountability are
prominent principles within most international guidelines,51 the Working Group
recommends that States take the additional step to systematically require the
enterprises that they own or control to report on environmental, social and human
rights performance.
81. States could also suggest or require that companies follow an established
methodology to communicate on human rights issues, such as the Global Reporting
Initiative G4 Sustainability Reporting Guidelines, which include references to the Guiding
with OECD guidance. Available at www.mneguidelines.oecd.org/chinese-due-diligence-guidelines-
for-responsible-mineral-supply-chains.htm.
47 Global Reporting Initiative, Carrots and Sticks: Sustainability reporting policies worldwide –today’s
best practice, tomorrow’s trends (2013); see also EU Directive 2014/95/EU regarding disclosure of
non-financial and diversity information by certain large “public-interest entities” with over 500
employees.
48 These were: Brazil, China, Ecuador, Finland, France, Iceland, India, Indonesia, Netherlands, Russian
Federation, South Africa, Spain and Sweden.
49 Global Reporting Initiative, Carrots and Sticks, p. 17.
50 Ibid., p. 27.
51 KPMG, Currents of change: The KPMG Survey of Corporate Responsibility Reporting 2015.
Principles and the Guiding Principles Reporting Framework.52 State-owned enterprises in
Chile, Norway and Sweden, for instance, are asked to report according to the Global
Reporting Initiative guidelines.
82. Finally, aggregate reporting by the State on the activities and performance of the
enterprises it owns is an additional means of improving companies’ transparency. It is also
a way to increase the State’s transparency and accountability with regard to the
requirements it sets for State-owned enterprises. In Norway and Sweden, the respective
ownership entities publish an annual report on the State’s ownership, which reviews the
corporate social responsibility performance of all enterprises.
H. Ensure effective remedy
83. As part of their duty to protect, States must take all appropriate steps to ensure that
victims of human rights abuses have access to effective remedy (pillar III of the Guiding
Principles). This applies to abuses by State-owned enterprises and private companies
equally. Given the separation of powers between the judiciary and the executive branch —
more specifically, in this case, the department or entity exercising ownership rights — the
State duty to ensure access to effective remedy for abuses by State-owned enterprises is not
distinct to its duty to ensure remedy for abuses involving private companies. The ownership
entity must respect the independence of judicial and non-judicial grievance mechanisms
and not interfere in their proceedings. This limits the State’s scope for action as an owner
and might explain the lack of State policies and practices in this regard.
84. As the owner of State-owned enterprises, the State should make sure that: (a)
the enterprises it owns or controls do not obstruct justice; (b) they cooperate fully
with judicial and non-judicial grievance mechanisms; and (c) they fully comply with
their responsibility to respect human rights, including providing remediation for
human rights abuses that they may be causing or contributing to. These considerations
are relevant for all three main categories of remedy mechanisms covered by pillar III of the
Guiding Principles.
85. The first category is State-based judicial mechanisms. States must ensure access to
judicial remedies for victims of all abuses, whether committed by a State-owned enterprise
or a private company. In addition, as the owner of State-owned enterprises, the State needs
to set clear expectations that: (a) when there are legal proceedings against a State-owned
enterprise, the enterprise should not interfere in the judicial proceedings or use its special
relationship with the State to interfere in or block proceedings; (b) States and State-owned
enterprises should carefully consider the circumstances under which the enterprise might
claim immunity based on its association with a State. Claims of State immunity in human
rights cases often constitute a risk of being a barrier in access to remedy. The expectations
of the State as owner of State-owned enterprises should be that the scope for claiming
immunity should be limited to the bare minimum and that State-owned enterprises fully
cooperate in judicial proceedings.53
52 See the United Nations Guiding Principles Reporting Framework (2015), available at
www.shiftproject.org/project/human-rights-reporting-and-assurance-frameworks-initiative-rafi. The
reporting framework enables companies to report in-depth on their responsibility to respect human
rights.
53 See United Nations Convention on Jurisdictional Immunities of States and Their Property; see also the Explanatory Memorandum to Council of Europe Committee of Ministers recommendation
CM/Rec(2016)3, para. 61.
86. The second category is State-based non-judicial mechanisms. Nothing prevents a
State from setting up a dedicated accountability mechanism to address abuses by State-
owned enterprises. For now, States seem to rely on existing mechanisms that address
abuses by any company, whether private or State-owned. One such mechanism is the
National Contact Points for the OECD Guidelines for Multinational Enterprises, which is
established by each adhering Government. States should require State-owned enterprises to
fully cooperate with National Contact Points and other non-judicial mechanisms, to
participate in the processes in good faith and to accept the findings of the mechanisms. For
instance, several State-owned enterprises in Brazil have signed terms of commitment to
better uphold responsible business conduct and follow the OECD Guidelines for
Multinational Enterprises, which include collaboration and dialogue with the National
Contact Points regarding any allegation of non-observance of the guidelines.54 States should
also make it clear that State-owned enterprises should not claim a privileged position with
regard to legitimate State-based mechanisms. In a landmark case, Norway’s National
Contact Point regretted the lack of cooperation by Norges Bank Investment Management,
which manages Norway’s Pension Fund, and stated that it was “particularly regrettable in
light of the Norwegian people’s expectation that applies to State-owned enterprises.”55
87. The third category of remedy mechanisms is non-State-based grievance
mechanisms, including operational-level grievance mechanisms. As with other aspects of
their operations, and in order to fully abide by their responsibility to respect human rights,
State-owned enterprises should be encouraged to be role models in their approach to
remediation. States should require State-owned enterprises to establish or participate fully
in operational-level grievance mechanisms (see guiding principle 29). The mechanisms
must comply with the effectiveness criteria contained in guiding principle 31.
IV. Conclusions and recommendations
A. Conclusions
88. All business enterprises, whether they are State-owned or fully private, have
the responsibility to respect human rights. This responsibility is distinct but
complementary to the State duty to protect against human rights abuses by business
enterprises. This duty requires States to take additional steps to protect against abuses
by the enterprises they own or control. This goes to the core of how the State should
behave as an owner and the ways in which its ownership model is consistent with its
international human rights obligations.
89. State-owned enterprises are an enduring and significant feature of the global
economy. They can have major human rights impacts that are not always positive.
Against this backdrop, there are compelling normative and policy arguments for
States to take additional steps to ensure that State-owned enterprises respect human
rights. Under some circumstances, an abuse of human rights by such enterprises may
entail a violation of the State’s own international law obligations and it is a matter of
policy coherence for States to ensure that enterprises that are closely related to them
54 OECD, Annual Report on the OECD Guidelines for Multinational Enterprises 2014, p. 25, available
at www.mneguidelines.oecd.org/2014-annual-report-oecd-guidelines-for-mnes.htm.
55 Norway National Contact Point for the OECD MNE Guidelines, “Final statement: complaint from Lok Shakti Abhiyan, Korean Transnational Corporations Watch, Fair Green and Global Alliance and
Forum for environment and development vs. POSCO (South Korea), ABP/APG (Netherlands) and
NBIM (Norway)”, 27 May 2013, p. 8.
and over which they have greater control respect human rights. There are also
compelling financial and reputational reasons for States, as active owners of
companies, to do so.
90. While the call to take additional steps applies to all States equally, its precise
implications will be context- and company-specific. In some countries or situations, or
with respect to specific enterprises, the relationship between a State-owned enterprise
and the State will be a very close one and the means at the disposal of the State to
ensure respect for human rights and the level of its control and leverage over the
enterprise will be greater than for others. In all those circumstances, States should
take the utmost care to ensure that those enterprises respect human rights.
91. This does not mean that States should pay less attention to ensuring respect for
human rights by fully private enterprises. The ultimate goal is the full respect for
human rights by all enterprises, irrespective of size, sector, operational context,
structure or ownership. As States work towards that goal, there are still persuasive
reasons for them to lead by example. This will only strengthen their legitimacy in
setting regulations and expectations towards private businesses.
92. The Working Group notes the significant efforts made by a number of States in
all regions of the world to flesh out their duties to ensure that the enterprises they own
or control respect human rights or standards of responsible business conduct. It notes
also the effective models that a few States have developed. Yet, most States do not
seem to fully understand what taking additional steps to protect against human rights
abuse by State-owned enterprises means in practice. Nor does it seem obvious to many
State-owned enterprises that they have a responsibility to respect human rights.
93. While this is no excuse for inaction, the Working Group acknowledges that,
compared to that given to other business and human rights issues, less attention has
been paid by all stakeholders to the human rights impacts of State-owned enterprises.
This report has shown why this situation must change.
94. States, as primary duty bearers under international human rights law, should
lead by example. To show leadership on business and human rights requires action
and dedicated commitment on many fronts. It also includes using all the means at the
disposal of States to ensure that the enterprises under their ownership or control fully
respect human rights throughout their operations. There is untapped potential for
State-owned enterprises to be champions of responsible business conduct, including
respect of human rights. The Working Group calls on States and State-owned
enterprises to demonstrate leadership in this field.
B. Recommendations
95. In the present report, the Working Group suggested a preliminary framework
for analysis and action and elaborated on the measures States should take as owners
of companies. These issues are complex and will have context-specific implications.
The Working Group welcomes feedback from States and other stakeholders on the
report and on the following recommendations:
Recommendations to States
96. States should comprehensively review whether and to what extent they are
meeting their international human rights obligations through the business activities of
the enterprises that they own or control, at home and abroad.
97. Based on that review, States should identify key entry points and measures to
be taken to more effectively discharge their obligations under principle 4 of the
Guiding Principles on Business and Human Rights, taking into account the measures
suggested in Section III of this report. States should specify the precise tasks they
commit to do in this respect in a public document, such as a National Action Plan.
98. At a minimum, States should clearly set their expectations that State-owned
enterprises respect human rights throughout their operations, adopt human rights
commitments and be role models in this regard. States could set out their expectations
in a specific document such as a national action plan or, preferably, amend existing
regulations on ownership, corporate governance or responsible business conduct so as
to expand their coverage.
99. States should be coherent in their implementation of international standards
and not implement them selectively. More specifically, the OECD Guidelines on
Corporate Governance of State-owned Enterprises should be implemented in a
mutually reinforcing manner with the Guiding Principles on Business and Human
Rights and the OECD Guidelines for Multinational Enterprises.
100. States should, as a matter of policy coherence and accountability, ensure that
the scope of any future legally binding instrument on or relevant to business and
human rights covers enterprises that are owned or controlled by the State.
Recommendations to State-owned enterprises
101. State-owned enterprises should strive to be role models and fully meet their
responsibility to respect human rights.
102. To do so, they should adopt appropriate policies and processes to address
abuse, including a policy commitment, human rights due diligence and remediation
mechanisms when harm occurs, which are integrated throughout their operations.
Recommendations to national human rights institutions
103. National human rights institutions should assess whether relevant policies
relating to State-owned enterprises are aligned with the State’s human rights
obligations and provide guidance to the State in this regard.
104. They should provide guidance to State-owned enterprises on their human
rights responsibilities.
Recommendations to international organizations and the United Nations system
105. International organizations and the United Nations system should assist States
and promote coherence in their implementation of international guidelines on
corporate governance, responsible business conduct and human rights.
106. They should promote such coherence when supporting States in developing
national plans to meet the Sustainable Development Goals, especially given the
potentially significant role that State-owned enterprises will play in this regard.
107. They should support initiatives to contribute to building the knowledge base
and competency of boards of directors and management of State-owned enterprises
with regard to respect for human rights.
Recommendations to the United Nations human rights system
108. United Nations human rights treaty bodies and special procedures, in
examining individual communications under their complaint procedures, assessing
specific countries and drafting general comments and recommendations, should
examine the human rights impacts of enterprises that are owned or controlled by a
State and clarify the State’s duty with respect to these enterprises, taking into account
principle 4 of the Guiding Principles on Business and Human Rights.
Recommendations to civil society organizations and academia
109. Civil society and academia should dedicate increased attention to the
implications of State duties with respect to State-owned enterprises and the
responsibility of State-owned enterprises to respect human rights, including in terms
of access to remedy and accountability under national and international law;
110. They should gather data specific to State-owned enterprises and their human
rights commitments and performance, in order to identify gaps and good practices
globally.
Recommendations to business associations
111. Business and employer associations, particularly in countries or sectors with
many State-owned enterprises, should build their own capacity around business and
human rights and offer specific guidance to their members that are State-owned
enterprises on their responsibility to respect human rights.
112. Business associations should use their convening power to share learning and
good practices among State-owned enterprises.