Increased scrutiny of human rights governance and compliance 6 min read
Australia is rapidly transitioning away from a centralised, coal-based energy system to one that is more decentralised and focused on the renewable energy mix. This transition is being accompanied by increasing scrutiny of the human rights performance of renewables projects, including new benchmarking and greater numbers of complaints.
It is critical to know what practical steps to take towards implementing and embedding a strong approach to human rights compliance.
Key takeaways
- The current complaint against ElectraNet in the Australian OECD National Contact Point regarding alleged impacts on Aboriginal heritage sites is indicative of the form that human rights impacts might take and the trend in private sector actions.
- This forms part of a broader trend of the crystallisation of the "S" in ESG, as human rights and other social issues faced by businesses are more clearly defined and strongly scrutinised.
- Renewables companies should take practical steps towards implementing and embedding a robust approach to human rights and broader ESG compliance, including ensuring that human rights policies and practices are properly embedded into overall compliance frameworks.
Increasing scrutiny of the human rights performance of renewables companies
The transition towards a renewable energy mix is prompted by (amongst other things) supply concerns, a growing consumer desire for renewable energy, and advances in renewable technology. The transition has been framed as part of Australia's push to 'build back better' in the post-COVID environment.
The transition is accompanied by increasing scrutiny of the human rights performance of renewables projects. This scrutiny is taking place through benchmarking the performance of companies. For example:
- A new renewable energy and human rights ratings standard established in July 2020, from the public interest organisation Business & Human Rights Resource Centre. The standard assesses large renewables companies on their commitment to respect human rights in their operations and supply chains.1
- The increasing scrutiny is also resulting in greater numbers of allegations and complaints, in particular to non-judicial forums such as the OECD National Contact Points (NCP).
Implementing effective human rights governance and compliance
Renewables companies are now in the spotlight, and should take practical steps towards implementing and embedding a strong approach to human rights compliance. This should include ensuring that human rights policies and practices are properly embedded into overall compliance frameworks.
Multinational enterprises with governance and compliance systems which span their global operations should be aware of the novel ways in which claimant groups may seek recourse, in order to calibrate the approach to group-wide risk management and dispute resolution.
Renewables projects should apply:
- The lessons learned over the last decide in regards effective implementation of the OECD Guidelines, UN Guiding Principles on Business and Human Rights, and other leading international standards.
Companies should:
- Ensure they have a human rights policy commitment that is well understood by the business and mapped into procedures. The policy commitment should be supported by appropriate risk-based human rights due diligence;
- Implement internal reporting procedures that extend to the board level, with board oversight of any risk assessment findings and an executive granted responsibility for overseeing human rights as a compliance risk;
- Implement external reporting procedures that review the development of soft law requirements in the jurisdictions where the companies operate, noting that these requirements are becoming more settled and enforceable with time; and
- Businesses that interact with indigenous communities and traditional landholders, for example, should confirm that their practices are consistent with current international standards, and update procedures to the extent they fall short.
International human rights standards also require companies to have in place effective operational level grievance mechanisms. These mechanisms should provide an accessible, transparent process for the business to respond to concerns of interested parties before issues progress to non-judicial complaints and/or litigation.
As we are seeing, a failure to identify and manage human rights impacts can expose companies to litigation, non-judicial complaints, and other forms of adverse scrutiny.
What should you be thinking about?
- Embed governance processes and risk management systems that are tailored to your risk footprint
- Review policies and procedures to ensure they reflect international best practice and stakeholder expectations, recognising that this is a fast-evolving area
- Ensure risk assessment and data management systems are up to scratch, and that communication is clear and appropriate reporting lines and procedures are in place
- Provide training that is tailored to the needs and responsibilities of your teams
- Implement site-level grievance mechanisms that take into account the views of rightsholders, and audit these mechanisms periodically for effectiveness against accepted criteria
How we can help
Allens has unrivalled expertise advising on business and human rights issues. Our approach always emphasises the prevention or minimisation of adverse human rights impacts, in line with internationally accepted standards such as the UN Guiding Principles on Business and Human Rights. We have extensive experience advising on risk management and compliance systems designed to identify, address and mitigate the risk of potential adverse impacts.
However, we recognise that, in some instances, issues can arise. In such cases we can assist your organisation with crisis response, investigations, and stakeholder management to guide your organisation through the challenging and nuanced business and human rights landscape.
Case study: complaint against ElectraNet on Indigenous rightsThe current complaint against ElectraNet in the Australian OECD NCP regarding alleged impacts on Aboriginal heritage sites is indicative of the form that human rights impacts might take and the trend in private sector actions.2 The OECD NCPs are national (ie State-based) institutions that provide a non-judicial dispute resolution process. Any individual, organisation, or community that believes a company's actions are inconsistent with the OECD Guidelines for Multinational Enterprises (the OECD Guidelines) may lodge a complaint with the OECD NCP. The OECD Guidelines include chapters on environmental and human rights, including expectations on companies to manage their impacts on Indigenous people. The OECD NCP will mediate the dispute and can propose (but not impose) outcomes. The complaint and the outcome of the process is public, and the OECD NCP will issue a final statement which may make recommendations to the parties. Non-judicial dispute resolution forums (such as the OECD NCPs and UN Special Procedures) are growing in prominence and influence to resolve human rights-related grievances. These forums are attractive to claimant groups as they can be low cost and high-profile. The absence of jurisdictional and standing issues also mean they are available to claimant groups where domestic remedies may have been denied. In this way, they can overcome obstacles for claimants that may arise due to the complexities of modern international business and corporate structures. In October 2020, a complaint was lodged with the Australian OECD NCP alleging that ElectraNet's construction of electricity facilities in South Australia damaged Aboriginal heritage sites. The complaint alleges that ElectraNet did not carry out appropriate human rights due diligence of potential adverse impacts. In February 2021 the Australian OECD NCP published its Initial Assessment, finding that the complaint merits further investigation. Traditionally, the subjects of such complaints in the human rights space have been resources companies with significant environmental and social footprints. However, there is a clear shift to focus on potential impacts arising from renewables projects. The ElectraNet complaint also highlights that business engagement with, and impacts on, indigenous peoples and cultural heritage is increasingly in the spotlight. The issue will remain a strong focus for investors, shareholders and community groups in 2021 and beyond. |