The new IFC Performance Standards refers to the “Protect, Respect and Remedy” Framework (Framework) and associated Guiding Principles (the Guiding Principles) approved by the United Nations Commission on Human Rights in 2011. According to the Framework, to “respect” human rights means that businesses must recognize a private duty to address human rights issues, even in the context of State actions that are not be in accordance with international legal norms.
The Framework defines “due diligence” to comprise four components:
- Development of a human rights policy statement;
- Periodic assessment of actual and potential human rights impacts of company activities and relationships;
- Integrating commitments and assessments into internal control and oversight systems; and
- Tracking and reporting performance.
Despite the human rights protections afforded by earlier versions of the Performance Standards, the IFC acknowledged these versions were not “systematically aligned with human rights” in the manner expected by some stakeholders. The IFC’s approach to human rights has focused on identifying the linkages between environmental and social considerations in business investment and the concept of human rights, while providing clarity on the IFC’s commitment to respect human rights through its environmental and social due diligence processes.
To respond, the IFC did enact changes that are reflected in the 2012 iteration of the IFC Performance Standards that take account of new developments in the field of business and human rights. This is done in two primary ways, through the Policy on Environmental and Social Sustainability (the Policy) of the Sustainability Framework and in the Guidance Note to Performance Standard 1, "Assessment and Management of Environmental and Social Risks and Impacts".
The Policy states at paragraph 12:
IFC recognizes the responsibility of business to respect human rights, independently of the state duties to respect, protect, and fulfill human rights. This responsibility means to avoid infringing on the human rights of others and to address adverse human rights impacts business may cause or contribute to. Meeting this responsibility also means creating access to an effective grievance mechanism that can facilitate early indication of, and prompt remediation of various project-related grievances. IFC’s Performance Standards support this responsibility of the private sector. Each of the Performance Standards has elements related to human rights dimensions that businesses may face in the course of their operations. Consistent with this responsibility, IFC undertakes due diligence of the level and quality of the risks and impacts identification process carried out by its Clients against the requirements of the Performance Standards, informed by country, sector, and sponsor knowledge.
In addition, footnote four of this paragraph of the Policy states that the IFC will be guided by the International Bill of Human Rights and the eight core conventions of the International Labour Organization. This commitment is further embedded into Performance Standard 1, at paragraph three of Guidance Note 1, which states:
Business should respect human rights, which means to avoid infringing on the human rights of others and address adverse human rights impacts business may cause or contribute to. Each of the Performance Standards has elements related to human rights dimensions that a project may face in the course of its operations.
Human rights due diligence is further addressed in Performance Standard 1 at footnote 12, which states that in “limited high risk circumstances” it may be appropriate for the Client to complement its environmental and social risks and impacts identification process with specific human rights due diligence as relevant to the particular business. Specific reference to the Framework and Guiding Principles is made in paragraph 45 of Guidance Note 1.
In addition, paragraph 46 of Guidance Note 1 states that companies should also be mindful that agreements they negotiate with host governments, concessions, and similar entities not be drafted in a way that could interfere with the human rights of parties potentially affected by the project, and the State’s bona fide efforts to meet its human rights obligations. Guidance Note 1 states that when negotiating stabilization clauses in these contracts, companies should not propose to impose economic or other penalties on the State in the event that the State introduces laws that are of general application and reflect international good practice in areas such as health, safety, labour, the environment, security, non-discrimination, and other areas that concern business and human rights. Together, these references are intended to incorporate the Framework and Guiding Principles into the overall set of considerations relevant to the implementation of the Sustainability Framework.
Due diligence against these Performance Standards will enable the Client to address many relevant human rights issues in its project, before these issues manifest into problems (legal, reputational or financial) that affect the sustainability of the project.
GN 1 states that if Clients decide to undertake business human rights due diligence they may refer to the human rights aspects of the risks and impacts identification and management processes set out in a joint publication of the International Business Leaders Forum and IFC entitled the “Guide to Human Rights Impact Assessment and Management (HRIAM)” (the Guide). The Guide was released near simultaneously with the updated Sustainability Framework and is intended to map the relationship between the Performance Standards and the Guiding Principles and to facilitate due diligence with respect to human rights issues. More information on the HRIAM can be found here.
Human rights due diligence is also regularly conducted in relation to the laws of host countries, and as such should be a part of comprehensive legal due diligence for a project.