II. Key VSS Actors and Processes

VSS are private regulatory schemes setting specific requirements to address sustainability challenges in global value chains, including human rights and environmental concerns.Footnote ⁵ VSS schemes typically include the following key processes: (i) the development of standards; (ii) the identification of indicators to assess compliance with and continuous monitoring of standards; and (iii) the certification of compliance carried out by independent certifiers, communicated through labels.Footnote ⁶ Although VSS are non-mandatory, enforcement may be achieved through refusal or loss of the certification.Footnote ⁷

VSS systems involve two main actors to carry out the above-mentioned processes: MSIs and TPCs. The first and the second processes are usually undertaken by MSIs, while the third is carried out by TPCs.Footnote ⁸

As the name suggests, MSIs consist of different stakeholders, such as corporations, NGOs and governments, cooperating to achieve a common aim.Footnote ⁹ Although MSIs classify themselves with different labels, such as ‘global non-governmental organizations’ or ‘international non-profit organization’, they are usually constituted in the form of private-law associations or companies. TPCs are mainly set up as corporations.

VSS schemes have de facto become necessary mechanisms for companies to gain better positions on the market and even to enter global supply chains.Footnote ¹⁰ For this reason, it is particularly important to address the responsibility of MSIs and TPCs for human rights abuses committed by members or certified companies.

III. The Bonsucro Case

Bonsucro (formerly, the Better Sugar Cane Initiative Ltd), is a non-profit company limited by guarantee incorporated in the UK. It presents itself as a MSI wishing to ‘accelerate the sustainable production and uses of sugarcane’Footnote ¹¹ by setting and promoting sustainability standards for sugarcane production. Bonsucro profits from the fees paid by the companies joining the network, the admittance to which is granted against companies’ adherence to its Code of Conduct.Footnote ¹² If they so wish, members can be certified against Bonsucro sustainability standards through the assessment of TPCs.

In 2008, the Cambodian government granted a 70-year land concession for sugarcane production to three subsidiaries of Mitr Phol Co. Ltd (MP), a Thai company. Most of the areas covered by the land concessions overlapped with private lands and no or inadequate compensation was provided to the affected rights-holders.Footnote ¹³ Between 2008 and 2009, MP’s subsidiaries carried out violent displacements of the villagers to clear the areas for plantations, leading to further multiple human rights violations such as arbitrary arrests and loss of food security. In 2013, such violations were brought to the attention of the Thai National Human Rights Commission (TNHRC) and confirmed by the Subcommittee for Community Rights of the TNHRC.Footnote ¹⁴ In 2018, a class action against MP was brought before Thai civil courts.Footnote ¹⁵

MP was first admitted as a member of Bonsucro in 2010. In 2011, the Cambodian League for the Promotion and Defense of Human Rights and other NGOs submitted a complaint to Bonsucro’s internal grievance mechanism denouncing MP subsidiaries’ human rights violations in Cambodia. After the complaint, MP voluntarily withdrew from Bonsucro. In 2015, MP was re-admitted as a member, with no re-engagement with, or resolution of the claim raised in 2011.Footnote ¹⁶

In 2019, a group of NGOs filed a specific instance before the UK NCP, arguing that Bonsucro had failed to: (i) conduct an adequate human rights due diligence (HRDD) before admitting MP as a member; (ii) exercise leverage upon MP when re-admitting it in 2015; (iii) put in place a human rights policy commitment in accordance with internationally recognized human rights; and (iv) provide an effective grievance mechanism.Footnote ¹⁷

In its final statement, the UK NCP reached a number of important conclusions. First, it held that Bonsucro, as a London-based non-profit company operating worldwide, should comply with the OECD Guidelines, despite its not-for-profit character. Second, it concluded that there was a link between the harm and Bonsucro by virtue of its business relationship with MP and, by extension, with MP’s subsidiaries. The existence of a business relationship between Bonsucro and MP was substantiated by the membership fees paid by MP, which provided the latter with the use of Bonsucro’s brand and access to other related benefits.

Third, it agreed with the complainants that MSIs have a ‘special leverage’ towards their members, as companies gain reputational benefits from membership. As a consequence, MSIs should make sure they provide the reputational benefits entailed by membership to responsibly-acting businesses only, and found that Bonsucro provided no evidence that it exercised the appropriate leverage towards MP before re-admitting it back in 2015.

Finally, the UK NCP concluded that Bonsucro did not undertake an adequate HRDD, as it failed to provide sufficient information on the minimum benchmark on human rights compliance it required in its admission procedure.

IV. NCP Precedents on VSS Actors

Prior to the Bonsucro case, NCPs already had the chance to deal with the accountability of MSIs and TPCs.

In the case TuK v Roundtable on Sustainable Palm Oil (RSPO), brought before the Swiss NCP in 2018, RSPO was accused of non-compliance with the OECD Guidelines as it had certified a company as compliant with RSPO principles, while it was still involved in unresolved land disputes. The Swiss NCP admitted the complaint notwithstanding the not-for-profit character of RSPO, holding that the OECD Guidelines apply to entities involved in commercial activities, regardless of their legal form, sector or purpose.Footnote ¹⁸ As for the alleged human rights violations, the NCP observed that they were directly linked to RSPO;Footnote ¹⁹ but it did not get to assess the merits of the case because the parties reached an agreement based on the elaboration of an action plan to solve the ongoing claim.

TPCs were accused of breaching the OECD Guidelines in relation to human rights abuses committed by companies they certified in both ECCHR v TÜV and AEFFAA v RINA, brought before the German and the Italian NCPs in 2016 and 2018, respectively.

In both cases, complainants argued that the TPCs failed to exercise leverage to prevent or mitigate corporate abuses, by issuing deficient audit reports and by failing to ensure appropriate auditing standards by their subsidiaries.Footnote ²⁰ While the NCPs admitted the complaints,Footnote ²¹ they did not examine the substantive question on TPCs’ responsibility. This is because no agreement was reached between the parties in ECCHR v TÜV,Footnote ²² and the issue was set aside in the conciliation process in AEFFAA v RINA. Footnote ²³

This account shows that, despite previous attempts to hold MSIs and TPCs accountable for due diligence failures, the final statement in the Bonsucro case can be seen as the first explicit acknowledgement of responsibility for breach of the OECD Guidelines by a VSS actor.

V. The Applicability of Bonsucro Rationale to TPCs

Companies are involved in human rights harms when they cause or contribute to adverse impacts or when such impacts are directly linked to their operations, products or services by a business relationship.Footnote ²⁴ Under the OECD Due Diligence Guidance for Responsible Business Conduct, contribution exists when a company causes, incentivizes or facilitates human rights harms by another enterprise.Footnote ²⁵ To avoid contributing to human rights impacts, companies must take action to cease or prevent such contribution and exercise leverage to mitigate any remaining impacts by another enterprise. Leverage should also be exercised when impacts are directly linked to the company’s operations, products or services.Footnote ²⁶

As service providers, MSIs’ and TPCs’ responsibility will typically arise from instances of contribution or being directly linked to human rights abuses.Footnote ²⁷ A ‘directly linked’ scenario was found in the Bonsucro case, in view of the business relationship between the MSI and its members, which in turn linked it to the members’ subsidiaries and the harm they caused. In these scenarios, companies are expected to use or increase leverage to seek to avoid harm. The UK NCP found that access to the reputational benefits linked to their brands gave MSIs considerable leverage, and Bonsucro’s failure to exercise its leverage amounted to a breach of the OECD Guidelines.

It is likely that the same rationale followed by the UK NCP in this case applies to future cases involving TPCs. The ability to grant reputational benefits and commercial advantages through membership in MSIs and certifications are factors that reflect the existence of leverage.Footnote ²⁸ TPCs are essential for accessing certificates of social and/or environmental compliance and show ethical labels which give companies a competitive advantage and add legitimacy to any claim of sustainability both towards business partners and end-consumers.Footnote ²⁹ By analogy with MSIs, TPCs can equally be found to: (i) have leverage towards companies wishing to obtain or retain their certificates, and; (ii) have breached the OECD Guidelines by failing to exercise such leverage, releasing certificates to harmful companies without previously demanding and verifying the implementation of corrective action plans. Therefore, to the extent that TPCs fail to exercise their leverage to effect changes on the harmful practices of entities wishing to obtain or retain a sustainability certificate, they may easily fall under one of the two grounds of responsibility under the OECD Guidelines. TPCs will likely be found, at a minimum, to be directly linked to the harm and responsible for failing to take steps to prevent or mitigate it. In some cases, they could also be found to have contributed to the harm, for example, if the failure to exercise leverage is found to have incentivized or facilitated the harmful conduct of aspiring companies.

VI. Concluding Remarks

Cases involving VSS actors before NCPs show an increasing awareness of the role that such actors can and should play in disincentivizing human rights violations and their potential responsibility for failing to use their leverage to this end. However, their responsibility is far from being clearly established in NCPs’ practice at present. The Bonsucro case can be the turning point. The UK NCP established that those in charge of releasing sustainability labels are in an extremely powerful position, capable of influencing the behaviour of companies wishing to access the market benefits of ethical labels. This understanding can prove very useful going forward to hold other VSS actors accountable under the OECD Guidelines, to the extent that they hold similar positions of power and influence towards enterprises wishing to access or retain the benefits of membership in MSIs and sustainability certificates.