An alleged detention facility in Artux in Kizilsu Prefecture in China's northwestern Xinjiang region on July 19.PEDRO PARDO/AFP/Getty Images
Oliver Cushing is the chief executive of the human-rights technology, consultancy and training company RightsDD.
The new Canadian Ombudsperson for Responsible Enterprise (CORE), the country’s watchdog for corporate abuses outside Canada, has had a busy summer. On Aug. 24, it published initial assessment reports on three companies: Diesel Canada Inc., Hugo Boss Canada Inc. and Walmart Canada Corp. These are in addition to reports it published on four companies, earlier this summer
To date, all complaints relate to the alleged presence of Chinese Uyghur forced labourers in either the target company’s own work force or its supply chains. The reports represent the culmination of the initial investigation stage, where companies are expected to co-operate and meet with the ombudsperson.
But CORE determined that only one of the seven companies under investigation fully co-operated with the initial investigation. All seven of the companies that in CORE’s view failed to do so will be subject to further investigation.
The one company that fully co-operated, GobiMin Inc., will be subject to no further investigation. Instead, it has been issued with a set of recommendations about implementing human-rights due diligence.
The apparent lack of co-operation by the seven companies is therefore surprising, particularly given that the strongest penalties that CORE can issue are for failure to act in good faith.
CORE was established in 2019 and replaced the, frankly toothless, CSR counsellor for the extractive sector. CORE has greater powers. The watchdog, led by lawyer Sheri Meyerhoffer, is relatively well resourced and appears to be gaining steam after a slow start (the eight initial reports discussed here are the first it has published).
People and organizations can file complaints with CORE about possible human-rights abuses arising from the operations of Canadian garment, mining and oil and gas companies outside of Canada. CORE’s remit extends to Canadian-registered subsidiaries of foreign companies.
CORE will conduct an initial review of complaints it deems credible and relevant. It will then either dismiss the complaint, issue recommendations to the company in question to address any concerns over its conduct, or carry out or conduct a full review. At the completion of the full review process, it can recommend that the company provide financial compensation, issue an apology to victims and change its policies. CORE can also recommend that the government refers the matter to law enforcement or a regulator.
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But if CORE determines that a company has failed to act in good faith during the assessment process (including by failing to co-operate), it can further recommend that the government withhold trade advocacy and export financing.
By failing to co-operate, a company may also increase the chances that the ombudsperson conducts a full review and ultimately delivers a damning report. CORE’s operating procedures state that in such situations the ombudsperson is allowed to “draw appropriate negative conclusions or adverse inferences” about the alleged human-rights abuse(s) under investigation.
A negative report by the ombudsperson will likely cause significant reputational damage to the company in question. It will be interesting to see how third parties, notably investors, react to the first full CORE reports.
While the focus thus far has been Uyghur forced labour, it should be kept in mind that CORE’s mandate covers human-rights abuses perpetrated anywhere outside of Canada. We therefore anticipate a wider variety of investigations going forward.
Each company may have their own reasons for not fully participating, or indeed feel that they have properly co-operated, despite CORE’s allegations to the contrary. Nonetheless, it is evident that failure to co-operate risks significant consequences.
CORE has yet to conclude a full investigation and the seven outstanding cases will set the tone for the future.
Editor’s note: An earlier version of this article included an incorrect number of companies under investigation by CORE, and the number of assessment reports it has published to date. This version has been corrected.