Dirty Diesel and Corporate Responsibility

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

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Around 500,000 premature deaths per year is the shocking cost of dirty diesel.[1] In September, a Public Eye investigation entitled Dirty Diesel, How Swiss Oil Traders Flood Africa with Toxic Fuels exposed how international oil companies, traders and port companies are involved in deliberately lowering the quality of fuels to sell to West-African countries causing damaging health effects. The study has placed this issue higher on the international agenda and complements the report released one month earlier by the International Council on Clean Transportation and UN Environment on Cleaning Up the Global On-Road Diesel Fleet – A global strategy to introduce low-sulphur fuels and cleaner diesel vehicles.

Recently, I was invited to discuss the corporate responsibility angle of the issue of Dirty Diesel. What do international standards such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles for Business and Human Rights  say about responsible business in this regard? In broad strokes, they provide a lens to discuss dirty diesel: the State duty to protect and the corporate responsibility to respect. The damaging health impacts of sulphur in diesel in West-Africa is first and foremost an issue of the state duty to protect its citizens from negative impacts on their health. Does that mean that companies, in this case Swiss oil traders and oil companies are off the hook? No. Independent of the state duty, there is a corporate responsibility to respect the human rights of citizens. In other words: companies cannot hide behind a government failure. This is a key point of departure in the discussions on corporate responsibility in the dirty diesel issue.

What are lessons learnt from the implementation of the OECD Guidelines and UN guiding principles in the system of National Contact Points (NCPs), the globally active grievance mechanism for responsible business conduct? The Environment chapter of the OECD Guidelines sets out clear expectations: enterprises should take due account of the need to protect the environment, public health and safety, and generally conduct their activities in a manner contributing to the wider goal of sustainable development. This means in practice collecting and providing the public with adequate information about the environmental, health and safety impacts of enterprise activities. They should carry out impact assessments if activities have significant environmental and health impacts. The Enterprises should also continuously seek to improve corporate environmental performance and contribute to the development of environmentally meaningful public policy.[2]

Interestingly, in 2011 the OECD reached a multilateral agreement on corporate value chain responsibility, building on the work of Professor Ruggie implementing the UN “Protect, Respect and Remedy” framework. This means that a company is not only responsible for avoiding causing or contributing to harm, but it is also expected to use its leverage in the value chain if that impact is nevertheless directly linked to its operations, products or services through a business relationship. This principle applies throughout the supply and distribution chain, in other words it concerns not only from whom you buy, but also to whom you sell, taking into account the potential end use.

Several NCPs have dealt recently with complaints concerning impacts that arise in the value chain ‘downstream’. For example in the Mylan case, the Dutch NCP dealt with the human rights impacts of pharmaceuticals that were used for the death penalty. In the Alsetex case, the French NCP considered a complaint relating to the sale of teargas to authoritarian states. In both cases: not only did the parties reach an agreement following the ‘good offices’ by the NCP, it was also pointed out that companies have their own responsibility regardless of the state duty to protect. Both NCPs made recommendations to the companies to strengthen due diligence in the value chain. According to the Guidelines, if negative impacts occur, companies are expected to use their leverage to influence the entity actually causing the harm to prevent or mitigate its impact. If – acting alone – they do not have the ability to effect change, they are expected to co-operate with other entities, for example in multi-stakeholder initiatives.

Companies have worked together to ensure responsible business conduct across sectors and industries, for example: in the textiles sector after the Rana plaza tragedy (to join the Accord on Fire and Building Safety in Bangladesh or the Alliance for Bangladesh Worker safety) and to get rid of child labour and forced labour in the cotton fields of Uzbekistan.

What does all of this this mean for addressing Dirty Diesel?

First and foremost the governments in West-Africa should raise national standards to require clean diesel. Following the roadmap set out in the UNEP report is the way forward. Dirty refineries are part of the underlying problem as governments do not want to close their own state-owned refineries and rely fully on import. Governments outside of Africa could help targeting development assistance to raise investments to upgrade the refineries in the African countries.

Second, major oil companies, such as Total, Shell and BP, and oil traders such as Vittol and Trafigura, as well as port companies should individually and collectively use their leverage on the African governments to improve the standards for diesel. How? For example, by joining forces to address relevant ministers and set up industry initiatives to initiate investment, and share knowledge and innovation for clean production practices.

Should they stop selling the diesel immediately? No. Cut and run is seldom the right answer. Other players will keep on supplying and responsible companies will lose all leverage. The companies are expected to make reasonable efforts to influence West-African governments to raise the standards. Only if they are not successful after a reasonable period of time, should they consider stopping sales. Yet prior to taking such a decision they will need to assess the socio-economic and human right impacts.

Fortunately, for addressing Dirty Diesel there is hope. The Nigerian Minister of Environment Amina Mohamed, the Dutch Minister of Trade and Development Liliane Ploumen and the Government of Ghana are taking a leading role in this debate and are taking action. Companies and other governments should follow their lead.

[1]              See Preface, Cleaning Up the Global On-Road Diesel Fleet- A global strategy to introduce low-sulfur fuels and cleaner diesel vehicles.

[2]              OECD Guidelines Chapter VI Environment: Chapeau; paragraphs 1a), 2 a), 3 and 8.

 

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