A. International guidance on implementing the UNGPs via National Action Plans

The two most important international guidelines assisting states in the development, implementation and review of NAPs are the Guidance on National Action Plans on Business and Human Rights developed by the UN Working Group on Business and Human Rights (UNWG Guidance);Footnote ¹⁵ and a Toolkit on National Action Plans on Business and Human Rights published by the Danish Institute for Human Rights in collaboration with the International Corporate Accountability Roundtable (DIHR/ICAR Guidance).Footnote ¹⁶ Drawing on extensive multi-stakeholder consultations and previous experiences with developing NAPs, both guidelines flesh out the procedural and substantive requirements for an effective implementation of the UNGPs.

NAPs on business and human rights should pursue three over-arching objectives: taking stock of existing state measures that contribute to the implementation of the UNGPs; identifying gaps in states’ legal and policy framework that require further action; and outlining strategies to close protection gaps and to otherwise prevent and re-dress corporate-related human rights abuse. In this regard, the UNWG Guidance emphasizes four criteria essential for a NAP to be effective. First, NAPs must be based on the UNGPs, incorporate all three pillars and be informed by core human rights principles such as non-discrimination and equality. Second, NAPs must respond to challenges in the national context and reflect country-specific priorities or particularly important sectors within the national economy. Third, they must be developed and implemented through an inclusive and transparent process, taking the views and needs of affected parties and relevant (governmental and non-governmental) actors into account. Fourth, NAPs must be regularly reviewed to ensure continuous progress in enhancing human rights protection and effective responses to changing conditions in the regulatory environment.Footnote ¹⁷

The UNWG and DIHR/ICAR Guidance contain more detailed process- and content-based criteria for developing and implementing a NAP. Both documents recommend that states make a formal commitment to engage in a NAP process, including publication of the terms of reference and a timeline. States should furthermore establish a format for inter-ministerial and cross-departmental collaboration, develop and publish a work plan and make adequate resources available.Footnote ¹⁸ Stakeholder participation in line with a rights-based approach is critical for successful development of a NAP. States should conduct and publish a stakeholder mapping to ensure the equal inclusion of all affected parties. Meaningful and effective participation should be facilitated through capacity building and providing all stakeholders with adequate and timely information. Stakeholders should participate in the identification of national priority areas and implementation gaps, as well as in the development of new instruments to enhance human rights protection against corporate abuse.Footnote ¹⁹

In preparation of drafting a NAP, a national baseline assessment should be conducted by a competent independent body (external research institutes, NHRIs, etc.) that maps out the current state of implementation of the UNGPs. The draft NAP should be widely disseminated and discussed with all relevant stakeholders prior to being finalized and officially launched.Footnote ²⁰ A NAP should contain a ‘smart mix’ of mandatory and voluntary, and national and international measures,Footnote ²¹ and ‘extend to all matters in the state’s jurisdiction, including matters outside the state’s territorial jurisdiction’.Footnote ²² NAPs should outline actions to implement the UNGPs that are specific, measurable, achievable, relevant and time specific (SMART).Footnote ²³ They should also lay down a framework for monitoring and reporting, based on a clear allocation of responsibility and accountability for implementation. All relevant ministries and government departments should collaborate in the implementation process, supported by a multi-stakeholder group and other institutions including NHRIs.Footnote ²⁴ Finally, NAPs should be regularly reviewed, evaluated and updated in order to identify successes and failures, remedy shortcomings, and share information and best practices within and between governments.Footnote ²⁵

B. Overall assessment of EU member state NAPs

While, as noted above, the EU member states have played a pioneering role in the early development of NAPs on business and human rights, their NAPs have at the same time been frequently criticized for shortcomings in process and content. A 2014 assessment of the United Kingdom (UK), Dutch, Danish and Finnish NAPs conducted by ICAR and the European Coalition for Corporate Justice (ECCJ) suggests that while states have involved various entities within and outside government in the drafting process, the mapping of relevant stakeholders and existing protection gaps, as well as the quality of consultations, leave much to be desired. In terms of content, while all four NAPS scrutinized by ICAR and ECCJ made an explicit commitment to the UNGPs, they focus heavily on past actions and soft/voluntary measures (such as awareness raising or training) at the expense of exploring forward-looking and regulatory options. Commitments to future action tend to remain vague, lacking sufficient information about concrete steps to be taken and the agencies responsible for implementation.Footnote ²⁶

In a similar vein, the European Network of National Human Rights Institutions (ENNHRI) has criticized procedural and substantive shortcomings in the development of EU member state NAPs:

Noting that ‘such weaknesses undermine NAP’s contribution to respect for human rights, good governance and accountability both in the EU and abroad’, ENNHRI has called upon the European Commission to better guide member states through the NAP process and to establish a ‘human rights-based, participatory, transparent multi-stakeholder NAP review process at EU level’.Footnote ²⁸ These critical assessments have been largely confirmed by later studies that draw on a broader sample of EU member state NAPs.Footnote ²⁹ Based on the authors’ own analysis of existing EU member state NAPs, three main procedural and substantive shortcomings risk undermining an effective implementation of the UNGPs in the EU: a failure to use indicators and benchmarks to measure success; inadequate provision for monitoring, review and follow-up; and a misalignment of the three pillars, leading to a failure to adopt a smart regulatory mix of voluntary and mandatory instruments.

C. Insufficient use of indicators and benchmarks

For states to design SMART actions implementing the UNGPs, the effects of the employed instruments have to be ‘measurable’.Footnote ³⁰ Classical tools of measuring effectiveness of public policies are indicators and benchmarks.Footnote ³¹ Indicators are parameters that assess whether and to what extent (the laws and policies envisaged in) the NAPs have proven suitable to contribute to an effective implementation of the UNGPs; benchmarks are quantifiable targets that states set themselves to achieve. Possible indicators and benchmarks that could be used are various, ranging from the number of corporations of a certain size having adopted a human rights due diligence mechanism (as defined in the second pillar of the UNGPs) to the amount of (public and private) funding being dedicated to the implementation process.

The current NAPs often fail to specify quantitative or qualitative indicators, and rarely set concrete benchmarks to be achieved. One exception is found in the German NAP that sets a benchmark of 50 per cent of German companies with more than 500 employees to have incorporated human rights due diligence by 2020.Footnote ³² If the 50 per cent target is missed, the German government will consider (‘prüfen’) further (legislative) steps.Footnote ³³ The Dutch, Danish and Italian NAPs include a list of forward-looking ‘action points’ aligned with the UNGPs, yet without sufficiently circumscribed indicators, benchmarks or a clearly defined time frame.Footnote ³⁴

The Dutch NAP at least contains a ‘transparency benchmark’ with which the government aims to encourage corporate human rights reporting.Footnote ³⁵ Other EU member state NAPs offer suitable entry points that could be developed into indicators and benchmarks in the future. The Swedish NAP, for instance, encourages companies to create grievance and redress mechanisms (e.g., ombudsmen mechanisms), but falls short of setting a concrete benchmark.Footnote ³⁶ The Lithuanian NAP promises to offer awards for responsible businesses and best anti-corruption practices, without, however, quantifying or measuring these efforts.Footnote ³⁷ The Finnish NAP considers that new funding lines to support the UNGPs could ‘possibly’ be made available but fails to indicate any concrete time commitment or target as to the intended amount.Footnote ³⁸ A commitment to hold roundtable meetings with all relevant stakeholders on a sector-by-sector basis remains similarly vague.Footnote ³⁹ The German NAP lists a number of measures suitable for the use of indicators and benchmarks, including corporations’ establishment of internal and external complaint procedures, or the introduction of a seal of approval (‘Gewährleistungsmarke’) for commodities whose production process explicitly adheres to human rights standards.Footnote ⁴⁰

Recent studies on the suitability of indicators and benchmarks in assessing business-related human rights impacts provide a solid basis for including such indicators and benchmarks into the NAPs.Footnote ⁴¹ This would render the envisaged actions more measurable and the implementing institutions more accountable for goals they have set out. While some EU member states have already conducted comparative studies in areas of law and policy relevant to business and human rights,Footnote ⁴² a set of agreed indicators and benchmarks would also facilitate cross-country comparison and could contribute to enhancing policy coherence at the European level (as supported in the recent FRA opinion).Footnote ⁴³

D. Inadequate provision for monitoring, review and follow-up

The provisions in EU member state NAPs concerning monitoring and follow-up are similarly weak or incomplete. Commonly, the lack of concrete commitments goes hand in hand with a failure to specify the institution responsible and accountable for monitoring and updating the NAP. With regard to monitoring, the Finnish NAP provides for yearly monitoring by the Finnish Committee on Corporate Social Responsibility.Footnote ⁴⁴ The Danish NAP promises, albeit vaguely, to ‘continuously update Danish priorities with regard to the implementation of the UNGPs in alignment with its National Action Plan on CSR’.Footnote ⁴⁵ The German NAP announces a yearly evaluation of the implementation process and assigns this task to a new specific inter-ministerial institution, supported by the (already existing and slightly enlarged) German CSR forum.Footnote ⁴⁶ However, monitoring is made conditional upon budgetary permission.Footnote ⁴⁷ Moreover, non-governmental organizations (NGOs) have expressed concerns about the composition of the enlarged CSR forum, fearing an over-representation of business interests and an undue focus on voluntary as opposed to mandatory measures.Footnote ⁴⁸ The Italian NAP that runs from 2016 to 2021 shall be ‘periodically monitored through an ongoing process of analysis of its implementation and consultation with all social partners and relevant stakeholders’.Footnote ⁴⁹ The NAP designates the Inter-ministerial Committee for Human Rights at the Ministry of Foreign Affairs and International Cooperation as the responsible entity for monitoring the implementation of the NAP. A ‘mid-term review’ is envisaged for 2018.Footnote ⁵⁰

In the Netherlands, a NAP update is on its way. The Netherlands Institute for Human Rights has urged the Dutch Government to provide more specific information about the follow-up measures it intends to take:

The Swedish NAP indicates that there could be a review in 2017 without using mandatory language or circumscribing the scope of such a review.Footnote ⁵² While neither the German nor the Italian NAP explicitly commit to an update,Footnote ⁵³ both NAPs are time limited so that an update can be expected by 2020 (Germany) and 2021 (Italy) at the latest.

The UK is currently the only country to have published an updated version of its NAP, honouring a commitment made in its 2013 National Action Plan. The update serves mainly to record government achievements since the publication of the initial NAP in 2013 and to reflect on more recent international developments, including guidance on implementation and the experience of other countries.Footnote ⁵⁴ While the UK update itself does not add much to the original NAP in terms of forward-looking actions, the UK Joint Committee on Human Rights has launched an (ongoing) inquiry into human rights and business that scrutinizes the steps the government takes to monitor compliance with the UNGPs; to clarify how far the government is able to enforce the UNGPs; to review progress British business has made in carrying out its responsibility to respect human rights; and to verify whether victims of human rights abuse involving business enterprises within UK jurisdiction have access to effective remedies.Footnote ⁵⁵ Notably, while the 2016 version of the NAP reaffirms the government’s previous commitment to report each year on implementation progress, it does not contain any information or commitment on a future NAP update.Footnote ⁵⁶ Nevertheless, the UK example points to the importance of regularly reviewing and updating NAPs, under the scrutiny of parliamentary bodies sufficiently independent from government.Footnote ⁵⁷ A regular review and update process is indispensable to adapt NAPs to a changing international regulatory and economic environment. Identifying responsible institutions and setting binding time frames for review contributes to holding states to account for failures to deliver on their commitments.

E. Insufficient alignment of the pillars, coupled with a failure to adopt a smart regulatory mix

An effective implementation of the UNGPs requires that the three pillars of the ‘Protect, Respect and Remedy’ framework are treated as a complementary whole, with each pillar supporting the others in achieving sustainable progress. Yet existing EU Member NAPs cover the three pillars unevenly, with little attention given in particular to remediation (Pillar 3).Footnote ⁵⁸ Moreover, many NAPs focus on Pillar 2 at the expense of exploring the full scope of the state duty to protect against corporate human rights abuse. One consequence is that, as in the case of the Danish NAP, measures relating to Pillar 2 appear reminiscent of the old ‘voluntary’ approach to CSR in that they heavily rely on corporate self-regulation and access to non-judicial remedies.Footnote ⁵⁹ Relatedly, the NAPs fail to make sufficient use of mandatory instruments, with state actions listed under Pillar 1 mainly confined to ‘soft’ measures such as state guidance, awareness raising, and training initiatives.Footnote ⁶⁰ While important, such measures are not suitable to address well-documented protection gaps in the legal framework governing business and human rights, particularly in the area of access to justice and effective remedies.Footnote ⁶¹

The insufficient alignment of the three pillars translates into a failure of the NAPs to adopt a ‘smart mix’ of voluntary and mandatory instruments that would allow states to use their political and financial leverage in incentivizing or compelling corporations to respect human rights. The NAPs’ approach to human rights due diligence – the heart of Pillar 2 – is a good example. Human rights due diligence is not only relevant in relation to the corporate responsibility to respect in that it enables businesses to manage stakeholder-related risk. Incentivizing or requiring human rights due diligence is equally a means for states to comply with their duty to protect human rights.Footnote ⁶² The EU member state NAPs fail to sufficiently operationalize this mutually reinforcing relationship between Pillars 1 and 2. The Dutch government, for example, commits to taking a more proactive role in implementing the UNGPs and to analysing its current regulatory mix as applied to human rights due diligence. However, the Dutch NAP largely confines itself to listing supportive government actions (such as awareness raising and capacity building) and does not provide for legislative and enforcement measures. Concerning the latter, the NAP concludes that consultations have ‘failed to produce consensus on whether the obligations of Dutch companies in relation to CSR are adequately regulated by law’.Footnote ⁶³ The prevalence of voluntary instruments and an uneven implementation of regulatory measures across the EU are not only detrimental to an effective global implementation of the UNGPs but also risk undermining a coherent European approach to business and human rights.Footnote ⁶⁴

The preparation of the German NAP, previously expected to set a very ambitious standard,Footnote ⁶⁵ offers an example of how achieving a smart regulatory mix through a proper alignment of the three pillars can be jeopardized during the drafting process. A 2013 scoping study for the German Ministry of Labour and Social Affairs had highlighted the importance of the state duty to protect in ensuring and monitoring corporate human rights due diligence.Footnote ⁶⁶ The later multi-stakeholder consultations in preparation of the NAP were conducted under the auspices of the Ministry of Foreign Affairs and received considerable praise.Footnote ⁶⁷ The results of the consultations, however, did not properly translate into the final NAP.Footnote ⁶⁸ In July 2016, the Ministry of Finance – not previously involved in the process – requested significant last-minute revisions of the draft NAP, allegedly under pressure from corporate lobbying.Footnote ⁶⁹ These revisions would have omitted any reference to legislative instruments requiring human rights due diligence. Proposals to elaborate corporate due diligence obligations through best-practice examples and guidelines were branded as ‘sweeping’ and ‘arbitrary’. The entire chapter on monitoring would have been removed. The final NAP published in December 2016 is an awkward compromise that, while in some ways paving new ground, is in many parts non-committal and dominated by concerns of creating a ‘global level playing field’ for German corporations.Footnote ⁷⁰

A. The concept of the Open Method of Coordination

The existing experience with NAP development in the EU member states displays significant shortcomings. To what extent – in line with its business and human rights strategy – could the EU play a role in addressing some of these failings? One can build a more complete picture of the strengths and limitations of the existing NAP process by engaging with the history of other forms of trans-national policy coordination. A prime example in this regard is the OMC – a process for multi-lateral surveillance introduced to coordinate EU social policies in the late 1990 s.Footnote ⁷¹ Since that period, the method has spread to a number of further policy areas, from education to culture, health, fiscal policy and beyond. While one of the characteristic features of the OMC is the lack of any one single procedural model applicable to all fields, the core of the method was elaborated by the Lisbon European Council in 2000. Most OMC processes thus contain some elements of the following four features (some of which mirror the design of the UNGP NAP process):

• ∙ Fixing guidelines for the Union combined with specific timetables for achieving the goals which they set in the short, medium and long terms;

• ∙ Establishing, where appropriate, quantitative and qualitative indicators and benchmarks against the best in the world and tailored to the needs of different Member States and sectors as a means of comparing best practice;

• ∙ Translating these European guidelines into national and regional policies by setting specific targets and adopting measures, taking into account national and regional differences;

• ∙ Periodic monitoring, evaluation and peer review organized as mutual learning processes.Footnote ⁷²

Understanding the usefulness of the OMC for implementing the UNGPs via NAPs requires understanding the rationale for the OMC’s creation. At its core is a tension between diversity and interdependence. For the EU of the late 1990 s and early 2000 s, interdependence meant the increasing realization that in a common currency Union, fiscal and social policies were likely to have severe spill-over effects between states (potentially capable of destabilizing the Union itself). Accompanying this was the realization that in an integrated economic area, joined action was needed to avoid a ‘race to the bottom’ in elaborating social standards.Footnote ⁷³ Attempts of individual member states to enhance social protection could negatively affect their national economic competitiveness in a common (internal) European market as such attempts may incentivize companies to relocate to member states with lower protection standards. In this sense, social policy became an area of ‘common’ European concern in which solutions to social and economic problems had to be sought collectively.

The diversity concern was that extensive EU intervention in areas such as budgetary and social policy was legally, politically and functionally infeasible.Footnote ⁷⁴ Legally, the EU carried unclear competences in these domains under the European Treaties.Footnote ⁷⁵ Politically, member states were unwilling to transfer more control to an unloved Brussels machinery. Meanwhile, functionally, any attempt at harmonizing national rules would probably flounder given the obvious diversity between the social and fiscal regimes of the member states. Open Coordination was the perfect solution to this dilemma.Footnote ⁷⁶ It promised coordinated EU action, guided by common principles and goals, but EU action that respected ‘legitimate diversity’ between different national legal and social orders.Footnote ⁷⁷ It also promised a more responsive form of EU regulation, where member states could shift and change their policy priorities according to new developments, and experiment with and learn from the practices of their neighbours.Footnote ⁷⁸ The outcome – a process of national plans based on EU goals, with peer-level review, exchange and benchmarking at the EU level – was thus seen as the best of both worlds: EU action without steering and control from the top down.

B. Lessons from the OMC for the UNGP NAP process

The European Union context in which the OMC has been developed differs significantly from the broader global context in which the UNGPs need to be implemented via NAPs. To take some of the key differences, the EU is a highly integrated legal space made up of a group of comparatively homogenous ‘Western’ liberal nation-states. At the same time, the challenges faced by many non-European states in implementing the UNGPs – most pertinently the fact that often the most severe human rights violations are committed by Europe-based ‘multi-national’ corporations operating in so-called developing countries – will be more difficult to address than the social policy challenges managed via the OMC. These differences notwithstanding, the European experience with open coordination can be helpful in improving the global process of implementing the UNGPs via NAPs.

The UNGPs’ attempt to ‘close governance gaps created by globalization’ responds to the necessity of enhanced state cooperation in preventing and redressing corporate human rights abuse under conditions of global interdependency.Footnote ⁷⁹ The ability of states to enforce human rights in relation to businesses incorporated within their jurisdiction increasingly depends on the human rights practice of other states where those businesses may be producing, packaging and trading their goods. Responding to this challenge requires consistent and effective international standards that ensure corporate compliance with human rights wherever they operate. At the same time, the legal and political orders into which the UNGPs must fit, and the state capacity to enforce them, varies considerably between national contexts. As a result, agreement on binding international norms – such as an over-arching Treaty regime – has thus far proven difficult to achieve.Footnote ⁸⁰ As the UNWG Guidance puts it, ‘while all NAPs share common ground in their alignment with the UNGPs and with international human rights instruments, … NAPs and the processes through which they are developed and updated must also adjust to each state’s capacity, and cultural and historic contexts’.Footnote ⁸¹

Moreover, the UNGP process speaks to the OMC’s challenge of managing collective action problems to avoid a ‘race to the bottom’ in regulatory and human rights standards. Economic globalization places both developed and developing states in a bind.Footnote ⁸² The experience with existing EU member state NAPs suggests that there are currently few incentives for home states of multi-national corporations to create binding extraterritorial standards lest those companies decide to shift capital and jobs elsewhere. Host states’ attempt to enhance human rights protection in relation to corporations operating on their territories, by contrast, carries the risk to imperil foreign trade and investment. This enables, in particular, large corporate groups to free-ride on inter-state competition – a global collective action problem that the UNGPs seek to address by encouraging states to move forward together without unilateral economic self-harm or competitive downward pressure on human rights standards.

It is because of these comparable governance challenges that the OMC’s experience can provide a number of lessons for successfully managing the tension between interdependency and diversity through the NAP process. Rather unsurprisingly, given the high hopes that greeted its arrival, the OMC in practice rarely lived up to its full promise. A key concern within social science research has been the OMC’s effectiveness.Footnote ⁸³ The EU’s original Lisbon Strategy failed to reach most of its headline targets, with much of the blame falling at the OMC’s door.Footnote ⁸⁴ One problem was the OMC’s voluntary nature: if member states were to deliver social and economic goals through purely national plans, what was their incentive to be responsive to common EU objectives?Footnote ⁸⁵ It was feared that national reports would merely list programmes that governments wished to implement anyway. States would follow EU principles they agreed with and disregard those that involved budgetary and political costs. Such a risk also presents itself in relation to the UNGP NAPs – and has already shown signs of realization in those EU member state NAPs that confine themselves to listing past national achievements.Footnote ⁸⁶ UNGP NAPs, too, are designed as a largely nationally guided process with few explicit incentives (either positive or negative) for governments to respond directly to international norms.

However, the OMC’s evolution from these early experiences also illustrates how both positive and negative incentives can be established. While empirical accounts of the first ten years of the OMC’s life are relatively sceptical about its ability to induce direct policy change, these accounts are more supportive of ‘second-order’ effects.Footnote ⁸⁷ Second-order effects concern the ability of the OMC to alter the process through which national and EU policy making is conducted, encouraging policy making to be more responsive to over-arching substantive goals.

One example is the ability of the OMC to mainstream social goals across government departments and to place social topics on the national agenda.Footnote ⁸⁸ This represents a concern of European policy-makers to this day (and one that finds some mirror in other ‘horizontal’ EU policy fields, including human rights). The fate of social policy, and its ability to meet positive social targets and outcomes, is likely to depend on policies determined beyond the traditional confines of social and labour ministries. For instance, a key determinant of social policy can be the attitudes of finance ministries, in terms of their willingness either to devote resources to social programmes or to consider the impact of financial and tax measures on inequality. By requiring the government as a whole to produce a common national employment or social inclusion strategy across departments, one goal of the social OMC has been to encourage states to develop cross-departmental governance structures in which social concerns are placed on the agenda of national actors who may otherwise be institutionally oblivious to such goals.

Another such ‘second-order’ effect can consist of improving policy-makers’ understanding of the relationship between policies and effects. Designing effective social policies requires understanding of the likely impacts of those policies on different groups in society, and the way similar policies have developed in the past. By asking states to measure their social performance, and by developing data streams and statistical indicators (e.g., on inequality or poverty at EU level), the OMC’s rationale is also couched in terms of improving states’ capacity for evidence-based policy-making.Footnote ⁸⁹ At the same time, the developed indicators and metrics can be used by civil society groups to monitor the social performance of individual states and of the EU as a whole. These examples of ‘second-order effects’ speak to some elements of the UNWG and ICAR-ECCJ NAP Guidance already taken up by a number of EU member states, such as the emphasis placed on inter-ministerial and cross-departmental cooperation and the importance of including civil society actors into the development and implementation of NAPs.

C. Structural features of the OMC process

The ability to induce ‘second-order effects’ depends on a number of structural features of the OMC process – features that the UNGP NAP process does not yet possess. These include, first, an infrastructure for states to conduct peer review on the performance of other states. In the OMC case, this is normally done within specialized committees, made up of national representatives and EU officials, who assess national plans according to common EU objectives and indicators. Peer review can be seen in terms of both negative and positive inducement. Negatively, peer review allows states to critically assess the performance of their neighbours, particularly in circumstances where negative national performance can have externalities on other states.Footnote ⁹⁰ Here, peer review provides a reason (in the absence of ‘hard’ legal obligations) for national officials to take seriously both the quality of their NAPs and the outcomes that domestic reforms produce over time. Yet peer review is about more than ‘negative’ shaming: empirical evidence from the OMC in the social policy field suggests that peer review mainly focuses on positive performers.Footnote ⁹¹ How have neighbouring states managed to successfully tackle endemic problems such as child poverty or long-term unemployment and how can their regulatory approach inform reform efforts elsewhere? Here, peer review exploits the positive aspects of interdependence: that other states are likely to face similar problems and may have innovative solutions to be learned from.Footnote ⁹²

Secondly, part of the OMC’s success (as discussed above) has been associated with developing indicators, and improving the information basis through which national policy-makers form their decisions. In the field of social policy, for example, the EU’s Social Protection Committee has developed a Social Protection Performance Monitor (SPPM), whose function is to track the performance of EU member states according to different metrics of social performance (e.g., employment, health and material deprivation).Footnote ⁹³ Crucially, the function of indicator development is not only cross-national comparison but to allow states to better understand causal relationships between different forms of regulation and social outcomes. What, for example, is the impact of early school-leaving on employment and productivity, or the effect of fiscal transfers to certain vulnerable groups on the poverty rate? The goal in this sense is not a convergence of social policies across states but a better understanding of the capacities and limitations of various policy tools to achieve a given goal. As highlighted in section IV, the issue of indicators and benchmarks is one for which both the NAP guidance and NAP development in the EU member states has thus far shown little interest.

Thirdly, one should reflect on the OMC’s failures as well as its successes. A frequently lamented feature of open coordination has been its poor record in terms of participation and transparency.Footnote ⁹⁴ This record has had a bearing not only on the OMC’s wider legitimacy but also on its effectiveness. The failure, for example, to include parliaments and regional bodies in the process of establishing national plans under the OMC gave rise to complaints that open coordination suffers from a lack of national and regional ownership, with ambitious goals set at the EU level often forgotten or disappointed when ‘translated’ into national action.Footnote ⁹⁵ This is particularly so in certain types of constitutional order: in federal states (e.g., Germany, where lower levels of governance have strong regulatory powers) or states with strong forms of parliamentary control (e.g., in Scandinavia), government plans without wider institutional input risk being overturned by other bodies later in the policy-making process. The link between poor participatory performance and weak delivery is yet another lesson the OMC may provide for the UNGP NAP process

Providing an appropriate institutional and procedural infrastructure for the OMC has been key to open coordination’s successes and limitations. A policy coordination process that relies purely on national reporting, without any inducements to deliver on commitments made or improve performance over time, can easily slip into a box-ticking exercise that is increasingly unresponsive to its initial goals. Similarly, a national strategy without wide domestic buy-in, including from constitutionally significant bodies, cannot expect to deliver wide-ranging reforms. Finally, a process of developing complex national strategies in response to transnational and global challenges is simply a wasted opportunity if no structures exist to compare national performance, to improve collective understanding of evolving shared problems, and to allow states to respond to the practices of their neighbours. Given the many features that the NAP process and the OMC share in common, the lessons learnt from the open coordination’s existing history are also of relevance to implementing the UNGPs at the global level.

A. An OMC for business and human rights in the EU governance context

The OMC’s experience points to some deficiencies of the otherwise highly detailed existing guidance for developing and implementing NAPs on business and human rights. The lack of sufficient consideration for indicator development, benchmarking, peer pressure and mutual learning through peer review suggests concerns about the broader sustainability and effectiveness of the NAP process. Some lessons, however, may have more specific relevance to the EU and the connections between the NAP process and the broader structure of EU governance. The vast majority of currently existing NAPs stem from EU member states. This creates a unique opportunity for developing national measures in a coordinated manner within the EU. One noticeable aspect of many of the NAPs produced by EU member states is their frequent references, either to EU-wide strategies on CSR, or to EU legislative measures.Footnote ⁹⁶ Moreover, the competence to implement a comprehensive business and human rights strategy is shared between the EU and the member states. As a consequence, the EU has in some areas already developed legislation of its own, raising issues concerning the coherence of EU and national measures and (by the operation of EU competence rules) limiting member states’ own powers to set binding standards.Footnote ⁹⁷

These considerations raise the prospect of developing a European OMC process for business and human rights. The idea of applying the OMC to the realm of EU fundamental rights more broadly is not new.Footnote ⁹⁸ It has, however, faced two key obstacles in the past. First, the legal powers available to the Union to develop an autonomous fundamental rights policy have often been contested and remain unclear.Footnote ⁹⁹ Second, member states have tended to see open coordination processes as a bureaucratic burden, establishing potentially costly and time-consuming implementation structures without clear rewards.Footnote ¹⁰⁰

These objections seem less pressing when considering an OMC in the particular field of business and human rights. Regarding the competence-based obstacle, many issues relating to the UNGPs touch upon areas of shared competence. By giving effect to EU legislation on matters such as accounting standards for trans-national corporations or human trafficking, the member states are implementing the UNGPs under the shadow of EU law. The OMC could be used to monitor national implementation of EU laws that carry a business and human rights dimension, ensuring consistency and coherence of these laws throughout the EU. Some key EU Directives already establish a duty of the European Commission to monitor their national implementation for this very reason.Footnote ¹⁰¹ While such a coordination process would lack a distinct legal basis in the EU Treaties, this has not prevented the establishment of OMCs in other policy areas (such as social inclusion), provided open coordination is used as a mechanism to support and complement, rather than entirely harmonize, the laws of the member states.

Secondly, it is questionable whether an OMC on business and human rights would constitute a significant additional bureaucratic burden. The vast majority of member states have produced, or have committed to producing, NAPs on business and human rights and/or CSR. Moreover, the European Commission has already dedicated expertise and resources to organizing peer reviews on CSR and human rights. The European Council’s Working Group on Human Rights (COHOM) also monitors the national implementation of the UNGPs as part of its work on implementing the EU’s Strategic Framework on Human Rights and Democracy.Footnote ¹⁰² While a wider OMC on human rights may struggle to politically convince, a more focused procedure, building on the UNGP process, could create synergies with existing institutions.

B. The role and added value of an OMC for business and human rights

What would be the role and added value of an explicit OMC process? First, an OMC on business and human rights could contribute to avoiding duplication, overlap and inconsistency in the implementation of different business and human rights processes at EU and member state level. By establishing a forum of institutionalized cooperation between national and EU actors in which divergent approaches to business and human rights can be monitored and addressed, an OMC process could be a central vehicle in delivering policy coherence across the EU.

Second, an OMC process could act as a means of identifying where further EU action to implement the UNGPs may be necessary. While some reforms necessary to implement the UNGPs can be delivered via purely national action, a coordinated European approach may be more effective in addressing those business and human rights challenges with a strong cross-border element. One example currently under discussion is accounting rules for financial and labour practice disclosure for large companies. EU rules in this area are likely to have far greater influence in encouraging corporations to disclose information about human rights-related standards than domestic regulation (which may be perceived as creating incentives for corporations to relocate to other EU member states with less intrusive standards).Footnote ¹⁰³ By providing a comparative overview of how EU member states are implementing the UNGPs, an OMC process could allow actors at the European and national level to identify the potential and limitations of future EU action on business and human rights.Footnote ¹⁰⁴

Third, the OMC could act as an incentive structure for member states to deliver on the content of their NAPs. Depending on the design of the process, an OMC procedure would set out specific timetables and feedback mechanisms for NAPs on business and human rights. Timetabling would encourage states to make actionable commitments through specific deadlines (a concern mirrored in the lack of ‘SMART’ measures in current NAPs), exerting particular pressure on those states that have repeatedly promised NAPs but failed to deliver them. Feedback mechanisms, such as peer reviews, would also allow member states to nudge each other into following prior commitments outlined in the NAPs.Footnote ¹⁰⁵ Furthermore, the OMC’s history indicates some evidence of open coordination facilitating rights of ‘structural entry’ for NGOs and civil society actors in national strategies, potentially building a coalition of national actors to encourage governments to deliver NAP promises.Footnote ¹⁰⁶

Fourth, the OMC could act as a space for mutual learning and the exchange of good practices between EU member states.Footnote ¹⁰⁷ Those peer reviews that have been conducted on member states’ CSR strategies demonstrate the usefulness of peer review in understanding common challenges (such as regulating business and human rights in times of austerity) and identifying emerging strategies to meet these challenges.Footnote ¹⁰⁸ A peer review process for business and human rights was considered by the European Commission in its 2011 CSR Strategy, but not followed up in a systematic manner, in spite of some indications of member state support.Footnote ¹⁰⁹ As discussed in the previous section, the purpose of such peer review would be to identify innovative strategies to meet shared problems, using the diversity of national implementation strategies regarding the UNGPs as an experimental advantage from which the EU as a whole may benefit.

C. Designing an OMC for business and human rights

How would an OMC on business and human rights look in practice? As discussed above, the history of the OMC suggests that there is no ‘one size fits all’ model.Footnote ¹¹⁰ In this sense, the very advantage of an open coordination process is that it need not fit within existing legal categories but can be shaped to meet the preferences and needs of the actors involved. Some core minimum requirements, however, are likely to be:

• ∙ Establishing a common timetable for the production and revision of NAPs as part of a bi-annual or tri-annual cycle;

• ∙ Tasking a specific institution (e.g., a committee of national representatives within the Commission or Council) with overseeing the NAP process and conducting state-to-state peer review;

• ∙ Building up qualitative and quantitative indicators to allow the comparative benchmarking or indexing of national performance on business and human rights (including via existing indicator systems for CSR built by other international organizations);Footnote ¹¹¹

• ∙ Facilitating civil society involvement, both at the EU level (e.g., via the EU’s multi-stakeholder platform on CSR) and at the national level (e.g., through incorporating into EU peer review an indicator concerning national civil society participation in the development and review of NAPs);

• ∙ Establishing mechanisms connecting the NAP process with the EU’s ongoing CSR strategy (to ensure that those responsible for designing EU initiatives in the field of business and human rights are included in the monitoring and peer review process).

The schema above provides only a first sketch of what an OMC process for business and human rights might look like. One should not over-estimate its potential – as much as the OMC’s history in the social policy field provides lessons, these are never entirely generalizable to other policy fields. An OMC in the business and human rights field ought to be adapted significantly to this area’s distinctive features. Given the potential benefits of such a process, however, an OMC for business and human rights ought to be seriously considered. It may provide new impetus to the UNGPs’ implementation, to which so much current academic and institutional attention is directed.Footnote ¹¹²