UN report on Xinjiang increases pressure on brands from Nike to Airbnb | Business and economy

Kuala Lumpur, Malaysia – A United Nations assessment that China’s treatment of Uyghurs may constitute “crimes against humanity” is the latest damning report to pressure multinationals like Nike and Tesla to rethink their operations in Xinjiang.

In a much-anticipated 45-page report released on Thursday, the United Nations High Commissioner for Human Rights (OHCHR) called on businesses in China’s far west to take “all possible measures” to respect the human rights, in particular by “strengthening human rights”. due diligence”.

The OHCHR report, released on the last day of rights chief Michelle Bachelet’s term, specifically mentions companies involved in security and surveillance, recommending an enhanced ‘human rights risk assessment’ for the sector . China’s permanent mission to the UN dismissed the report as “disinformation” and “lies fabricated by anti-China forces and presumption of guilt”.

The damning UN assessment comes after Tomoya Obokata, the UN special rapporteur on slavery, said earlier this month that it was ‘reasonable to conclude’ that forced labor was taking place in the region.

Justine Nolan, an expert on the intersection between business and human rights at the University of New South Wales, said the report meant it was “no longer possible for a state, a business or an individual to plausibly deny large-scale human rights abuses”. that have happened and continue to happen in Xinjiang.

“This poses a challenge for many companies that continue to source products from Xinjiang,” Nolan told Al Jazeera, adding that companies should assume that their “supply chains are tainted by modern slavery and should not not source from the area unless they can disprove that”. ”.

“Withdrawing from a region or plant should always be a last resort, but if it is simply not possible to independently verify working conditions at your production facilities, then based on this report, a company should assume that there are ongoing human rights abuses based on production coming out of Xinjiang.

Legal and reputational risks

Major international companies, including household brands such as Nike, Airbnb, Tesla, Siemens and Volkswagen, have faced advocacy groups and Western governments in recent years for doing business in Xinjiang, a major producer of the world’s supply of cotton and polysilicon, the key raw material for solar panels.

A 2020 report by the Australian Strategic Policy Institute, a Canberra-based think tank, identified 82 international brands as benefiting from Uighur labour.

In June, US customs officials began enforcing the Uyghur Forced Labor Prevention Law, which prohibits the importation of goods from Xinjiang unless it is proven that they were not produced by labor. strength.

Despite the broad scope of the legislation, which some multinationals and business groups have opposed on the grounds that it would upend supply chains, US officials have said the enforcement will initially focus on four high-risk sectors – clothing, cotton, tomatoes and polysilicon. – as well as shipments coming directly from Xinjiang and companies sanctioned for using forced labor.

“China continues to dominate global apparel and textile production, and so the supply chains of many global brands have been marred by associations with Chinese forced labor,” said UNSW expert Nolan. .

“It’s not just a problem for brands with direct production ties to factories or fields in Xinjiang.”

Julien Chaisse, an investment and trade expert at City University of Hong Kong, said he expected more “decoupling and isolation” between China and Western countries.

“Although many countries started as early as 2018 to require their companies to perform stricter due diligence on the risks of doing business in Xinjiang, the UN report is likely to require these countries to review and further tighten due diligence obligations,” Chaisse told Al Jazeera.

“In practical terms, this means from a purely business perspective that companies that source directly – or even indirectly – from Xinjiang or engage in the Xinjiang market will face even more scrutiny than before; they will be exposed to legal and reputational risks in their home country.

Volkswagen has operated a plant in Urumqi, the capital of Xinjiang, since 2013 [File: China Daily via Reuters]

In addition to targeting imports tainted with forced labor, the United States and other Western countries have also sanctioned dozens of Chinese companies in recent years, many of which are technology companies such as Hikvision and Dahua that produce surveillance, for their alleged complicity in human rights abuses in Xinjiang. .

Charles Rollet, an analyst with the IPVM surveillance research group, said while the UN assessment might make some multinational companies think twice about starting operations in Xinjiang, it would have little effect on the Chinese tech companies already working in the region.

“China is not like the United States where certain companies or CEOs actively criticize certain government policies,” Rollet told Al Jazeera. “It risks being shut down, retaliation against the company, or both. Technology and surveillance companies in the People’s Republic of China are already heavily involved in government surveillance, so they have no qualms with Xinjiang.

While global brands such as Nike have pledged to strengthen their forced labor auditing procedures, international companies have nevertheless shown an appetite for maintaining and even expanding operations in the region.

In January, Tesla, the Texas-based electric car maker, came under fire from U.S. lawmakers and rights activists when it announced the opening of a new showroom in Xinjiang.

In June, outgoing Volkswagen China CEO Stephan Wollenstein said the company planned to continue manufacturing cars in the region and was open to a visit from a company-appointed human rights expert in its factory in the capital, Urumqi.

The German auto giant has repeatedly said its operations do not rely on forced labor and insisted its presence in Xinjiang is having a “positive impact”.

Nike, Airbnb, Volkswagen, Tesla and Siemens have been contacted for comment.

While under pressure to operate in Xinjiang, international brands that acknowledge concerns over alleged human rights abuses risk invoking the wrath of Chinese nationalists.

Last year, Nike and fashion retailer H&M were boycotted by consumers, e-commerce sites and celebrities in China after raising concerns about allegations of forced labor in their supply chains.

A Hong Kong-based business lawyer, who requested anonymity due to the sensitivity of the situation, said companies operating in Xinjiang were at an impasse.

“The UN report is likely to put additional pressure on companies like Tesla and Airbnb which have already received negative publicity for their operations in Xinjiang,” the lawyer said.

“I suspect that all remaining companies in Xinjiang will consider this report and balance ESG/reputational risks to continue doing business there with the backlash from the Chinese government and Chinese public for appearing to discriminate against from China.”

Darryl A. Chapin