UN report on Xinjiang increases pressure on brands like Tesla, Airbnb | Business and Economics

Kuala Lumpur, Malaysia – A UN assessment that China’s treatment of Uyghurs may amount to “crimes against humanity” is the latest damning report to increase pressure on multinationals such as Nike and Tesla to rethink their operations in Xinjiang.

In a long-awaited 45-page report released on Thursday, the UN High Commissioner for Human Rights (OHCHR) urged businesses in China’s Far West region to take “all possible measures” to respect human rights, including through “enhanced human rights due check”.

The OHCHR report, released on the final day of rights chief Michelle Bachelet’s term, specifically mentions companies involved in security and surveillance, recommending enhanced “human rights risk assessment” for the sector. China’s Permanent Mission to the United Nations dismissed the report as “disinformation” and “lies fabricated by anti-Chinese forces and presumption of guilt.”

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

Justin Nolan, an expert on the intersection of business and human rights at the University of New South Wales, said the report meant “it is no longer possible for any country, business or individual to be in plausible deniability of the widespread human rights abuses that are taking place and continue to happen in Xinjiang.”

“This presents a challenge for many companies that continue to source products from Xinjiang,” Nolan told Al Jazeera, adding that firms must accept that their “supply chains are tainted by modern slavery and should not be sourcing from the region , unless they can disprove it.”

“Recall from a region or factory should always be a last resort, but if it is simply impossible to independently verify the working conditions in your production facilities, then based on this report the company must assume that there are ongoing human rights violations based on the output of Xinjiang.”

Legal and reputational risks

Major international companies, including household brands such as Nike, Airbnb, Tesla, Siemens and Volkswagen, have faced a backlash from human rights groups and Western governments in recent years for doing business in Xinjiang, a major producer of global cotton and polysilicon supplies. a 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 Uyghur labour.

In June, United States customs officials began enforcing the Uyghur Forced Labor Prevention Act, which prohibits the importation of goods from Xinjiang unless they can be proven not to have been produced using forced labor.

Despite the sweeping scope of the legislation, which has been opposed by some multinationals and business groups on the grounds that it would upend supply chains, US officials have indicated that enforcement will initially focus on four high-risk sectors – apparel, 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 are clouded by associations with Chinese forced labour,” said UNSW expert Nolan.

“This is not only a problem for brands with direct manufacturing links to factories or fields in Xinjiang.”

Julien Shays, an investment and trade expert at the City University of Hong Kong, said he expected further “separation and isolation” between China and Western countries.

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

β€œIn practice, this means from a purely business perspective that companies that source directly – or even indirectly – from Xinjiang or participate in the Xinjiang market will be scrutinized even more than before; they will be exposed to legal and reputational risks in their home countries.

Volkswagen has operated a factory in Xinjiang’s capital Urumqi since 2013 [File: China Daily via Reuters]

In addition to targeting imports tainted by forced labor, in recent years the US and other Western nations have also sanctioned dozens of Chinese firms, many of them technology companies such as Hikvision and Dahua, which make surveillance technology, for their alleged complicity in human rights abuses in Xinjiang.

Charles Rolet, an analyst at the watchdog research group IPVM, said that while the UN assessment could make some multinationals reconsider whether to start operations in Xinjiang, it would not have much of an effect on Chinese technology firms already operating in the region. .

“China is not like the US where some companies or CEOs actively criticize certain government policies,” Rolet told Al Jazeera. “It risks arrest, retaliation against the company, or both.” The People’s Republic of China’s technology and surveillance companies are already heavily involved in government surveillance, so they have no real concerns about Xinjiang.

While global brands such as Nike have pledged to strengthen their audit procedures against forced labor, international firms 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 US lawmakers and human rights activists when it announced the opening of a new showroom in Xinjiang.

In June, outgoing Volkswagen China CEO Stefan Wollenstein said the company planned to continue making cars in the region and was open to a company-nominated human rights specialist visiting its plant in the capital Urumqi.

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

Nike, Airbnb, Volkswagen, Tesla and Siemens were approached for comment.

Despite being under pressure for their operations in Xinjiang, international brands that acknowledge concerns about alleged human rights abuses risk incurring the wrath of Chinese nationalists.

Last year, Nike and fashion retailer H&M faced boycotts 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 trade lawyer, who spoke on condition of anonymity because of the sensitivity of the situation, said firms operating in Xinjiang were in a difficult position.

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

“I suspect that whatever companies are left in Xinjiang will look at this report and balance the ESG/reputational risks of continuing to do business there with the backlash from the Chinese government and the Chinese public for appearing to discriminate against China.”

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