UN report on Xinjiang puts pressure on brands like Tesla, Airbnb | business and economy

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

In a long-awaited 45-page report released on Thursday, the United Nations High Commissioner for Human Rights (OHCHR) urged companies in China’s far western region to take “all possible measures” to respect human rights, including through “enhanced human rights”. due diligence”.

The OHCHR report, released on the last day of human rights chief Michelle Bachelet’s term in office, made particular mention of companies involved in security and surveillance and recommended increased “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 out of presumption of guilt.”

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

Justine Nolan, an expert on the intersection of business and human rights at the University of New South Wales, said the report means that “it is no longer possible for any state, company or individual to plausibly deny the widespread human rights abuses that have occurred in Xinjiang and continue to perform.”

“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 fraught with modern slavery and should not source locally, unless they can refute this”.

“Withdrawing from a region or factory should always be a last resort, but if it is simply impossible to independently verify working conditions in your manufacturing facilities, then based on this report a company should assume that production is causing it to continue Human rights violations come from Xinjiang.”

Legal and Reputational Risks

Big international companies, including household brands like Nike, Airbnb, Tesla, Siemens and Volkswagen, have faced backlash from rights groups and Western governments in recent years for doing business in Xinjiang, a major producer of the world’s cotton and polysilicon supply Key raw material for solar panels.

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

In June, US Customs began enforcing the Uyghur Forced Labor Prevention Law, which bans the importation of goods from Xinjiang unless it can be proven that they were not produced by forced labor.

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

“China continues to dominate global production of garments and textiles, and as such, many global brands’ supply chains have been impacted by associations with Chinese forced labour,” said Nolan, the UNSW expert.

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

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

“Although many countries began requiring their companies to conduct more rigorous due diligence on the risks of doing business in Xinjiang as early as 2018, the UN report is likely to oblige those countries to review due diligence obligations and continue to tighten it up,” Chaisse told Al Jazeera.

“In practical terms, from a purely business perspective, this means that companies that source directly – or even indirectly – from Xinjiang or engage in the Xinjiang market will come under even more scrutiny than before; they will face 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]

Not only has the US and other Western nations targeted imports tainted by forced labor, but dozens of Chinese firms, many of them tech companies like Hikvision and Dahua, that manufacture surveillance technology in recent years, for their alleged complicity in human rights abuses in Xinjiang sanctioned .

Charles Rollet, an analyst at surveillance research group IPVM, said that while the United Nations’ assessment might make some multinationals think twice about starting operations in Xinjiang, it would have little impact on Chinese tech companies already based in Xinjiang operate in the region.

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

While global brands like Nike have pledged to step up their screening procedures against forced labour, international companies have nonetheless shown interest in maintaining and even expanding their operations in the region.

In January, Tesla, the Texas-based electric car maker, came under fire from US 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 plans to continue making cars in the region and is open to a visit by a company-appointed human rights expert to its plant 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 has a “positive impact”.

Nike, Airbnb, Volkswagen, Tesla and Siemens were asked to comment.

As they come under pressure to operate in Xinjiang, international brands that acknowledge concerns about alleged human rights abuses risk angering Chinese nationalists.

Last year, Nike and fashion retailer H&M faced boycotts from 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 asked not to be identified due to the sensitivity of the situation, said firms operating in Xinjiang were in a bind.

“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 would suspect that all remaining companies in Xinjiang will review this report and weigh the ESG/reputational risks of continuing to do business there with backlash from the Chinese government and Chinese public for discriminating against China.”

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