The committee reports the UK's current strategy on human rights gives undue priority to voluntary initiatives, without clear guidance. It considers that the UK Government should clarify its policy on business and human rights both at home and overseas.
The report follows a major inquiry by the committee, which heard from all sides of the debate including UK multinational firms, unions, campaigners, lawyers, government ministers and the UN representative.
It recommends that the Government should produce new guidance for businesses and believes the UK Government should use its position as major purchaser and investor and call for a review of public procurement rules, export credits guarantees, company law, investment policy and listing rules.
The committee recognises the need for a particularly robust approach to business in conflict zones.
It calls for the Government to undertake a review of the compatibility of domestic labour and trades union law with the UK's international obligations.
The committee questions new draft regulations on blacklisting and calls on the Government to provide a full explanation of the compatibility of its proposals with international law. The committee calls on the UK Government to continue supporting the UN special representative, professor John Ruggie, who leads international work in this area, and notes that few UK firms meet the due diligence standards he recommends.
Andrew Dismore, chairman of the Parliamentary Joint Committee on Human Rights, said: "Human rights law is designed to protect the individual against the state. In the modern world, the law is increasingly failing to address the impact of the private sector on individual rights.
"UK multinationals may present a compliant face at home but show quite a different approach when operating elsewhere and some have a woeful record abroad. We were most concerned about the range and seriousness of allegations both in the press and in the evidence we received, including against 18 British companies that are household names.
"There is much that the UK Government can do to provide guidance to business on human rights and to set the standards which the UK considers business should meet. We are not convinced by the argument that if the UK takes a lead in this area it would impact on UK business competitiveness."
