A/HRC/4/35 page 3 Introduction 1. There is no magic in the marketplace. Markets function efficiently and sustainably only when certain institutional parameters are in place. The preconditions for success are generally assumed to include the protection of property rights; the enforceability of contracts; competition; and the smooth flow of information. But a key requisite is often overlooked: curtailing individual and social harms imposed by markets. History demonstrates that without adequate institutional underpinnings, markets will fail to deliver their full benefits and may even become socially unsustainable.1 2. In recent decades, especially the 1990s, global markets expanded significantly as a result of trade agreements, bilateral investment treaties, and domestic liberalization and privatization. The rights of transnational corporations became more securely anchored in national laws and increasingly defended through compulsory arbitration before international tribunals. Globalization has contributed to impressive poverty reduction in major emerging market countries and overall welfare in the industrialized world. But it also imposes costs on people and communities - including corporate-related human rights abuses, for reasons detailed in the interim report of the Special Representative of the Secretary-General.2 3. These are challenges posed not only by transnational corporations and private enterprises. Evidence suggests that firms operating in only one country and State-owned companies are often worse offenders than their highly visible private sector transnational counterparts. Clearly, a more fundamental institutional misalignment is present: between the scope and impact of economic forces and actors, on the one hand, and the capacity of societies to manage their adverse consequences, on the other. This misalignment creates the permissive environment within which blameworthy acts by corporations may occur without adequate sanctioning or reparation. For the sake of the victims of abuse, and to sustain globalization as a positive force, this must be fixed. 4. Realigning the relationships among social institutions is a long-term process. While Governments representing the public interest must play a key role, they need to be joined by other social actors and to utilize other social institutions to achieve this goal, including market mechanisms themselves. The Commission on Human Rights recognized the scope and complexity of the challenge when it established this multifaceted mandate. 5. The mandate requires the Special Representative to “identify and clarify”, to “research” and “elaborate upon”, and to “compile” materials - in short, to provide a comprehensive mapping of current international standards and practices regarding business and human rights. Resolution 2005/69 also invites him to submit his “views and recommendations” for consideration by the Commission. This mandate was extended pursuant to Human Rights Council decision 1/102. This report is devoted to the first task: mapping evolving standards, practices, gaps and trends. 1 John McMillan, Reinventing the Bazaar: A Natural History of Markets (Norton, 2002). 2 E/CN.4/2006/97, paras. 20-30.