Exploring Trends in Corporate Human Rights Due Diligence
This blog is part of a series 'Towards Mandatory Human Rights Due Diligence'.
The Bonavero Institute of Human Rights and the Oxford Business and Human Rights Research Network held a series of events ‘Human Rights Due Diligence in Law and Practice’ to discuss the recent regional and national developments in the field with a group of leading practitioners and academics. In a three-part blog series, Dr Ekaterina Aristova shares insights and key lessons learnt (special thanks to Lisa Hsin for her comments). This blog post focuses on the current trends towards efficient and comprehensive human rights and environmental due diligence (“HRDD”) (see also part 2 and part 3). Audio recordings of the seminars are available here.
Momentum for HRDD in Europe
There is a growing momentum worldwide, especially in Europe, towards improving corporate human rights performance through mandatory HRDD. Anna Triponel (Triponel Consulting) suggested that business and human rights laws generally fall into one of two categories: (1) reporting or transparency requirements, and (2) mandatory HRDD. The first generation of legislative initiatives has focused on increasing transparency in business and introducing reporting requirements for companies to disclose certain human rights risks in their own operations and/or supply chains (e.g. the UK Modern Slavery Act; the California Transparency in Supply Chains Act, etc). Yet, the reporting requirements often lack meaningful enforcement and remedy provisions have been widely questioned by civil society and human rights practitioners. The Alliance for Corporate Transparency recently published the results of its assessment of the sustainability disclosure of 1,000 European companies showing that only a small number of companies are communicating specific policies and procedures in place towards effective management of human rights risks, actual human rights impacts and the structure of their supply chains. The Corporate Human Rights Benchmark 2019 results observed that 49% of the 200 largest global companies in four high-risk sectors scored 0 across all HRDD process indicators.
The second model of legislation goes beyond disclosure and embeds HRDD into law (e.g. the French corporate duty of vigilance law and the Dutch child labour due diligence law). After all, the UN Guiding Principles on Business and Human Rights (UNGPs) endorse the idea of a ‘smart mix’ of voluntary and mandatory measures. Mandatory HRDD legislation seems, therefore, to fill a gap in the regulatory landscape. Campaigns for mandatory HRDD are underway in many European states. Businesses – perhaps more than ever before – play a critical role in protecting the most vulnerable members of the society. In light of the spread of COVID-19 and states’ focus on the adequate response to the pandemic, it should also be noted that corporate respect for human rights matter more than ever, as the European Parliament said ‘corporate human rights and environmental due diligence are necessary conditions to prevent and mitigate future crises and ensure sustainable value chains’. In a significant step, the European Commissioner for Justice on 29 April 2020 committed to introducing in 2021 mandatory HRDD legislation. The good news comes after the release of the European Commission study on HRDD in supply chains, led by the British Institute of International and Comparative Law, in February 2020.
Phil Bloomer (BHRRC) argued that emergence of the mandatory HRDD movement could be explained by two interrelated factors. The first one is frustration with the pace of change. Unanimous endorsement of the UNGPs in 2011 was an extraordinary achievement at the time. Since then, states have taken only small steps to embed corporate respect for human rights into binding laws. The National Action Plans – still few in number – developed to support the implementation of the UNGPs suffer from systemic weaknesses. According to Phil, the second reason for the growing interest around HRDD legislation is “a fear generated around the threats that are happening to the fundamental social values and climate change”. Business sustainability is no longer seen as a choice. Rachel Barrett (Linklaters) confirmed that ESG explosion is certainly a driving force for many lawyers now. A sense of urgency is clearly shaping around mandatory HRDD.
I would also add a third factor – an expansion of the permissible limits of state control over persons and activities beyond its borders. The problem of extraterritoriality under the rules of public international law has dominated the debate on regulation of multinationals for a long time. At the same time, the emergence of parent-based regulatory techniques (e.g. the UK Bribery Act) has identified a problem of terminology when describing control over cross-border activities. When states bind parent companies with domestic requirements to exercise control over their overseas operations, are we talking about extraterritorial or transnational regulation? More importantly, if states are prepared and willing to enact legislation to prevent bribery, corruption and anti-money laundering in business operations, surely it is feasible to do the same in relation to business-related human rights abuses.
Human rights due diligence is an ongoing process, and some companies are already demonstrating willingness to take it seriously. Moreover, several companies have publicly announced support for strengthening regulation in the business and human rights field. In December 2019, cocoa companies called on the EU to introduce mandatory HRDD in global cocoa supply chains. In March 2020, Caobisco, the trade association for the European chocolate, biscuits and confectionery manufacturing sector, issued a statement calling for collective due diligence across the industry’s supply chain to address key human rights and environmental issues. Antonie Fountain (VOICE Network) suggested that HRDD legislation will provide businesses with a level playing field and increase legal certainty about relevant requirements. Otherwise, they are facing a ‘regulatory tower’ of various – sometimes inconsistent – national laws across multiple jurisdictions of operation.
But there are also still companies that argue in favour of the lowest denominators when it comes to human rights performance. Matthew Waller (Ergon Associates) touched on some potential challenges for businesses from his perspective: smaller companies may sometimes be under resourced and unable to respond to the regulatory pressure; companies employ different managerial and corporate structures and there are difficulties with identifying the scope of the supply chains; and the administrative burden of having to write several different reports for different regulators and stakeholders on relatively similar issues. This being said, I would add that these are potential challenges that can be avoided in well-designed HRDD legislation. Returning to the UNGPs’ smart mix of measures, Matthew claimed that two things are necessary to ensure meaningful change: coherent HRDD legislation with a clearly defined liability provision accompanied by the related support for businesses in the form of the guidelines and toolkits on how to conduct HRDD. Some inspiration can be found, for instance, in the Australian Government’s approach and publication of the information sheet on the impact of Covid-19 to support implementation of the 2018 Modern Slavery Act.