Governments can help make business more diligent on human rights
Dr Irene Pietropaoli, Research Fellow in Business and Human Rights, British Institute of International and Comparative Law, and Phil Bloomer, Executive Director, Business & Human Rights Resource Centre
In the last few months, a host of new initiatives and regulations have been announced around mandatory transparency and mandatory due diligence for companies.
In September 2017, Business & Human Rights Resource Centre (BHRRC), with the International Trade Union Confederation (ITUC), published a report on the rise of these approaches in modern slavery. The report said: “A welcome unity may be emerging between diverse governments that they must come together to take action.”
It now seems that, with the support of civil society, investors, and responsible companies, there are growing opportunities for mandatory due diligence and transparency across the wider field of business and human rights.
- On 29 November 2018, the Australian Parliament approved the Modern Slavery Act, which will require companies headquartered or with operations in Australia to submit a ‘Modern Slavery Statement’.
By virtue of the AUD$100 million threshold, the Australian Act will apply to fewer companies than the UK Modern Slavery Act, but it imposes more onerous and mandatory reporting requirements.
The statements must disclose the structure, operations and supply chain, exposure to risk and the effectiveness of measures taken to address the risk.
- In Norway, the Rafto Foundation is leading a campaign for the government to start a political process for introducing a Norway modern slavery law.
- In Finland, more than 70 companies, civil society organisations and trade unions are calling for a Finnish law on mandatory human rights due diligence. The campaign, coordinated by Finnwatch, sets out to promote a law that, based on the UN Guiding Principles on business and human rights, would oblige companies to map and prevent human rights impacts.
- France’s Duty of Vigilance Law, enacted in March 2017, mandate companies of a certain size headquartered or with operations in France to publish and implement a vigilance plan to prevent human rights and environmental violations.
In October 2018, 13 French local authorities and four NGOs threatened legal action against oil and gas major Total, if it fails to take into account climate risks and plan measures to tackle global warming in its March 2019 vigilance plan.
- The Swiss Responsible Business Initiative (RBI), launched in April 2015 and currently under review in the Parliament, aims at adding an article to the Swiss Constitution that would entail a mandatory due diligence provision for corporations and a liability provision.
In June 2018, one chamber of the parliament adopted the text of a counter-proposal, which would include the due diligence obligation of the RBI, but it is narrower in scope: only companies of a certain size and those with particular human rights or environmental risks are subject to the requirement.
The process has led to a workable compromise that may well be brought into law in 2019.
- In April 2017, the UK Joint Committee on Human Rights released a report on human rights and business in which it proposed the introduction of a UK ‘failure to prevent’ mechanism for corporate human rights abuses.
The Joint Committee suggested that such a mechanism could be modelled along the same lines as Section 7 of the UK Bribery Act 2010, which introduced a new offence of failure on the part of a commercial organisation to prevent bribery being committed in connection with its business.
- The German government has established a process to evaluate their National Action Plan with the goal of having 50% of German companies with more than 500 employees establish effective due diligence policies and practice by 2020. If businesses fail to meet this goal, the government will consider legally binding measures.
- On 5 December 2018, the EU Economic and Financial Affairs Council endorsed three measures requiring banks to disclose environmental, social, and governance (ESG) related financial risks.
- Civil society has called on the European Commission to overhaul the reporting framework for corporate disclosure on human rights, environment, and anti-corruption issues to create a common standardised reporting framework and compulsory metrics.
This is a prerequisite for creating a sustainable and just economy, and allowing investors to fulfil their current and planned legal ESG obligations.
- In Canada, the ombudsperson office will have powers to investigate allegations, and possibly compel witnesses and documentation, regarding abuse worldwide by Canadian companies in key industrial sectors. The Canadian government might also consider a modern slavery act, and a due diligence law, if the Liberal Party gains a second term in elections.
These initiatives are the latest in a series of regulatory developments around the world towards mandatory corporate human rights due diligence.
These actions would seem to suggest that broadly liberal governments, at least in Europe, are being shaken from their timidity. This might be a response to the public backlash and collapse of public trust in global markets since the 2008 financial crash.
The Edelman Trust Barometer shows that in the public mind, economic globalisation, far from being associated with a Golden Age of Progress, is associated with stagnant wages, precarious employment, inequality and environmental harm.
Unscrupulous politicians are exploiting this growing public fear, anger, and sense of vulnerability to advance causes of chauvinist nationalisms, authoritarian demagoguery, and withdrawal from multilateralism.
Demagogues use public fear of rootless corporations, with their lack of loyalty or sense of due diligence in their introduction of automation and out-sourcing, for instance.
But, rather than focus on real solutions, such as putting human rights and climate security at the core of business, they deflect it onto the weakest: migrants, refugees, ethnic minorities, and the poor.
There is no better time for responsible politicians to demonstrate their commitment to a new era of shared prosperity and shared security. And there are few better ways of demonstrating this, to an increasingly distrustful public, than to introduce mandatory due diligence and transparency legislation around the world.