High hopes for mandatory human rights due diligence in 2020
17/12/2019 - Saskia Wilks, Business & Human Rights Resource Centre
The last years have seen momentum behind mandatory human rights due diligence (HRDD) legislation grow rapidly. At the international level there are ongoing efforts to advance due diligence laws under a proposed legally binding UN treaty on business and human rights, and increasingly governments are adopting or debating such regulatory measures at the national and regional level (see our portal and blog series).
The time for these developments is ripe: Evidence continues to show consistently weak implementation of HRDD by companies. The 2019 Corporate Human Rights Benchmark found that almost half (49%) of companies assessed scored zero on all due diligence indicators. Barring a few leaders, analyses of companies in Europe – including the top 50 Finnish, 22 largest Irish and 20 largest German companies – yield similarly poor results. With evidence of the failure of voluntary measures mounting, laws and regulations that deliver HRDD are urgently needed. This could go a long way towards enhancing human rights protections for people around the world affected by business activities, ensuring access to justice for victims and holding companies legally accountable when abuses occur.
Two years after France pioneered HRDD legislation in 2017 through the Duty of Vigilance law, a dozen European countries have discussions underway on HRDD legislation. Most recently, an expert committee appointed by the Norwegian Government drafted a national law that would establish binding human rights transparency and due diligence obligations, the latter only for larger companies. Importantly, the conversation has also moved to a regional level. Under its Presidency of the European Union (EU), Finland has committed to promote this goal at an EU level and held discussions on HRDD legislation at its high-level EU conference on business and human rights. This is key as legislation at an EU level can help build on and harmonise national efforts.
The German Government’s decision on whether to introduce such legislation on a national level is also expected next year, depending on the results of an ongoing survey assessing how German companies are meeting their due diligence obligations. Our benchmark of the 20 largest German companies, published last month, found none could demonstrate that they fully meet the requirements of the UN Guiding Principles on Business and Human Rights (UNGPs). Based on recent statements from Labour and Development Ministers Hubertus Heil und Gerd Müller respectively, the results of the government’s wider study appear to be similarly poor. Indeed, the two ministers announced they will draft a HRDD proposal, meaning a law is now very much on the cards. With the German presidency of the EU coming up in 2020, Germany has an opportunity to maintain this momentum at an EU level as well. Heil has already said he intends to make this a priority.
Civil society has been a key driver behind this movement through campaigns in Finland and Germany, among other European countries, and more than 100 civil society organizations and networks have recently joined a call for EU-wide due diligence legislation.
The role of business and investors
Support from business and investors is key to give a market signal to policymakers on the viability and desirability of HRDD legislation. Businesses have been a part of several campaigns for HRDD, including in Finland and Switzerland. In the case of the Dutch child labour law, a group of companies, including major Dutch companies such as Heineken, sent a supportive letter to parliament. A rising number of companies such as Daimler, Mars and Nestlé are joining the ranks of supporters who see value in harmonised and binding standards set by governments for clarifying expectations, offering legal certainty and ensuring a level playing field. A statement in support of mandatory human rights due diligence in Germany, published by the Resource Centre was signed by 42 German companies.
At the same time, other companies fiercely oppose binding legislation. In Switzerland, a group of 19 companies were accused of lobbying against a mandatory HRDD proposal making its way through parliament. This prompted a response from the author of the UNGPs John Ruggie clarifying that such laws are in fact consistent with the UNGPs despite what companies had claimed.
There is also increasing recognition of the role investors can play as a key driver and source of leverage for HRDD by requiring such steps from their portfolio companies. Led by the Investor Alliance for Human Rights, a significant number of investors recently released “The Investor Case for Mandatory Human Rights Due Diligence”, calling on governments to adopt due diligence laws to help assess risks and prevent abuse.
However, the question remains, how would mandatory HRDD laws hold companies to account and provide effective remedy for victims of business-related abuse? Without strong accountability measures, regulations have no teeth. The European Coalition for Corporate Justice argues a law should at a minimum establish “civil liability of companies for damage caused by entities under their direct or indirect control” and “allow persons harmed […] to bring an action against the parent company”. Existing laws/proposals have adopted different approaches. While the French Duty of Vigilance law and the Swiss proposal link HRDD obligations to corporate (civil) liability, the Dutch law relies on criminal sanctions including fines and even imprisonment but offers no redress for damages.
The real test of these mechanisms will be their effectiveness in practice. The French law is facing this first. In October 2019, six Ugandan and French NGOs filed the first lawsuit under the regulation against Total, over an oil field project in Uganda, and two further companies, EDF Group and XPO Logistics, were sent formal notice to comply with the law this Autumn.
At the international level, the Revised Draft of the proposed binding treaty, which was released in July 2019, requires states to introduce mandatory HRDD legislation (Article 5) and includes provisions on legal liability for companies to ensure that victims of corporate-related harm can access remedy (Article 4).
Looking beyond Europe
As debates in Europe gather momentum, the participation of affected communities, workers and civil society from the global South will be key. Bringing in their voices reinforces the need for effective regulation vis-à-vis policymakers. Human rights organizations such as Conectas in Brazil are also initiating mandatory HRDD discussions nationally, and Kenya’s National Action Plan has a provision encouraging the relevant agencies to consider mandatory HRDD. The movement in Europe can benefit from looking at developments elsewhere – and vice versa.
Processes at the national, regional and international levels are all vital to deliver real improvement to peoples’ lives on the ground without further delays. 2020 is poised to be a significant year for mandatory HRDD not only in Europe, but also beyond.
The latest expert commentaries on Mandatory Human Rights Due Diligence are available here.