Mandatory Human Rights Due Diligence: A business perspective

William Anderson, Inhouse Counsel (Human Rights), adidas

In short, it is not a question of if, but when such laws will be in place and how they will impact current business operations and practices.

This blog is part of a series 'Towards Mandatory Human Rights Due Diligence'.

As a European-headquartered company, we have been watching with interest, and introspection, the translation of the soft law expectation of a corporate responsibility to respect human rights, under the UN Guiding Principles, into hard law, through legislative action.

Whereas some within the business community may be concerned with what this means for corporate liability, our immediate interest and attention has been on more practical questions. How can we take and make our current human rights due diligence approach and risk mitigation strategies fit an emerging, but somewhat divergent, regulatory environment; one that may or may not include enforcement mechanisms? What is our level of preparedness? How can we learn and evolve our systems based on our own practice and experience and that of others in jurisdictions where these expectations are already in force? How do we move from a standard of business conduct that is voluntary in nature, underpinned by various guidelines and advisories, including the OECD Guidelines for MNEs, into a formal and legally-binding framework? What will be the reach and impact of new regulations, some of which call for rights-specific due diligence, on say child labour or forced labour, and some which are programmatic in nature?

We continue to debate these questions, internally, but also with our stakeholders, including governments, investors and ESG analysts.

Our working hypothesis is that human rights due diligence will be increasingly formalized and regulated – whether this is by way of a pan-European directive from the EU, or as part of a national legislative agenda - and the primary target of that legislation will be public companies and multinational corporations. In short, it is not a question of if, but when such laws will be in place and how they will impact current business operations and practices.

The signs are clear for all to see, the precedent having been set by France’s Corporate Duty of Vigilance Law, which calls on large companies to disclose annual due diligence plans. And in a similar vein, the Swiss National Council is currently considering mandatory human rights due diligence legislation.

Other recent rights-specific legislation reaches well beyond national boundaries and involves both domestic and international companies. The supply chain transparency clauses of the UK’s 2015 Modern Slavery Act, for instance, applies to an estimated 12,000 companies who fall within its ambit – adidas included. And once in force, the Netherlands’ 2017 Child Labour Due Diligence Act will apply not only to companies registered in the country, but also to companies delivering their products or services to the Dutch market.

Also, in recent months, we have seen MEPs renew their call for an EU law that will require companies to carry out human rights due diligence in their supply chains, with the claim that this will “level the playing field for business.”

Indeed, business is looking for a level playing field. And more so, legal certainty. The current legal frameworks are relatively new and will need to be tested in the coming years to understand to what extent they are delivering the desired results. As a minimum, this may require independent reviews, linked directly to the government’s own performance and responsibilities under their National Action Plans for business and human rights.

The UNGP’s were carefully crafted to allow their broad application to all manner of business enterprise, large and small. They promote a standard of business conduct that respects human rights and uses the power of engagement with stakeholders and affected rights holders, etc., to identify impacts, to mitigate risks and, when required, work individually or collectively towards remedies. In this respect, human rights due diligence should deliver both in terms of outcomes, as well as process. In UNGP-speak, it should support the goal of “know and show”.  

Our call to governments is a simple one: engage with companies and wherever possible reduce duplicative processes and the administrative burden of multiple reporting channels. Streamline expectations around business and human rights due diligence. Businesses should be investing their efforts, and energy, into preventing adverse impacts and, when required, driving remedial outcomes for affected communities and individuals.  It is this, that they must account for.