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Commentary: EU mandatory due diligence law could increase pressure on companies to address responsible product usage

"Responsible Product Usage", 1 March 2021

With the continued progress of an EU Corporate Due Diligence and Corporate Accountability legal requirement, multi-national companies may soon be compelled to pay as much attention to their customers, end-users, and other “downstream” actors as they do to their “upstream” supply chains. Since the UK adopted its Modern Slavery Act in 2015, companies around the world have increasingly instituted processes to address human rights risks in their supply chains. 

Far fewer efforts have been devoted to the human rights implications of company products and services, although the UN Guiding Principles on Business and Human Rights (UNGPs) draws no distinction between upstream and downstream in the value chain. 

While there is no guarantee that the European Commission will take a similar tack, the current European Parliament Legal Affairs Committee “provisional” draft directive follows the UNGPs approach, and covered companies soon may be expected to institute significant steps to mitigate risks that their products are being used in connection with negative human rights impacts.

Responsible product usage risks span a wide spectrum.  For example, a chemical fertiliser, overwhelmingly used for farming purposes, might be still misused as an ingredient for an explosive.  Pharmaceutical drugs, such as opioids, may pose addiction and overdose risks if misused or misprescribed.  Information technologies, including AI, facial recognition and surveillance products, can have myriad legitimate uses while also being used to violate human rights in a wide variety of ways...

The EU’s proposed legislation on corporate due diligence and accountability may bring a change in this direction.  The publicly available proposal from the European Parliament’s Committee on Legal Affairs applies to human rights, environmental and governance risks and impacts throughout company value chains, covering all “business relationships.” ...

Much as in the early days of supply chain due diligence, companies will have to adjust.  Among the steps they might consider are:

  • Strategy and leadership at the board level to understand how company products and services may be misused, and how management is addressing those risks. 
  • Due diligence on products and customers to determine the likelihood that a company product or service may be misused generally or following a specific transaction. 
  • Policies and procedures addressing responsible use and/or product misuse, both in the sales process and in customer and end-user usage. 
  • Training relevant employees, resellers, contractors and even potentially customers and end-users. 
  • Additional controls or processes where higher risk situations are present, such as limiting the volume or duration of sales, changing technical requirements, heightened internal approvals, and relevant contractual terms. 
  • Monitoring potential product misuse through media reports, grievance mechanisms, or engagement with civil society, and initiating investigations and reviews when concerns are identified.

While the focus on human rights in supply chains is now engrained in many human rights programmes, the EU legislation is likely to make the “other” side of the value chain – customers and end-users – equally relevant.  Companies would be wise to begin preparing.