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John Ruggie delivers keynote speech on corporate due diligence & liability at webinar supported by Portuguese EU presidency

"Keynote Speech delivered at the webinar on Corporate Due Diligence and Civil Liability, organised by the NOVA Centre on Business, Human Rights and the Environment with the support of the Portuguese presidency of the Council of the EU", 28 January 2021 (transcript published 23 February 2021)

...There is a track in the EU on updating the non-financial reporting standards and then there is the due diligence... [T]he reporting system and what you report ought to be very closely related to the due diligence system. So far, they do not seem to be...

...Quite deliberately we adapted the term ‘due diligence’ from the world of business... But we insisted that even though business may be familiar with the concept, there are critical distinctions... 

First of all, human rights due diligence is not a transactional process... You are undertaking a long-term relationship with people so the focus needs to be on those people, whose lives, activities, and opportunities you can affect. That means that stakeholder engagement is absolutely critical...

It is also  different from the way many people are thinking about stakeholder capitalism... My third point is that human rights due diligence can be included within a broader enterprise risk management system, as long as these differences are respected and taken into account...

...If you make a due diligence system mandatory..., it becomes a legal responsibility for the company..., which in turn has implications for the governance of the company... You do not have to rewrite directors’ duties... Human rights due diligence properly constructed has that potential... 

The liability that is being discussed in the Brussels initiative involves a standard of conduct not result. [A] business... is judged by whether a certain standard of conduct has been followed and what the consequences were, but the initial emphasis is on the standard of conduct. The 27... different [EU] jurisdictions are going to require guidance on this front...

My next point relates to the question that everybody is asking: for how many levels down does a company have to go? ...My sense is that the answer should not be defined by layers in the supply chain. It should be driven by wherever a company’s due diligence identifies salient human rights risks... If your human rights due diligence process turns up a risk, whether it is in the 12th layer or the 2nd layer, that is where you go. This should include... an analysis of... how lead companies may be contributing to human rights harms through their own business models and practices...

Finally given that we are dealing with a standard of conduct, there should be, in my view, a due diligence defence, but not an automatic safe harbour... Just checking the box is not going to do the trick here... 

[W]e still have a long way to go but... we are talking about designing a legal regime that will initially cover 27 countries. And if the decision is made that non-EU companies that have a major business presence in the EU are included, then the EU becomes a surrogate global regulator in this field...

Click here for an overview of all six episodes (including registration links) in this webinar series organised by NOVE BHRE in collaboration with the Portuguese EU presidency.