Human rights due diligence update

Human rights due diligence allows companies to proactively manage potential adverse human rights impacts, thus unsafe and unhealthy working conditions for workers, child labour and forced labour. They are involved in those, either through their own activities or through its operations, products or services by its business relationships. According to the Office of the United Nations High Commissioner for
Human Rights, human rights due diligence consists of the:

  • Identification and assessment of actual or potential adverse human rights
    impacts;
  • Integration of findings from impact assessments across relevant
    company processes and taking appropriate action;
  • Tracking of the effectiveness of measures and processes to address
    the impacts;
  • Communication on how impacts are being addressed to the
    stakeholders.

The aim to achieve the protection of human rights has been discussed and included in several international conventions over the last decade. The United Nation Guiding Principles on Business and
Human Rights, endorsed in 2011, provided an internationally recognized framework for duties and responsibilities of governments and business enterprises to prevent human rights impacts. Practical guidelines on the implementation of human rights due diligence have been further provided in the globally recognized OECD Guideline on Responsible Business Conduct, and its concept has
also been embedded in the International Labour Organization (ILO) Tripatite Declaration of Principles concerning Multinational Enterprises and Social Policy.

It has become clear for the international community that companies throughout the global value chain play a vital role in realizing effective and sustainable protection of human rights. This has resulted in several initiatives to build legal frameworks with a higher level of sanctions that require companies to identify, assess, prevent and mitigate risks, and, where necessary, remedy the negative impacts of their activities that cause human rights abuse in their supply chains.

Global trends on human rights due diligence

International legal frameworks for human rights due diligence work as guidelines that companies may use to set out their internal practices on a voluntary basis. However, these ‘soft laws’ are being solidified and generalized applicably in certain jurisdictions. A number of countries have already introduced new rules on conducting human rights due diligence. Although many rules are still voluntary at the national level, the movements to achieve sustainable and responsible corporate practices in connection with human rights writ large are becoming more visible.

Some recent trends in relation to human rights due diligence around the globe are:

  • France enacted the Duty of Vigilance Act which functions as essential legislation in its supply chain legal framework since 2017. The Act requires certain large-size companies to develop a due diligence plan in order to monitor and prevent potential fundamental human rights abuse in their supply chains.
  • Germany passed its Supply Chain Act in the middle of last year. The Act, to be effective on 1 January 2023, imposes upon certain business operators an obligation to develop preventive and remedial measures regarding human rights due diligence and environmental due diligence as well as reporting duties.
  • The Netherlands is considering another bill on sustainable business conduct based on its Child Labour Act which was adopted in 2019. The corporate obligations under the bill include conducting human rights due diligence as a part of policy documentation requirements.
  • The EU has also advanced another step for human rights due diligence rules. In February 2022, the European Commission adopted a proposal for a Directive on Corporate Sustainability Due Diligence. This proposal establishes a comprehensive corporate duty to conduct not only human rights due diligence, but also due diligence to address impacts on the environment. The proposal, once approved and adopted, will allow the EU member states two years to internalize the Directive into national law.
  • The new due diligence rules will not only apply to the EU companies, but also to non-EU companies if their turnover has been generated in the EU and the total number of employees are aligned with the prescribed threshold criteria. Under the current proposal, non-compliance may be subject to a fine and the victims may have the opportunity to take legal actions for damages that could have been avoided with appropriate human rights due diligence.

It should also be noted that the EU has been very vigilant on human rights abuses in certain industries which are prone to human rights abuses, such as mining and fishery. Significant action has taken place, resulting in the enactment of the Conflict Minerals Regulation and the Common Fisheries Policy. 

  • Canada has been developing its supply chain-related legislation, which empowers the authority to prohibit the importation of goods manufactured by forced or child labor.
  • In the US, the Uyghur Forced Labor Prevention Act was signed into law last year. The Act provides a rebuttable presumption that all goods manufactured in Xinjiang Uyghur Autonomous Region are the product of forced labor and thus not allowed to be imported into the country.
  • The Japanese government is now drafting its human rights due diligence guideline for its own companies. The guideline, scheduled to be issued sometime in the summer of this year, is expected to be based on the EU and US practices on human rights due diligence and provides an assessment method, implementation system, and sanction measures in case of violations.

It is noteworthy that these legal frameworks generally set out criteria for applicable companies based on revenue and/or the number of employees. Some specific industries, including textile and garment, fishery, mining and oil and gas, can become a focus for stricter regulations due to a higher tendency for potential human rights abuse.

Source: Baker McKenzie