Companies are obliged to monitor and manage environmental and human rights standards in their supply chains. This week saw major steps forward in support for enforcing human rights due diligence by law, as well as major debates in shaping the new laws. Here are my 10 takeaways from the debates.
It’s been difficult to avoid the buzz around the idea of mandatory human rights due diligence (HRDD) legislation for companies — following rapid developments in Europe, in particular.
But what’s new on the issue at this week’s UN Forum on Business and Human Rights?
If it’s already a buzz; this week, it’s been a swarm.
For non-practitioners, it’s important to explain that due diligence is an obligation on companies to monitor and manage environmental and human rights standards in their supply chains. The concept itself is widely supported by business, as part of the UN Guiding Principles.
The Power of '&': Integrating Sustainability into Business Strategy
Join us as Procter & Gamble CEO Jon Moeller and Chief Sustainability Officer Virginie Helias share their insights on how companies can embed environmental sustainability throughout their business and the role it can play in a business strategy — Tuesday, Oct. 17, at SB'23 San Diego.
But this week saw major steps forward in support for enforcing HRDD by law, as well as clarifying some of the major debates in shaping what the new laws will look like.
Here are my 10 takeaways from the debates.
The first key development was the unequivocal commitment from European Commissioner Didier Reynders that Europe will do this. The public consultation in Europe may be ongoing, but Reynders left the UN Forum in no doubt about his intent to table the new law.
“The world needs a new business model; and one which is more sustainable, equal, just and resilient,” Reynders said.
The second key conclusion from the week, for those who are attracted to global rather than regional standards, is that the world has welcomed the European initiative. It was backed by leaders from successive UN agencies at the opening session — including Sanda Ojiambo, the new Chief Executive representing 11,000 companies in the UN Global Compact; alongside a long line of business organisations including the Global Business Alliance, the Principles for Responsible Investment and Europe’s amfori.
As Theo Jaekel, legal counsel at telecommunications giant Ericsson, explained: “A new business consensus has emerged to favour the law — in order to create a level playing field, harmonise standards and provide legal certainty.”
In response to France’s ‘Devoir de vigilance’ law — and similar initiatives in the Netherlands, across Europe and due to be voted at next week’s referendum in Switzerland — Jaekel added: “The process at EU level has created comfort for companies, rather than being subject to fragmented national initiatives.”
“Mandatory human rights due diligence law will provide a level of transparency investors need,” BMO Global Asset Management VP Rosa van den Beemt also asserted. “Investors can’t assess human rights risk, if companies don’t do so.”
Third, the forthcoming law isn’t simply seen as being consistent with future global standards — it could actually make them more likely.
As Ruwan Subasinghe, Legal Director for the International Transport Workers' Federation, pointed out: “We need global governance, but it’s great that the European Union is first mover.”
Lara Wolters MEP — the European Parliamentarian responsible for the law — said mandatory HRDD will be in the European business interest, saying:* *”First movers do have an advantage.”
Fourth, issues of liability on companies were seen to be sensitive in framing the law, but accepted to be a clear part of the whole.
“A law without sanctions, isn’t a law,” quoted European Coalition for Corporate Justice representative Claudia Saller, having been said by the European Commissioner.
“The Guiding Principles clearly foresaw the relevance of liability as one form of corporate accountability, driving better behaviours and outcomes,” added the Shift Project’s Francis West.
Fifth, for others who may be concerned that companies may be stretched too far in their responsibilities for complex supply chains, the UN Guiding Principles themselves were shown to provide the best answer.
Principle 17 describes the difference between “causing” human rights violations and “contributing” to them — which opens the option to apply different levels of liability, depending on the closeness of the business relationship, according to Saller.
Sixth, many speakers advocated for public policy incentives for companies to be transparent about their findings — so they do not seek simply to protect their reputation, but to create better outcomes on the ground.
The UN Working Group on Business and Human Rights announced it had written to the European Commission, suggesting a range of incentives — including through financial support, trade preferences and export credits.
Seventh, there was support for a broad scope — beyond only the largest companies. Jaekel argued that this is important to ensure the right company or companies are identified as responsible for any harm.
Meanwhile, Subasinghe argued that “all workers” should be covered — including those in the informal sector — in line with the International Labor Organisation’s Centenary Declaration on the future of work. Wolters was one of several speakers insisting that access to remedy would be an essential part of the legislation.
Eighth, participants argued the economic benefit to companies, evidenced by businesses who have already adopted robust due diligence systems.
The efficiency, quality and loyalty that result from longer-term relationships with suppliers was highlighted in European research published earlier this year and followed similar findings in an earlier OECD study, the Forum was told.
Ninth, stressed by UN Working Group Chair Anita Ramasastry herself, there can be no ‘safe harbour’ that excludes companies from responsibility altogether, if harm is proven — even where reasonable steps towards due diligence have taken place. Each case has to be judged on its merits, she argued, citing her own background in bringing forward anti-corruption law.
Tenth, human rights specialists might be surprised to learn that some of the challenges of environmental due diligence are even more complex, compared to the debates being held at this week’s Forum. Presentations showed that — as there is no single, comprehensive body of environmental law — it is inevitable that the new law will draw on a diverse range of standards.
Germany’s Environment Agency has produced a study suggesting the legislation should actually define the whole set of environmental goods that need to be protected.
According to Wolters, political negotiations had seen some argue that a similar set of human rights impacts should be defined in the law, in order to offer legal certainty.
But like so much at this week’s Forum, the predominant argument is to leave discretion to companies — to enable them to engage with stakeholders including trade unions, apply grievance mechanisms at the local level and understand the context in which they work.
Due diligence is about the quality of your business relationships; and ultimately, that is more satisfying for all involved.
By next year’s Annual Forum, legislative consideration of the European proposal should be well advanced, and the question will be: How soon will others follow?
Richard Howitt is providing daily updates from the UN Business and Human Rights Forum 2020.