Steadily mounting social and political pressures, coupled with growing legislation, have elevated awareness of human rights practices on the part of stakeholders – investors, customers, employees, and businesses – in many parts of the world. To a great extent, the UN Guiding Principles on Business and Human Rights (UNGPs) plays a significant role in setting standards for business behavior when it comes to assessing and improving the state of human rights due diligence practices globally.
The standards that have been adopted to date have helped establish human rights due diligence as a necessary and ongoing risk management process that accounts for a wide range of behaviors and policies of companies and institutions throughout their supply chain.
Global businesses are facing a significant number of new and recent regulations, with UNGPs and the OECD Guidelines for Responsible Business Conduct as the global standard for human rights due diligence. In the US, the policy impact of the Biden administration’s passing of the Uyghur Forced Labor Prevention Act (UFLPA), combined with EU Human Rights Due Diligence legislation, in particular, adds to existing human rights regulation, including the UK Modern Slavery Act, the EU Conflict Minerals Rules, the Australian Modern Slavery Act, and the California Transparency in Supply Chains Act. In addition to efforts in the US, EU, and Australia, other countries, including Japan, Switzerland, Canada, and Mexico, have made their own efforts to combat human rights abuses, better protect workers’ rights, and hold businesses accountable for any misdeeds in their operations.
Despite the progress that has been made, it’s clear that businesses across the globe still have far to go to ensure accountability in an age of steadily increasing regulations. Furthermore, implementation has been somewhat inconsistent. That was the assessment of the World Benchmarking Alliance’s fifth Corporate Human Rights Benchmark. The Benchmark assesses 127 companies – including Microsoft, Unilever, Coca-Cola, Ford, and Amazon – in terms of how they are performing against UNGPs principles.
Disturbingly, over a third of all companies scored zero on human rights due diligence – the critical process that allows them to translate their commitment to respecting human rights into practice.
In recent decades, as human rights, equality, and equity have become central social themes, governing bodies and regulators have felt pressure to provide legal and regulatory requirements that aid in the protection and overall respect of human rights – especially related to labor rights. In fact, since the adoption of the Universal Declaration of Human Rights (UDHR), adopted by the United Nations General Assembly in 1948, numerous international and regional human rights treaties and conventions have been established, shaping the legal landscape of human rights on a global scale.
However, while there has been notable advancement in the development and implementation of human rights legislation worldwide, the general consensus of the public and regulators alike is “more needs to be done.”
A prime example: Australia’s Modern Slavery Act 2018 (MSA) was considered a critical first step by Australia towards tackling the global problem of modern slavery. The government proclaimed at the time that it would drive a business-led “race to the top,” dramatically altering how businesses respond to modern slavery. However, two years into its operation, the Act appeared to have an uncertain impact on business practices or the lives of workers.
In March 2021, the European Parliament adopted by a clear majority three-quarters of the recommendations for a proposal for a directive to strengthen the EU Corporate Responsibility Regulation. Although the proposal is based specifically on human rights due diligence, the obligation will also apply to environmental and good governance issues. More recently, in June of this year, the European Parliament put forward an amended version of the draft Corporate Sustainability Due Diligence Directive (CSDDD).
It goes much further than the version proposed by the European Commission and Council in terms of application and scope. In terms of next steps, the proposal will next be presented to the European Parliament and the Council. If approved, the proposal will come into force in 2026 or 2028, depending on the industry.
Under the amended version, companies will be required to identify and, where necessary, address adverse human rights and environmental impacts along their value chain or face strong sanctions, including fines with a maximum limit of at least 5 percent of their net worldwide turnover. The extent of due diligence to be conducted will vary depending on the size, sector, operating scope, and risk profile of the company.
No one doubts that much effort has been expended in the area of human rights due diligence. Nonetheless, observations from expert organizations focused on human rights legislation have pointed to continued shortcomings.
The CSDDD, to point to a prominent development, is an opportunity for policymakers in the European Union to make significant advances requiring businesses operating in the EU to address their human rights and environmental risks and impacts.
Didier Reynders, the European Commissioner for Justice and co-initiator of the draft legislation, has lauded the proposal as “a real game-changer in the way companies operate their business activities throughout their global supply chain. With these rules, we want to stand up for human rights and lead the green transition. We can no longer turn a blind eye on what happens down our value chains. We need a shift in our economic model.”
But Amnesty International has drawn attention to the fact that two of the three co-legislators of the EU (the European Commission and the Council of the EU) have released proposals for the directive which, in its estimation, fail to live up to international standards on human rights in several ways. Amnesty International has stated, “If the law is to be effective, these weaknesses must be addressed.”
Legislation protecting human rights, such as the Modern Slavery Act, has been subject to scrutiny and criticism due to several shortcomings identified by experts, activists, and civil society organizations. One is the lack of effective enforcement mechanisms. In the case of the Modern Slavery Act, critics argue that the enforcement provisions are inadequate, resulting in limited accountability and enforcement of the law.
A second concern is the absence of robust reporting and transparency requirements within human rights legislation. The Modern Slavery Act, for example, requires certain organizations to publish an annual statement outlining the steps taken to address modern slavery in their operations and supply chains. However, critics argue that the current reporting requirements are often vague and lack standardized formats, making it difficult to assess compliance and hold organizations accountable.
A third area of concern is somewhat obscured beneath the legal term known as limited extraterritorial jurisdiction. In sum, agreed laws may not adequately address human rights abuses that occur outside the jurisdiction of the enacting state, enabling companies and individuals to evade accountability when operating in countries where human rights protections are weaker or enforcement mechanisms are lacking. A fourth area primed for remediation is inadequate protection for vulnerable groups, such as the unique challenges faced by migrant workers, followed by, finally, questions around whether human rights legislation imposes adequate penalties for offenders.
There are various techniques available for analyzing the impact of human rights due diligence efforts. Both link analysis and supply chain mapping have proven to be useful tools in assessing an array of human rights risks in the course of ensuring companies are being diligent in their oversight of human rights across every aspect of their business operations and relationships.
Holding businesses accountable has been immeasurably aided by the vigilance of non-government organizations (NGOs), who have been tracking these efforts, investigating, and collecting raw data on the progress that businesses are making. Their primary emphasis is on ensuring human rights standards and practices are promoted through a company’s supply chain and achieved through real due diligence efforts. Integrity Risk International addressed the subject earlier in our post, “Leveraging NGO Data to Supplement Human Rights Due Diligence.”
Clearly, the global breadth and scope of third-party supply chains calls for continually renewed vigilance and accountability to find and close the gaps and blind spots that continue to proliferate. In addition, complex global supply chains require nuanced assessments to identify and mitigate human rights risks. The solution will continue to call for robust approaches to human rights due diligence – approaches that are designed to work within the various confines and characteristics of jurisdictions across the world.
To learn more about how IntegrityRisk can help you maintain human rights compliance and employ best due diligence practices for your organization, contact us today.