Mandatory Human Rights due diligence: Is your business prepared?

Colleen Theron, chief executive of Ardea International discusses the evolving legislation surrounding corporate approaches to human rights, and why it pays to be proactive.

Mandatory Human Rights due diligence: Is your business prepared?

In 2017, edie published a blog of mine entitled ‘Human Rights due diligence: what should business do next?' where I discussed the growing consensus that the emerging trend towards transparency and disclosure in a range of responsible business issues (not just human rights, but also gender and diversity, fair pay, and taxes) is encouraging companies to look at compliance as only a benchmark.

Since 2017, there has been increasing momentum by governments worldwide introducing legislation requiring companies to undertake mandatory human rights due diligence. This signals a move away from the era of relying on voluntary due diligence standards (such as the UNGPs and the OECD) and company self-regulation and CSR programmes, towards mandatory legislation setting out the requirements for organisations to put effective strategies in place to address potential and actual negative human rights impacts.

The proposed mandatory due diligence legislative frameworks do, however, incorporate the standards set by the UNGPs and the OECD and companies will have to incorporate these standards into their policies and practices to demonstrate compliance with the laws.

On 10 March 2021, the European Parliament backed a report on mandatory due diligence and accountability. The EU initiative will require its member states to align with the principles of the Directive when it is finalised by transposing the requirements into domestic legislation. Some member state countries have already started introducing legislation that requires business to address human rights in their supply chains.

In March 2021, a Dutch Bill for Responsible and Sustainable international business Conduct introduced due diligence obligations for certain companies. The proposed legislation is separate from the Dutch Child Labour Due Diligence Act. In Germany, a historic Lieferkettengesetz – meaning ‘supply chain law’ is expected to be passed in the next six months. In Switzerland, there is a requirement for companies of a certain size to ensure they report on human rights standards.

The movement to introduce legislation that addresses human rights issues is not constricted to the EU. Australia introduced a Modern Slavery Act in 2018 similar to the requirements of the UK 2015 UK Modern Slavery Act. Canada has introduced a Bill (BillS-211) to help to combat modern slavery by imposing supply chain reporting requirements that meet certain criteria and that produce, sell or import good in Canada.

There are principles that are common to all of these proposed pieces of legislation – (discussed in this blog). Critically all companies should become familiar with the four key components of human rights due diligence as set out by the UN Guiding Principles on Business and Human Rights, the universally recognised framework on human rights and business.

The four key components are:

  1. Identifying and assessing the potential adverse human rights
  2. Taking appropriate action
  3. Tracking the effectiveness of measures taken to address human rights impacts;
  4. Communicating on how impacts are being addressed

How should business be preparing to ensure they are carrying out adequate due diligence? We discussed this in the previous Edie blog. Additional considerations are:

  • Understand if the board is equipped to address human rights
  • Integrate how human rights will be addressed into the company strategy
  • Undertake a gap analysis of all policies and procedures to ensure they address human rights
  • Review all complaints mechanisms, grievance mechanisms and speak up problems
  • Review all roles, resources and expertise of key functions who will play a role in addressing these issues.
  • Review all training to see that it is fit for purpose. Our new Business and Human Rights 6 week online training and support programme is an all levels support programme to identify and manage human rights impacts in business to meet the ‘fit for purpose’ requirement.

We recently updated the Human Rights Mandatory Due diligence reporting know-how note for LexisPSL.

Colleen Theron, Ardea International

Topics: CSR & ethics
Tags: ethics | CSR reporting
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