Keep one step ahead!
Upcoming business and human rights laws
 

February 28th 2021 - Edition #76

The Sustainable Development Goals have become a universal language and a roadmap to business sustainability, quickly ushering in a new era also for international human rights standards, which are increasingly becoming sanctionable corporate obligations and a matter of compliance. Businesses wanting to improve their impact, market competitiveness and risk management are now adding human rights to their due diligence procedures. Would you be willing to join the movement?

The United Nations started off by setting universal human rights standards and ratifying multilateral agreements on specific human rights. The world reached a global consensus on human rights, which was a remarkable feat, but private economic agents like corporations remained unbound by these agreements as they are not recognized as “international legal persons”. Thanks, in no small measure, to Nottingham University sociologist Kevin Bales, the existence of modern slavery in well-known multinationals’ supply chains made the news and shocked the world in the late 90’s, driving forward a slew of novel business and human rights standards that became a stepping stone to responsible business. The United Nation’s Guiding Principles on Business and Human Rights (“UNGPs”) (link opens as a PDF) have set the global framework and provided corporations with guidelines on how to protect and abide by the human rights of people and communities across their value chains and remedy any violations of those rights. 

It is only a matter of time before national laws take up these principles too. Legislators across the world are aware that although soft law played a crucial role in the global surge of what is now known as business responsibility to protect human rights, the exponential growth of complex supply chains (stepped up by the digitalization of international trade) demands hard law measures establishing mandatory obligations and accountability. 

That explains why States and international organizations are rapidly adopting legislation to step up corporate compliance with human rights. At the EU level, the European Commission is committed to advancing EU-wide human rights due diligence law by June 2021. Pending a final proposal, the report published by the European Parliament Committee on Legal Affairs (link opens as a PDF) indicates that the proposed legislation would apply to EU and any non-EU companies operating within the European Union and that companies would be expected to implement mandatory human rights due diligence to prevent adverse impacts on people and mitigate environmental risks. Moreover, earlier this month Germany announced a draft Supply Chain Act that forces companies to ensure that their suppliers abide by human rights, building on the trend set by the UK’s Modern Slavery Act (2015) and the French Due Diligence Law (2017). 

These legal developments show that the world is inarguably moving towards obligatory human rights due diligence, report and accountability. As always, those companies who are not (yet) subject to such obligations have a unique opportunity to gain a competitive advantage by starting to assess their human rights risks and to implement a comprehensive strategy to leverage their social impact. Since the UNGPs are the main source of inspiration for domestic legislators, they are an excellent starting point (with the help of the interpretative guide) for businesses wanting to initiate their journey towards human rights compliance, before the implementation of mandatory rules.

Companies typically regard corporate-related human rights violations as a remote or unlikely event. But human rights rules are clear – all businesses, regardless of size and sector, must implement due diligence throughout their value chain. This includes not only evaluating salient human rights risks but also assessing supply chains. Well-known examples set the bar: the $ 25 million fine paid by the banana producer Chiquita for gross human rights violations in Columbian banana farms; the reputational damage to the Adidas brand following the Asian sweatshops' scandal or the sale of Nokia Siemens Networks’ operations in Iran to government-owned telecom companies (among the 35 cases described in a recent study commissioned by the European Parliament) are cautionary tales about the importance of conducting human rights due diligence, across business connections, suppliers and even M&A transactions. 

In her article Human Rights and M&A: It’s no longer about the ‘why’; it’s now about the ‘how’, Anna Triponel explains how conducting a human rights due diligence is getting more and more mainstream when acquiring new businesses or divesting old ones, stressing that it is crucial to assess potential human rights’ implications especially when purchasing companies that operate in States that fall short of international human rights standards.

As we are witnessing a significant move towards mandatory human rights due diligence, companies that want to be “ahead of the game” should follow Jack Welch advice: change before you have to!

Have a great and impactful week!

Margarida Couto
Presidente do GRACE - Empresas Responsáveis,  em representação da Vieira de Almeida & Associados

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