Blog
By Catie Shavin, Director, Global Business Initiative on Human Rights
The prospect of mandatory human rights due diligence laws has been in the air for a while – certainly since the introduction of the French Duty of Vigilance Law in 2017 – but are companies preparing sufficiently?
National initiatives are now underway in a rapidly growing number of countries and, significantly, the European Commission has committed to introducing a draft mandatory human rights and environmental due diligence law this year. These laws will impact not just companies domiciled or operating in the EU and other relevant national jurisdictions. They will have wide-ranging implications for companies around the world – particularly those embedded within global value chains.
Those companies that are already actively implementing human rights and environmental due diligence processes in line with the UN Guiding Principles on Business and Human Rights (the UNGPs) and other key standards should be well-placed to meet the requirements of new laws.
But even for these companies, there will be much to do to prepare for forthcoming laws.
Some steps will need to wait until the detail of the various proposed laws is clearer. However, we know these laws will aim to align with authoritative global standards, such as the UNGPs, and there is much that companies can – and should – get started on now.
Five suggestions for business
1. Look for and address any gaps or blind spots in your company’s due diligence processes
Many companies now have human rights due diligence processes in place, but even among leading companies, there will often be gaps.
Are there any areas of the business that have been overlooked? For example, do due diligence processes cover transport and logistics, research and development, and downstream (customer and product use-related) risks?
It may also be a good time to revisit how risks are prioritised. Under mandatory due diligence requirements, companies are likely to experience stronger pressure to demonstrate prioritisation on the basis of salience.
2. Do the same for your company’s grievance mechanisms.
Similarly – most, if not all, companies have at least some grievance channels in place. But even leading companies express a strong interest in strengthening and expanding these.
Consider each of your company’s potentially affected stakeholder groups. Is there a grievance mechanism available to them? Do they know – or can they easily find out – that it exists? Can they access it and would they trust it? Don’t overlook barriers such as language, access to technology, physical proximity and cultural factors.
3. Strengthen processes to track and measure progress and effectiveness.
Approaches to tracking progress and effectiveness are advancing, but still nascent. Yes, it’s tough – particularly when it comes to assessing human rights outcomes.
But being able to demonstrate credibly not just that the company has human rights due diligence processes in place, but that they are effective will almost certainly be key to managing a range of legal risks associated with mandatory due diligence laws.
4. Ensure human rights governance and accountability is fit for purpose
Expectations regarding governance and the role of senior management are likely to be incorporated into mandatory due diligence laws. Good human rights governance and clear lines of accountability also help establish a strong ‘tone from the top’ and make it an everyday part of how business gets done.
Now’s the time to check that what your company has in place is working and fit for purpose. Is someone at board or executive committee level responsible for ensuring the company meets its human rights commitments and responsibilities? Do they have the know-how and access to information needed to fulfil that responsibility? Does everyone else in the business understand their role in human rights risk management – and know where to turn if they need support?
5. Build strong relationships with key colleagues and teams that will be involved in due diligence.
Mandatory due diligence laws are likely to increase the role of various teams in the company’s human rights and environmental due diligence processes.
Up to now, these processes have typically been led by representatives of the company’s sustainability or corporate responsibility teams. Increasingly, colleagues in legal, compliance and – if due diligence obligations extend across the value chain – procurement, and sales and marketing, will become more deeply involved. With the inclusion of environmental due diligence obligations in a number of proposed laws, your relationship with colleagues in the environmental sustainability team will also become key.
Do these teams have a shared understanding of what’s expected of the company – under authoritative global standards and in the eyes of stakeholders? Do they have the practical know-how to work with you to implement and demonstrate effective due diligence? Are you in a position to coordinate and work together as needed?
No time to lose
The moral case for implementing effective human rights (and environmental) due diligence processes has long been clear. Mandatory due diligence laws don’t change that. But they do significantly increase the consequences for the company of not getting it right.
None of the suggestions offered above are new or ground-breaking. They encompass challenges business practitioners and others have been focused on for some time.
But they will take time and effort.
Which is why I strongly suggest that you start now, and don’t wait for draft laws. We know broadly what these laws will require. The sooner you get started, the better positioned your company will be to meet the requirements of mandatory due diligence laws.
Read more:
- Mandatory human rights and environmental due diligence: What an EU-level law will mean for business (GBI and Clifford Chance, Jan 2021)
- Navigating the changing business and human rights legal landscape (GBI and Clifford Chance, May 2020)
- A smarter mix: From talk to action (GBI, Dec 2019)