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According to the United Nations, “human rights are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status.” Human Rights Due Diligence (HRDD) is a general term for the kinds of laws that require companies to undertake proactive measures to ensure business practices and operations do not violate human rights.
These laws require companies to regularly assess, identify, remediate, and prevent human rights violations within their business and with varying scopes of application up and down the value chain. This starts with traditional due diligence to confirm the identity, legal status, policies, and practices of potential contractual partners, but adds additional responsibilities once a supply relationship is entered into, including remediation of violations.
This limits a company’s ability to remove itself from a problematic supply chain and implies that supply relationships should be entered into with a long-term view—hence, the due diligence stage (pre-contract) is the decision point that will determine the kinds of obligations and potential liabilities you have with respect to this supplier and their associated stakeholders after you sign the contract. In this whitepaper, we will use “due diligence” to refer to all of the obligations that companies have under HRDD laws, not just traditional due diligence.
The UN Guiding Principles on Business and Human Rights (UNGPs) published by UNHCR in 2011 are the authority on defining human rights in the business context and are the basis for HRDD principles that countries have used as the foundation of their HRDD laws.
The UN Guiding Principles on Business and Human Rights has three pillars:
1. The States Duty to Protect Human Rights
States set clear expectations that companies domiciled in their territory/jurisdiction respect human rights in every country and context in which they operate.
2. A Company’s Responsibility to Respect Human Rights
3. Access to Remedy
Since the adoption of these principles, a new era of socially responsible and sustainable business has taken shape and continues to build momentum. Many governments and businesses have used these principles to set regulations, policies, and set long-term goals. Recently we have seen several governments enact far-reaching laws and regulations in line with the Guiding Principles to help regulate businesses and their supply chains and ultimately protect workers.
By implementing HRDD practices, companies can ensure that their products and services are created without harming the environment or violating human rights. This can help build trust with customers, stakeholders, and investors, while also minimizing legal and reputational risks. Furthermore, HRDD helps companies to promote sustainability and improve the overall well-being of their employees, suppliers, and communities where they operate. Overall, adopting HRDD is a critical step towards building a responsible and ethical supply chain, which is increasingly important for consumers and society as a whole.
Globally HRDD regulations are being passed and more to come
Several countries and regions have passed laws over the last few years regulating industries and imports into their country. Laws range from issue specific to disclosure reports to national-level mandatory due diligence and reporting that cover all human rights.
Here are a few examples (this is far from exhaustive, and laws and regulations are being enacted, passed, and updated in real-time– so please check with legal counsel)
Issue Specific Laws
The UK, US and Australia Modern Slavery Act, and the Dutch Child Labor Due Diligence Act.
Disclosure Laws
Mandatory Supply Chain HRDD
The enforcement mechanisms vary from case to case and could result in hefty fines or customs seizure of goods. Some laws allow for indiscriminate detention of specific types of goods, meaning importers are responsible for proving their supply chains are clear of violations. Buyers will be particularly sensitive about supplier selection and retention based on their ability to comply with human rights requirements.
How Do Human Rights Due Diligence Regulations Effect Global Buyers
Since January 2023, governments and NGOs have started to enforce and test the limits of the laws through investigations and in court. A complaint was filed in early 2023 against three major retailers alleging that their failure to become signatories to the Accord on Fire and Building Safety in Bangladesh is a violation of their due diligence obligations under the LkSG. In the UK, the Uyghur World Congress has brought a suit in London’s High Court over the government’s failure to ban imports of cotton products made with forced labor.
And in the US, an environmental law organization filed suit against a global commodities trader for breaching the OECD guidelines on responsible business conduct for its operations in soya supply chains in Brazil and allegedly causing environmental damage and human rights violations. While these cases are still ongoing, the uncertainty and potential liability evidenced by these complaints and claims put global companies on notice about their human rights and environmental obligations.
Having HRDD in your supply chain contracts can help you drive not only positive social impacts but also financial impacts. HRDD can help you avoid legal risks and reputational damage that may result from being associated with human rights abuses. Having good HRDD policies and practices can also enhance your competitiveness and attractiveness to customers, investors, and stakeholders who value ethical and sustainable business practices and see a lack of due diligence as a risk. Furthermore, these practices can also improve your operational efficiency and quality by reducing disruptions, conflicts, and grievances in your supply chains.
Technological tools like Labor Solutions’ WOVO can help global companies understand and manage their supply chain risks at scale, and to collect the data they need to make required annual reports under new HRDD laws.
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