Due diligence and business
Business enterprises and investors have a key role to play in stopping human rights violations. International organisations and states should support their efforts towards better universal human rights implementation. The process has already started at a global and European level. In 2011, the United Nations adopted Guiding Principles on Business and Human Rights (UNGPs) and these rules became the primary mechanism addressing the responsibility of private businesses to respect human rights. On an European scale in 2016 the Council of Europe’s Committee of Ministers approved Recommendation CM/Rec(2016)3 to member States on Human Rights and Business. However, the non-binding nature of the Guiding Principles and other international ‘soft law’ instruments in this area has led to the general understanding that there is a need ‘hard law’ obligations that are binding for business companies to be passed.
At state level some examples can be put forward such as the Netherlands’ Child Labour Due Diligence Act (2019), the Swiss referendum on mandatory human rights due diligence that took place on 29 November 2020, and the German government’s planned Due Diligence Act.
In 2014 work commenced on what is intended to be a legally binding UN treaty on business and human rights. A ‘zero draft’ was published in July 2018 and a revised version in 2019. One of the main criticisms of the Zero Draft was that it applied only to transnational businesses. This was amended in the first revised draft to apply to business activities conducted by all business enterprises, including but not limited to transnational corporations. The definition of ‘business activities’ in the second revised draft was modified in order to include state-owned enterprises that do not operate internationally. However, this changed the scope of the first revision of the treaty, which maintained a ‘particular’ focus on transnational corporations.
Under the proposed treaty, states would be required to ensure that businesses established on their territories undertake human rights due diligence to identify and assess any actual or potential human rights abuses. The latter might stem from own business activities, or from business relationships. Businesses would be obliged to respond appropriately to prevent and mitigate identified abuses (including potential abuses), monitor the effectiveness of their response and communicate these matters regularly with stakeholders. States would be required to envisage ‘effective, proportionate, and dissuasive’ criminal and/or administrative sanctions where legal entities or individuals have caused or contributed to human rights abuses. Though there are apparent differences among state positions discussions on the draft will continue in 2021.
On its turn the EU has also taken steps to replace voluntary measures on business and human rights with mandatory solutions. On 11 September 2020, the European Parliament Committee on Legal Affairs published its recommendation for a proposed Directive which would apply to all undertakings established in the member states or in the EU territory, but also to non-EU limited liability entities selling goods and services into the EU. This means that it would potentially affect UK companies selling into the EU regardless of Brexit. Similar to the draft UN Treaty, the Directive would require member states to impose mandatory due diligence obligations on relevant undertakings. The latter would be obliged to identify whether their operations or business relationships cause or contribute to human rights, environmental or governance risks. ‘Risk’ would encompass potential and actual adverse impacts on individuals, groups or organisations caused by the undertaking itself or its value chain, including those with which it has business relationships. An important document will be the companies’ due diligence strategy which will ensure that business relationships are in compliance with human rights principles through contract clauses and codes of conduct. In addition a grievance mechanism for complaints and remediation will be set up.
The Commission must submit a formal legislative proposal to the European Parliament and the Council of the European Union in early 2021. Member States will have a two-year implementation period and after transposing the Directive they will be required to provide ‘effective, proportionate and dissuasive’ penalties for infringements of national provisions and to publish regular reports on the state of affairs. In order to address effective enforcement action and coherence at member states level the EU should also publish guidance to navigate national legislative reforms.
However, practical steps are still to be accelerated. A UN Treaty is a long way off (and may never happen) and the EU Directive will be implemented in different ways in different member states. In order to address effective enforcement action and coherence at member states level the EU should also publish guidance to navigate national legislative reforms in this respect. The majority of Swiss voted in favor of the responsible business initiative, but the referendum failed due to unique requirements associated with Switzerland’s direct democracy. During the US campaign, President-Elect Biden stated that he would require, for example, public companies to disclose climate risks and the greenhouse gas emissions in their operations and supply chains but concrete decisions are pending.
Compiled by Media 21 Foundation from: https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/603495/EXPO_BRI(2020)603495_EN.pdf
and other sources.