This blog is the third in a three-part series. In the first blog, we focused on the current landscape of mandatory human rights due diligence (HRDD), disclosure requirements, and the push towards a more universal approach. In the second blog, we discussed the elements that BSR has found important for effective HRDD. In this blog, we explore some of the challenging questions that the forthcoming European mandatory human rights due diligence (EU mHRDD) legislation should seek to address.
Over the past 25 years, BSR has worked with companies to manage human rights risks, including conducting more than 200 human rights impact assessments worldwide and supporting countless companies with integration and implementation. And due to our strong presence in France, we have also supported companies’ efforts to align with the French Corporate Duty of Vigilance Law (the French Law) requirements and learned a lot about the complexity of moving from soft to hard law.
As we have noted in previous blog posts, we believe that the proposed EU mHRDD legislation is a significant development for corporate human rights programs because it provides a regional-level mandate for due diligence. However, many aspects of the proposed legislation are still largely unclear and up for debate. Based on learnings from our experience working with companies to navigate the French Law, we present the following recommendations on how the upcoming legislation can be most effective.
Include All Types and Sizes of Businesses
In the absence of an official list of companies covered by the French Law, it is often difficult to assess whether a company is within its scope. To avoid such confusion, the EU legislation should establish a clear scope of application and cover all types and sizes of businesses, including state-owned enterprises and small and medium-sized enterprises (SMEs). Beyond reducing confusion, universal scope would strengthen corporate efforts to address human rights impacts. All organizations have an impact somewhere in their respective value chains, including SMEs, and we need all players involved to drive effective change.
Instead of spending time trying to determine the right size or type of company within the scope of the law, a better option would be to cover all entities with appropriate guidance for their type or size and operation to implement the due diligence expectations. By leveling the playing field and requiring HRDD for all business entities, we can effect real change across all types of businesses and encourage more cooperation among all types of companies in tackling human rights challenges, regardless of where they fall in the value chain.
Address All Types of Human Rights
The EU legislation should require business entities to apply due diligence with respect to all human rights across their entire value chain, in line with the UN Guiding Principles on Business and Human Rights (UNGPs). This broad scope is necessary to ensure that all areas of potential risk and impact are adequately assessed, prioritized, and mitigated.
“All human rights” can be understood as, at a minimum, those enshrined in the International Bill of Rights and the International Labour Organization (ILO) Core Conventions, but this can also include other international instruments that can guide companies on specific challenges in relation to child rights, migrants' or indigenous people’s rights, privacy rights, and more. While guidance would be welcome, the EU mHRDD should not be prescriptive in terms of the human rights conventions, standards, and principles within scope since this will always be an evolving field, and such a step would not be in line with the approach articulated by the UNGPs.
Addressing all types of human rights also means focusing beyond just the most severe impacts.
Addressing all types of human rights also means focusing beyond just the most severe impacts. The French Law aims at preventing the most severe adverse impacts on human rights, but a broader scope is important to effectively prevent human rights abuses. Restricting the scope of human rights risks to be covered by the law prevents broader company engagement and structural changes in the approaches implemented based on adequate prioritization.
Cover All Aspects of the Value Chain—Upstream and Downstream
In our experience working with French companies trying to meet the French Law, we have observed that too many focus their due diligence energies exclusively on their supply chains given the law’s requirements. This means that many miss identifying or addressing important human rights impacts, such as those caused by products, services, or other business relationships. As outlined by the UNGPs, proper human rights due diligence should cover all business activities up and down the value chain, including companies’ own operations and supply and subcontracting chains but also products and services and their impacts downstream—from end use to decommissioning and recycling. We have seen companies build robust human rights due diligence programs to tackle supply chain risks while neglecting to assess the impacts of their products and services, thereby missing significant impacts caused by those other aspects of their operations.
Require Stakeholder, and Specifically Rightsholder, Engagement
Stakeholder involvement and consultation is a fundamental component of effective due diligence. It is necessary to ensure that the identification of risk as well as the subsequent mitigation and remediation measures are sound and effective and address the needs of rightsholders and vulnerable populations. This approach helps ensure that companies’ overall approaches are credible and adequately communicated and that those most impacted can weigh in during the assessment process. The first cases brought to the French courts reflect, to some extent, the failure of those companies to adequately involve rightsholders—in particular the most vulnerable and relevant stakeholders—in their mapping exercises and the development of their mitigation and remediation plans. Requiring such engagement will go a long way in ensuring that rightsholder voices are part of the due diligence process.
Stakeholder involvement and consultation is a fundamental component of effective due diligence.
Apply a “Reasonable” Approach to Liability
As European Commissioner of Justice Didier Reynders put it, “a regulation without sanctions is not a regulation.” We believe that expecting companies to conduct HRDD that meets a “reasonableness” threshold is the right approach to liability, though a transition period to develop an understanding of what “reasonableness” entails is warranted. Under this middle-of-the road approach to liability, companies can be held liable for not meeting reasonable due diligence obligations—which will be established over time through binding case law and other guidance—should their due diligence programs and processes not meet basic expectations. This would prevent companies from hiding behind a claim of being unaware of certain human rights impacts of which they should have been aware or avoid liability altogether by simply not conducting any diligence.
While the EU mHRDD law has been proposed during a very challenging year, it is an extremely promising development that can positively build on the lessons learned from the French Law to harness the strength of the private sector to contribute to (re)building a more just and sustainable world. By requiring companies to perform robust, comprehensive, and inclusive human rights due diligence programs that carry some liability for companies that either fail to perform these exercises altogether or fail to meet a minimum threshold of diligence, we can anticipate greater attention, identification, and efforts to mitigate human rights impacts wherever they may take place.