The United Nations Working Group on business and human rights has published a report on trends in human rights due diligence, highlighting some of the progress that has been made since the introduction of the UN Guiding Principles, and recommending steps that companies, governments, investors, NGOs and others should take to drive better results. With a focus on state (and in particular legislative) action, the report will likely aid those pushing for “hard law” on human rights due diligence at the national level.
Human rights due diligence is a cornerstone of the UN Guiding Principles on Business and Human Rights (UNGPs); and the process of identifying, preventing and mitigating actual and potential human rights impacts that a business may cause, or to which it may contribute or be directly linked, forms an essential part of any corporate human rights policy.
Now, seven years on from the introduction of the UNGPs, a UN Working Group has concluded a wide-ranging review of how this “second pillar” of the UNGP scheme has developed. Its report rightly recognises the progress that has been made, but it pulls no punches in identifying enduring issues. Much of its critique is targeted at businesses, but the report also calls for improvement in the practices of investors, NGOs, consultancies, legal counsel and – in particular – governments.
What has gone well?
The report notes with approval the integration of human rights due diligence into the OECD Guidelines for Multinational Enterprises, endorsement at G7 and G20 summits, and the emergence of domestic legislation implementing relevant concepts into “hard law”. Legislation such as the French Duty of Vigilance law and the UK Modern Slavery Act is described as a “paradigm shift”, responsible for greater corporate engagement with human rights issues and raising awareness of issues amongst senior executives and legal counsel.
The report praises a “small but growing number of large corporations in different sectors” making commitments to human rights due diligence and developing innovative practices. It also notes positive contributions amongst the investor community, and the growing expertise of business lawyers, who are increasingly asked to assist multinationals in identifying and managing human rights risks.
Where is there room for improvement?
The Working Group’s report states that the majority of companies subject to human rights scrutiny (such as those listed in the Corporate Human Rights Benchmark) do not demonstrate practices that meet the requirements set by the UNGPs. In particular, the report notes:
- a lack of transparency on the “concrete details of risk assessments and human rights due diligence processes”, which perpetuates gaps in understanding and consensus;
- a misconstruction of human rights risk, whereby companies focus on risk to the business rather than rights-holders;
- a tendency to address risks that are easily remedied or are particularly topical, rather than those which are more significant or challenging;
- the prevalence of ‘box-ticking’ approaches to human rights due diligence, which are not appropriately tailored to the business’ operating context;
- failures to translate group-level policies into implementation by global subsidiaries or beyond the first tier of the supply chain; and
- a preference for reactive measures implemented to deal with issues when they arise, as opposed to pro-active preventative strategies.
The report’s criticisms of business largely echo certain other contemporary commentaries on business and human rights. Where the report breaks new ground, however, is in taking a more holistic view of the business and human rights ecosystem, and describing the need for improvement amongst non-business actors. It notes:
- there are “systemic issues [which] are in many contexts linked to the root causes or fundamental development issues, such as poverty, corruption and weak rule of law.” These, the report notes, are “challenges that individual business enterprises cannot solve on their own”;
- NGO and journalistic criticism often expects too much of companies linked to a human rights violation, rather than targeting the actual perpetrator; and there is a tendency to challenge companies that are 'early adopters' of the UNGP scheme and therefore transparent about human rights issues, whereas less responsible or transparent companies are left unchallenged;
- some consultancies operating in the market lack genuine business and human rights expertise;
- some business lawyers fail to give due regard to the issue in the course of the core advisory services; and
- too often investors, regulators and public agencies fail to establish incentive structures which reward good behaviour; a problem which is compounded by a lack of common metrics by which performance can be evaluated.
The report acknowledges that there are plenty of examples of good business practice, particularly where there is commitment from top executives and integration across corporate functions. In particular, it encourages:
- comprehensive and thorough engagement with stakeholders, including collaboration and partnership with credible NGOs to gain a clear understanding of potential risks and overcome practical barriers to engaging with right-holders;
- accurate reporting on risks and the due diligence processes that businesses have in place to address them; and
- building and exercising leverage throughout the value chain by conveying expectations to suppliers and setting incentives which reward them for carrying out their own human rights due diligence.
The report also places significant emphasis on the role of investors and other financial institutions in incentivising such behaviours. It calls for the integration of human rights risk management as part of mainstream investment decision-making, and praises stock exchanges that have begun to embed human rights in environmental, social and governance requirements.
Much of the report’s recommendations are, however, aimed at governments. It calls for greater human rights due diligence requirements where the state is economically active, i.e. in public procurement processes, and for states to do more to produce and promote relevant guidance. It also advocates passing legislation to incentivise businesses to conduct human rights due diligence, and provides guidance on what this should require: meaningful disclosure on how human rights issues are addressed (whilst respecting commercial confidentiality considerations); robust, rather than “tick-box”, human rights due diligence; and – perhaps most interestingly – “carefully targeted use of strict liability concepts which make appropriate use of evidence of targeted due diligence as a possible legal defence”.
Implications of the Working Group’s report
For businesses and others engaged in business and human rights discourse, the report provides a helpful reminder – from an authoritative source – of current expectations on human rights due diligence, and the pitfalls and poor behaviours that should be avoided.
Its most profound impact, however, is likely to be on governments and national legislators, where its publication will spark further debate on issues such as mandatory human rights reporting, changes to public procurement rules and civil liability for human rights impacts.
The latter in particular is an increasingly central theme in discussions at national level. It is hardly a new idea; liability may arise under the French Duty of Vigilance law in limited circumstances, and it has been mooted as an amendment to the Modern Slavery Act in the UK (with a ‘reasonable procedures’ defence, not dissimilar to that set out in the UK Bribery Act). But it seems inevitable that the Working Group’s report – and in particular its reference to the exacting concept of 'strict liability', i.e. liability arising irrespective of any negligence or harm – will provide succour for national legislators calling for greater 'teeth' in national business and human rights legislation.