A recent UN Forum on Business and Human Rights exposed four key takeaways for manufacturers focused on sustainability in their operations. In this blog post, we’ll explore them in detail, talk about upcoming legislation, and provide context on what all that means for manufacturers.
First, a little background. On December 10, 1948, the UN General Assembly adopted the Universal Declaration of Human Rights, enshrining the rights and freedoms of all human beings. For the past 25 years, the UN has expanded its commitment to human rights by encouraging businesses to adopt sustainable and socially responsible policies. Moreover, the organization encourages reporting and due diligence to ensure these policies are effective.
The last two decades in particular have seen a push toward greater human rights due diligence. Part of that push follows the adoption of the UN Guiding Principles on Business and Human Rights, and the subsequent establishment of an annual forum — the UN Forum on Business and Human Rights — that focuses on the role of the private sector in the advancement of human rights around the world.
Focusing on Rights Holders
There’s a growing understanding that rights holders must be at the center of any meaningful human rights due diligence efforts, but particularly in relation to the mitigation or remediation of adverse impacts.
The focus on the issue of access to remedies for victims of business-related human rights abuses is not incidental. If anything, it mirrors the same level of importance attached to remedies within emerging due diligence frameworks.
For example, having mechanisms in place to remedy violations is a key requirement of the German Supply Chain Due Diligence Act (SCDDA), which stipulates that companies must take remedial actions if they cause or are connected to adverse environmental or human rights impacts in their operations and supply chains. Similar requirements exist in other human rights due diligence legislation. A point that came out strongly during the forum was that businesses must pay attention to and be involved in developing adequate remedies alongside rights holders.
Creating a Stronger Connection Between Human Rights, Climate & the Environment
In recent years, there has been increased recognition that human rights and the environment are connected. Climate change threatens humanity’s ability to protect a range of human rights, and so companies must link their environmental and climate change strategies to their human rights due diligence programs.
As the push for renewable energy grows stronger, manufacturers must pay attention to the unintended consequences of the transition, ensuring that their efforts to address climate change do not lead to negative impacts upstream.
The environmental, social, and governance (ESG) framework represents an effective model for addressing the cross-cutting sustainability issues that companies must address. When they recognize that negative environmental impacts also adversely affect human rights as well as the long-term sustainability of a company, business leaders will be better equipped to take a holistic approach that takes all three pillars into consideration.
Addressing Investor Concerns About Human Rights
Investors have expressed growing concern regarding human rights. This concern comes not just from the fact that they want to be a force for good, but that human rights violations expose them to risks.
If a story comes out that a portfolio company violated the human rights of its workforce or of the communities in which it’s located, that creates risk for the investor. Investors can’t afford to be associated with companies that are embroiled in lawsuits or subject to large financial penalties. It isn’t good for their bottom line.
Involving Corporate Leaders in Human Rights Due Diligence
Consumers now care quite a bit about where their products come from. As such, responsible sourcing for companies is critical. C-suites and boards of directors must take an active role in human rights due diligence.
Creating a committee of senior leaders across the organization to focus on ESG topics that are relevant to your organization is a good first step toward sustainability.
What’s Driving Human Rights Legislation?
For manufacturers, legal obligations regarding human rights due diligence are growing, particularly in relation to the regulations coming out of different regions. Legislation like the EU Corporate Sustainability Due Diligence Directive (CSDDD) and the German Supply Chain Due Diligence Act (SCDDA) demonstrate that governments are committed to using regulations to change corporate behavior that negatively impact human rights. Companies must therefore not only come to terms with increasing regulations, but proactively position themselves to thrive in that environment.
Why are there more human rights due diligence regulations being proposed and passed? The answer lies in global events of the past two decades. Governments have been under pressure to transpose human rights standards to national laws as evidence of human rights abuses in the supply chain became ever clearer. Child labor and forced labor are two of the disturbing labor practices that have come to light.
The unanimous endorsement of UN standards for human rights in 2011 paved the way for governments releasing “soft” human rights due diligence measures. As businesses show they can meet these standards, governments have felt more confident in creating stronger, prescriptive legislation. We’re in that prescriptive legislation era now.
Future Human Rights Due Diligence Legislation
All indications point to even more human rights due diligence legislation being enacted in the coming years. We expect forthcoming legislation to continue to coalesce around three major trends, namely:
- Mandatory human rights due diligence legislation, which legally requires companies to undertake human rights and environmental due diligence by examining their operations and supply chains to identify and address human rights and environmental risks. The SCDDA and the proposed CSDDD are examples of such legislation.
- Trade-oriented legislation or trade compliance laws refer to those categories of laws that are designed to limit market access for businesses that do not have adequate due diligence processes in place to help them operate in compliance with those laws. The Uyghur Forced Labor Prevention Act (UFLPA) is an excellent example of trade-oriented legislation, as its provisions effectively prevent companies from importing items made with forced labor from entering the U.S. market. The EU recently adopted a proposal to follow suit by banning products made with forced labor from being imported into or exported from the EU or marketed within the EU.
- Reporting or disclosure laws, which make reporting on due diligence processes mandatory for in-scope companies. The CSDDD referenced above falls into this category. This proposed directive would affect thousands of companies, requiring them to report on their sustainability practices. Additionally, in-scope companies would need independent verification of this information.
All of these trends point to the broader trend of increased due diligence requirements. The good news for manufacturers is that they don’t need to wait for proposed legislation to come into effect. They can start putting a risk management system into place to educate and engage suppliers about sustainability now.
What Does This Mean for Manufacturers?
Complying with existing human rights due diligence legislation helps manufacturers avoid risks such as:
- Loss of market access
- Fines
- Lawsuits
- Loss of access to procurement processes
It’s crucial manufacturers understand these laws will only become more common. They won’t be able to avoid human rights due diligence legislation obligations.
As a result of these laws, manufacturers will face greater competition for suppliers that comply with human rights due diligence standards. If manufacturers can’t find these suppliers soon, they’ll face production delays and potential seizure of their products at borders.
How Assent Can Help
The Assent Human Trafficking and Slavery solution offers greater visibility into the supply chain. It deep maps the supply chain to monitor suppliers, products, parts, practices, and regulations to comply with various human rights due diligence requirements.
As regulations continue to come into effect, Assent’s team of subject matter experts will provide customers with insights to ensure compliance and business continuity.
To learn more about how Assent can help you meet your human rights due diligence requirements, contact us at info@assent.com.
