In our previous article, we discussed the substantial elements in the “S” of the ESG (Environment, Social and Governance) movement in terms of human rights due diligence (HRDD), its importance, and background. In this article, we will take an in-depth look at recent international HRDD trends.
Global trends on human rights due diligence
International legal frameworks for HRDD work as guidelines that companies may use to set out their internal practices on a voluntary basis. However, these “soft laws” are being solidified and generalized applicably in certain jurisdictions. A number of countries have already introduced new rules on conducting HRDD. Although many HRDD rules are still voluntary at the national level, the movements to achieve sustainable and responsible corporate practices in connection with human rights writ large are becoming more visible. Some recent trends in connection with HRDD around the globe are outlined below:
- France enacted the Duty of Vigilance Act which functions as essential legislation in its supply chain legal framework since 2017. The Act requires certain large-size companies to develop a due diligence plan in order to monitor and prevent potential fundamental human rights abuse in their supply chains.
- Germany passed its Supply Chain Act in the middle of last year. The Act, to be effective on 1 January 2023, imposes upon certain business operators an obligation to develop preventive and remedial measures regarding HRDD and environmental due diligence as well as reporting duties.
- The Netherlands is considering another bill on sustainable business conduct based on its Child Labour Act which was adopted in 2019. The corporate obligations under the bill include conducting HRDD as a part of policy documentation requirements.
- The EU has also advanced another step for HRDD rules. In February this year, the European Commission adopted a proposal for a Directive on Corporate Sustainability Due Diligence. This proposal establishes a comprehensive corporate duty to conduct not only HRDD but also due diligence to address impacts on the environment. The proposal, once approved and adopted, will allow the EU member states two years to internalize the Directive into national law. The new due diligence rules will not only apply to the EU companies but also to non-EU companies if their turnover has been generated in the EU and the total number of employees are aligned with the prescribed threshold criteria. Under the current proposal, non-compliance may be subject to a fine and the victims may have the opportunity to take legal actions for damages that could have been avoided with appropriate HRDD.
It should also be noted that the EU has been very vigilant on human rights abuses in certain industries which are prone to human rights abuses, such as mining and fishery. Significant action has taken place, resulting in the enactment of the Conflict Minerals Regulation and the Common Fisheries Policy.
- Canada has been developing its supply chain-related legislation, which empowers the authority to prohibit the importation of goods manufactured by forced or child labor.
- In the US, the Uyghur Forced Labor Prevention Act was signed into law last year. The Act provides a rebuttable presumption that all goods manufactured in Xinjiang Uyghur Autonomous Region are the product of forced labor and thus not allowed to be imported into the country.
- The Japanese government is now drafting its HRDD guideline for its own companies. The guideline, scheduled to be issued sometime in the summer of this year, is expected to be based on the EU and US practices on HRDD and provides an assessment method, implementation system, and sanction measures in case of violations.
It is noteworthy that these legal frameworks generally set out criteria for applicable companies based on revenue and/or the number of employees. Some specific industries, including textile and garment, fishery, mining and oil and gas, can become a focus for stricter regulations due to a higher tendency for potential human rights abuse.
In the following article, we will look at HRDD developments in Thailand and potential implications of HRDD on business operators.