The UN Guiding Principles on Business & Human Rights confirm that companies have a duty to respect the human rights of people impacted by their operations and value chains. To help companies meet this duty, they define a process of human rights due diligence.
Millions of people are being exploited in supply chains globally to make the goods we all consume. Companies are increasingly being held to account for human rights abuses that are identified in their supply chains. Such revelations damage brand value and trust with consumers, investors and employees alike.
New laws require ever more companies to ensure that they are not importing goods made by victims of human rights abuse (e.g. the US Uyghur Forced Labor Prevention Act). These regulations are complimented by new regulations that require companies to report on the steps they are taking to prevent abuse in their supply chains (e.g. the Australian and British Modern Slavery Acts).
Governments around the world have endorsed the UN Guiding Principles and the process of human rights due diligence codified in it. Countries, including Australia, France, Japan, the UK and the US, have provided guidance to companies recommending that they conduct human rights due diligence. Laws coming into force this year, such as the German Supply Chain Act and the Norwegian Transparency Act, explicitly require thousands of companies that do business in their countries to conduct human rights due diligence.
Companies that fail to engage in human rights due diligence expose themselves to considerable commercial and reputational risk.
So what is human rights due diligence? Put simply, it’s a way for companies to manage potential and actual adverse human rights impacts in which they are involved.
It is a four stage and continuous process.
Firstly, companies need to identify and assess actual or potential adverse human rights impacts that they may cause or contribute to. These include direct impacts through their own business operations as well as impacts they may contribute to through business relationships with suppliers, clients and business partners.
Companies should identify all potentially impacted groups of people, including workers in their supply chain and local communities. Then they should assess the potential impact that their business has on these groups.
Secondly, they must integrate the findings from the assessment into their business processes. Critically, they must take appropriate action to prevent or mitigate adverse impacts that they are involved in. This should be informed by the degree to which they are involved in the impact.
Thirdly, the companies should track and measure the effectiveness of the actions they have taken to address their adverse human rights impacts.
Finally, the company should communicate with stakeholders throughout the due diligence process. Companies will benefit from being transparent about what they have done to assess and address their human rights impacts.
All organizations need to be careful not to overstate the scope of due diligence undertaken or to understate the potential adverse human rights impacts identified. Sincere and accurate statements about the scale of due diligence and the identified potential risks provides a stronger mitigation, should actual human rights abuse be identified later down the line.