Human rights requirements build on a shared foundation

Recently adopted regulations effectively require strengthening corporate human rights due diligence practices and making sure these are grounded in the UNGPs and OECD Guidelines, PwC’s ESG expert Anna Bulzomi states. This means going beyond the drafting of a human rights policy or a supplier code of conduct and going beyond reporting.
 
For human rights lawyers and responsible business advisors the last few weeks have been very eventful. One of my clients told me she was tracking so many different regulatory initiatives on human rights due diligence that she was really wondering how her company could ever be able to implement them all and at what cost.

And mind you, her company does care about the rights of workers, communities and consumers. They strive for transparency and for compliance with ‘the spirit of the law’, whether it is about living wage or land rights or the right to privacy. But her dilemma is real, and she is certainly not the only client to raise this very practical question.

Companies operating across multiple jurisdictions, relying on global value chains and on a vast network of suppliers and business relationships are often asking what no-regret moves they can make today to save on litigation, compliance and reputational costs tomorrow.

Start with the UNGPs and OECD Guidelines

My advice is to start with the implementation of:

• the UN Guiding Principles on Business and Human Rights (UNGPs), and
• the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.

Those are the underlying standards to many of the recently adopted regulations. They provide a common language and a shared foundation on which each company can then build further, in light of additional (sector or country) regulation, risk profile of their products and services, and individual ambition.

Tailoring will always be needed, but by designing and implementing a robust due diligence process that meets the requirements of the UNGPs and OECD Guidelines, companies have a good basis to future-proof their business. Most importantly, they can bring about real change in the way they impact people and their rights. By identifying and prioritizing risks to people, preventing or mitigating negative impacts, and tracking effectiveness of the due diligence process to improve it over time.

From financial products to AI systems: human rights have been on the EU agenda for a long time 

The future of sustainable business in the EU includes more than environmental considerations and puts human rights issues prominently on the agenda. The direction of travel was already clear in the very first wave of sustainable finance regulations. The EU Taxonomy includes ‘minimum safeguards’, with the aim of ensuring that companies carrying out sustainable activities do so with respect for human rights.

The Sustainable Finance Disclosure Regulation (SFDR) requires considering a list of principal adverse impact indicators on social and human rights matters, both at entity and product level. Under the Corporate Sustainability Reporting Directive (CSRD), companies are starting to report on a broad range of sustainability issues, including their approach to human rights due diligence.

All these regulations refer directly or in practice to the standards of conduct set out in the UNGPs and OECD Guidelines – another reason for my ‘no regret’ advice. The substantive content that needs to be addressed is defined in the International Bill of Human Rights and the ILO Conventions, among others.

In addition, several specific legislative initiatives outside of the sustainable finance space reiterate the importance of human rights. Two recent examples: 

• The EU Deforestation Regulation (EUDR), in force since June 2023, requires that products in scope are produced with respect for the human rights protected under international law and the principle of free, prior and informed consent as set out in the UN Declaration on the Rights of Indigenous Peoples.
• The EU AI Act (expected to be endorsed by the EU Council after the corrigendum procedure) introduces a risk-based approach and points to ‘high-risk AI systems’ in the fields of education, employment, essential public and private services (e.g. healthcare, banking), law enforcement, migration and border management, justice and democratic processes – all fields that touch on fundamental civil, political, economic and social rights.

Raising the floor through CSDDD and the EU Forced Labour Regulation

The UNGPs and OECD Guidelines are also important in two very recent developments that will further shape the regulatory landscape around human rights.

After endless rounds of negotiations, the EU Council approved the Corporate Sustainability Due Diligence Directive (CSDDD). The file is now on the agenda for the EU Parliament plenary vote at the end of April. Despite the weakened scope and coverage of the final text, the core of the directive remained intact. CSDDD is an ambitious law, with the potential to harmonize the currently fragmented EU regulatory landscape.

While all eyes were on the CSDDD file, another groundbreaking regulation made significant progress. The EU Council and the EU Parliament have reached a provisional agreement on the EU Forced Labour Regulation (FLR). The draft law would require the EU Commission and member states to investigate products imported or made in the EU if there is a risk they were made with forced labour.

The EU Commission is also tasked with the creation of a database containing verifiable and up-to-date information on such risks. The implications and sanctions could be far-reaching, with possible bans, withdrawals or disposal of the product(s) made with forced labour.

Overall, the implementation road may be long and complex, but the starting point is becoming increasingly clear with each new law being passed. In my next blog, I will delve into more detail on how to establish a robust process for human rights due diligence.