At the end of April 2020, the European Commissioner for Justice, Didier Reynders, announced during a webinar hosted by the Responsible Business Conduct Working Group of the European Union that the European Commission will be developing legislation making human rights and environmental due diligence mandatory for EU companies from 2021.
This notice followed a study commissioned by the European Commission and published in January 2020 on due diligence requirements through the supply chain, which received massive support among business respondents. The study identified several benefits associated with mandatory due diligence legislation, including economic benefits derived from an overall improvement in companies’ brand and image reputation, an increase in companies’ attractiveness for employees and talent recruitment and retention, improvement in operational efficiency, innovation and risk management, a better financial and stock performance, and lower capital costs.
While the exact legal mechanisms are not yet known, Commissioner Reynders explained that any legislation passed in this regard will be “inter-sectorial, mandatory and […] with a lot of possible sanctions” and it will be set to identify, prevent and account and mitigate for human rights abuses and environmental degradation linked to companies’ operations and those of their subsidiaries and supply chains.
In the words of the United Nations Secretary-General António Guterres, the COVID-19 pandemic is “a human crisis that is fast becoming a human rights crisis”, with its immediate effects calling out deep-seated inequalities and hitting vulnerable communities a lot harder than others. Commissioner Reynders told the audience during the aforementioned webinar that there has never been a more pressing need for this legislation than today.
The first globally accepted standard for embedding human rights principles in business practice has been the 2011 UN Guiding Principles on Business and Human Rights (UNGPs); complemented by the OECD Guidelines and the ten principles of the UN Global Compact, these form the basis of the IMPA ACT Responsible Supply Chain Management programme that IMPA has helped developed back in 2013 in an attempt to instil some degree of uniformity when it comes to creating policies, due diligence systems and remediation mechanisms in shipping.
While there is a general agreement that human rights are important and should be part of normal business practice and absolutely at the core of economic recovery, statistics show a stark mismatch between the narrative and actual practice. The latest UN Global Compact Progress Report, assessing approximately 10,000 of its members, shows that while 90% of responding companies do have a policy in place, only 20 to 23% have a risk-assessment process and only 15% are actually assessing their impacts on human rights; and that scenario does not account for the level of integration in management systems or the effectiveness of implementation across the value chain and subsidiaries, as these cannot be gauged for lack of comparative data. With mandatory due diligence in place, businesses will no longer have a choice between assessing their adverse impacts on human rights, environment and anti-corruption principles, and not doing so.
Companies will need to start positioning themselves in a way that ensures they will be prepared for the time the EU passes this legislation, as the EU is a major leader in sustainable policy and this mandatory due diligence law will most likely trigger further developments in regulations around the world. If one prefers to push and lead by example before being pushed into action, the IMPA ACT programme is a great place to start; with ACT, you learn to integrate environmental, social and economic considerations in supply chains, and developing the necessary policies, systems and mechanisms to ensure you adopt an internationally-endorsed responsible supply chain management practice.
Responsible Business Conduct Working Group, Presentation and Discussion With Commissioner for Justice Didier Reynders on Due Diligence Study, Webinar, 29 April 2020, available at: https://vimeo.com/413525229
European Commission, Study on Due Diligence Requirements Through The Supply Chain, Final Report, January 2020, available at: https://op.europa.eu/en/publication-detail/-/publication/8ba0a8fd-4c83-11ea-b8b7-01aa75ed71a1/language-en
Secretary-General António Guterres, “We are all in this together: Human Rights and COVID19 Response and Recovery”, 23 April 2020, available at: www.un.org/en/un-coronavirus-communications-team/we-are-all-together-human-rights-and-covid-19-response-and
United Nations Global Compact, UN Global Compact Progress Report 2019, available at: https://www.unglobalcompact.org/library/5716