What are the recent human rights-related laws we are seeing apply to companies?
What are the reasons behind this surge in human rights-related legislation?
Which companies are caught by these laws?
What are companies required to do?
What are the penalties for breaching these laws?
How are companies responding?
What are some key tips for companies seeking to implement these laws?
Find out more about what these human rights expectations in recent laws mean in practice for in-house lawyers and companies in Thomson Reuter’s interview with Anna Triponel, available as free content here
Hello. And welcome to this video on human rights expectations in recent laws. My name is Anna Triponel. And I’m a business and human rights advisor. I worked on the UN Guiding Principles on Business and Human Rights which describe what’s expected of companies when it comes to human rights. And I work today with companies to help them put human rights risk management processes in place.
We’re going to be speaking in this video about what we’re seeing when it comes to recent legislation in this area, what’s expected of you as a company, who this applies to and thinking about in practice how to respond to these laws in a way that makes sense for you as a business.
Recent human rights-related law
So let’s travel back in time to ten years ago. This was part of the process when we were trying to clarify what does human rights mean for companies, and this ultimately resulted in the UN Guiding Principles on Business and Human Rights. Ten years ago we initiated research to look into how corporate laws and securities laws were addressing human rights. And the answer was that they weren’t. There weren’t many laws that touched upon human rights at that point in time. Now, fast forward to today, of course we’ve seen a dramatic change:
- The UK Modern Slavery Act of 2015.
- The French Duty of Vigilance Law of 2017.
- The upcoming Australian Commonwealth Modern Slavery Act.
- The Swiss Responsible Business Initiative, which is under parliamentary debate.
- The Dutch Child Labor Due Diligence Bill, which is under parliamentary debate.
These are just some examples but there are many more, so we have definitely seen a number of different human rights related legislation that are coming up on the books now.
Reasons for the recent surge in human rights legislation
There are two key factors that explain this surge in human rights related legislation: clarity and visibility.
Clarity; we now have the clarity that we need to understand better what is expected of companies when it comes to their human rights related behavior in their own operations but also overseas with their supply chains. We now know what’s expected of companies and what’s to be expected of governments. We now know how far down the supply chain companies are expected to go. We also now know what companies can do when they don’t have control over their supply chain, what’s reasonable to expect of them in this situation. That clarity is enshrined in the UN Guiding Principles on Business and Human Rights and that convergence, that consensus, has then spread to all of these different pieces of legislation which build on the consensus.
We also have visibility. We have investigative journalists going out on the ground, buried deep in companies’ supply chains to find out what’s going on. We have workers using technology to voice their complaints, to tell people what’s going on. And we have social media that connects consumers with the stories. People want to know that the tea they’re drinking hasn’t been picked by women who are subject to sexual harassment. People want to know that the clothes they’re wearing hasn’t being stitched by workers who are risking their lives because their factories are unsafe. People want to know that the buildings they are in haven’t been built by men who are in a situation of bonded labour with their employers. People want to know this; whether I’m a consumer, whether I’m an investor investing in a company, whether I’m an employee, or frankly, senior management working within a company, people want to know this. So the laws are an embodiment of that quest for knowledge of what’s going on when companies are making their goods and selling them to us.
Which companies are caught by these laws
The laws here are focused on large companies. In the UK and in Australia, it’s companies that are doing business in the territory over a certain threshold of annual turnover. So in the UK, for instance, if you’re doing a part of your business in the UK and you have an annual turnover of over £36 million you’re caught by the law. A similar story for Australia, although it’s a slightly different threshold.
In France it’s different, they’ve defined it differently, depending on the number of employees, if you have 5,000 employees as a French company in France you are caught. If you have 10,000 employees in France and overseas, you’re caught by the law.
In Switzerland they’re also debating what will define the size of the company that will be subject to the law, but they’re also saying you can be caught by the legislation if you are a higher risk company in terms of the severity of your risks to people.
The Dutch bill, however, is different because here it’s about protecting the consumer. So here it’s not about the size of the company, what matters is: are you selling to the Dutch consumer? If you are, twice a year, you’re caught by the law.
But what we’re seeing here with these laws is that in fact it doesn’t really matter whether you’re technically caught by them or not because if I’m a large company and I’m subject to one of these laws what will I do? I’ll turn around to my suppliers and say: “Please tell me what you’re doing on human rights due diligence so that I can then satisfy the requirements of this law.” So we’re seeing a cascading effect here, even smaller companies that are not technically subject to the law, actually, in practice, become so.
What companies are required to do
These laws are focused on human rights or a subcomponent thereof, something that’s deemed particularly heinous, like child labor or modern slavery. There are two groups of laws here that we’re seeing emerge.
The first category is focused on disclosure. The UK, Australia, Hong Kong, California laws are all examples of these. So, tell us what you’re doing. Tell us what you’re doing on modern slavery to know about it and to try and prevent it. Tell the world.
The second category of legislation is a duty of care. You as a company have a certain duty of care to conduct due diligence to try and prevent these things from happening in your supply chain.
So these are two very different pieces of legislation but ultimately seeking to require the same thing which is asking companies to put human rights due diligence in place. How do they do that? They’re all looking at the UN Guiding Principles as their reference point. So in essence all of these laws are asking companies to have a policy, a commitment to respect human rights, to embed their commitment, specifically through training, training is called out in the legislation, but there are other examples of embedding like contract provisions, specific governance, structure changes, cross-functional committees, etc. They’re asking companies to build their awareness of what’s going on, to act on what they’re finding, to track the effectiveness; there’s a lot of reference to key performance indicators in the laws, to track the effectiveness and to provide remedy when things go wrong and, within all of that, to tell people what’s happening when they’re communicating. Even the second category of laws that focus on the duty of care have a disclosure component attached to it. You have the duty and you also need to tell us what you’re doing to satisfy that duty.
Penalties for breaching these laws
The penalties for breaching these laws are directly tied to the way in which the law is set up. So if it’s a disclosure law, what is the penalty? Frankly, not much, you can have an injunction to publish a statement, but really it’s about the market driving this. It’s about investors, NGOs, consumers seeking a race to the top in terms of forward-looking disclosure. That’s really the penalty. It’s more of a reputational thing here rather than an actual legal compliance sanction. But the second category is different. Duty of care, there is a certain civil liability. If there is a harm that occurs and a complainant can prove that there’s a causal link between the harm and the company’s lack of human rights due diligence then, yes, civil liability can be engaged.
How companies are responding
The Modern Slavery Act has been called a game changer, and I would agree with that. There’s a significant increase in understanding and the awareness that companies have now of how they could be connected, inadvertently, to human rights harm that’s happening, both overseas as well as in our backyard here in the UK. We’re seeing much higher levels of commitment, we’re seeing senior level attention to this (CEOs, boards of directors, general counsels) really focus now on modern slavery and on human rights more broadly. We’re also seeing new structures be put in place, cross-functional committees where different departments within companies are working together to try and help protect the company from modern slavery harm, from human rights harm.
We’re seeing disclosure change, companies are now much more forward looking with what they’re putting in the public domain, warts and all, being more open. This is hard, this is challenging, but this is what we’re doing, this is what we’re learning and this is how we intend to take this forward.
I was just in France a couple of weeks ago talking about the French Duty of Vigilance Law, and what I heard there was that this has really been a tool for sustainability teams in companies to get the attention that they needed to try and push this, embed it within the company. Of course there are challenges, there’s a a lack of understanding of how these laws play together. There’s a fear of legal liability and there’s a concern that sometimes focus on one area of human rights, modern slavery, for instance, can distract from the broader holistic picture of human rights.
Tips on achieving compliance
I would have three recommendations for companies that are seeking to implement these laws:
- Take a holistic approach. All of these laws, whether or not they have the same terminology, are actually trying to implement the UN Guiding Principles. So focus on your human rights due diligence, on human rights risk management and once you’ve done that you can then respond to all these pieces of legislation.
- You’re not alone. Your department is working with other departments in the business. You all have a role to play in helping the company meet its responsibility to respect human rights. You also can work with others outside of your company, stakeholders on the ground, other peer companies, we’re all in this together to try and strengthen our response to human rights.
- These things are challenging — no one expects you to have all the answers but you are expected to try. You’re expected to look at how you make your products, the effect, the impact they can have on people and to take a reasonable approach to trying to prevent harm as you do so. This is what it means today to be a responsible business in the 21st Century.