Note to commissioner Reynders: as human rights due diligence becomes EU law, don’t forget that the UN Guiding Principles already define it!

Week of 26 October 2020

Note to commissioner Reynders: as human rights due diligence becomes EU law, don’t forget that the UN Guiding Principles already define it!

As the EU gets closer to its 2021 timeline for introducing new mandatory human rights due diligence (HRDD) legislation, stakeholders are weighing in. The latest input comes from the UN Working Group on Business and Human Rights, which urges European Commissioner Didier Reynders to align the law with the UN Guiding Principles, to go beyond reporting to incentivize meaningful HRDD processes and outcomes, and to make sure the law has teeth on a country level.

The UN Working Group has ten core recommendations for Commissioner Reynders (sent on 22 October 2020), summarised below:

    1. “The Directive should be based on the key expectations set out in the Guiding Principles,” including what the Guiding Principles provide for when it comes to human rights due diligence. In particular, human rights due diligence (HRDD) “concerns risks to people”, and “the higher the risk, the more complex the processes.” “The Directive should … also clarify the expectation that business enterprises exercise heightened due diligence in conflict-affected contexts.”
    2. “The Directive should be based on meaningful and inclusive stakeholder consultations.” In addition to companies and governments, this should include affected and potentially affected rightsholders such as communities, workers, trade unions, civil society groups, women’s organizations, human rights defenders, and Indigenous Peoples. The UNWG points Commissioner Reynders to process recommendations it has put together for National Action Plans on Business and Human Rights.
    3. “The Directive should cover all internationally recognized human rights and all types of adverse human rights impacts.” This should include the fundamental human rights outlined in the International Bill of Human Rights and ILO Core Conventions, as well as rights of vulnerable groups like women, children LGBTI+ people, ethnic minorities, indigenous peoples and human rights defenders. In particular, “The Directive should … aim to address all potential or actual adverse impacts, not just severe impacts”, with severity playing a role for prioritization – where needed
    4. “The Directive should apply across value chains, not just within supply chains,” meaning that HRDD should “[extend] not only to its relationships with first-tier suppliers, but to business relationships along the whole of its value chain, including business connections in the extended supply chain, business relations using products and services, joint venture partners, corporate lenders, project financers, investors, and governments.” In particular, the UNWG notes that “[t]he scope of HRDD expected under the Guiding Principles may be broader than the scope of a company’s legal liability for negative human rights impacts, and the nature of legal obligations and liability will therefore need to be carefully calibrated to achieve desired outcomes.”
    5. “The Directive should cover all EU undertakings (i.e. companies and other forms of business enterprises incorporated or domiciled in an EU Member State) and non-EU (i.e. foreign) business enterprises which sell goods or services in the EU, and it should apply to both groups’ extraterritorial operations and business relationships.” There should be a “clear and transparent timeline” for integrating all types and sizes of companies if a stepwise approach for certain companies (e.g. SMEs, financial industry companies, etc.) is to be taken at the outset.
    6. “The Directive should apply to government as an economic actor,” in consideration of human rights impacts that might be associated with State-owned enterprises, export credit, official investment insurance, and public procurement.
    7. “The Directive should facilitate both vertical and horizontal policy coherence” so that HRDD legislation is mutually reinforcing with other legal regimes, that businesses do not face conflicting requirements, and that other, existing regulations can be leveraged to incentivise and/or facilitate HRDD regulation. 
    8. “The Directive should go beyond reporting regimes and require meaningful processes and outcomes”: While recognising the importance of HRDD as a transparency measure, the Directive should “[focus] on and [incentivize] meaningful HRDD processes and outcomes.” At the same time, businesses should be given leeway to make continual improvements over time.
    9. “The Directive should require businesses to take measures that facilitate access to effective justice and remedy.” This should include: establishing or participating in grievance mechanisms; monitoring complaints and assessing the effectiveness of remediation processes and outcomes; and strengthening grievance mechanisms in consultation with affected stakeholders.
    10. “The Directive should set out clear compliance monitoring and enforcement structures and procedures that facilitate access to effective justice and remedy.” In particular, the UNWG calls for “explicit designation within each EU Member State of competent administrative and judicial authorities that will manage oversight of implementation, such as via a central registry of covered companies’ annual reporting, a system for processing information and complaints by third parties such as civil society organizations and trade unions, and the investigation of potential infringements.” Enforcement must be undertaken equally by all EU Member States and should “draw on multiple measures, including administrative, civil, and criminal law instruments, to penalize or sanction infringements.”

You can read the full recommendation here: Recommendations regarding the commitment to a proposed EU Directive on human rights and environmental due diligence in 2021, UN Working Group on Business and Human Rights (22 October 2020).

The draft directive will soon open for public consultation. In advance of the public consultation, the Global Business Initiative on Business and Human Rights and Clifford Chance will hold a virtual discussion on Wednesday, 4 November for companies to hear and discuss what an EU-level law will mean for business. For more information and to register, visit this link.