Week of 2 August 2021
How does the proposed EU mandatory due diligence legislation align with the UNGPs?
Our key takeaway: The draft EU due diligence legislation is rooted in business and human rights principles in many ways, but there are some key divergences from the UNGPs in terms of defining HRDD and stakeholder consultation that still need to be addressed.
The Office of the UN High Commissioner for Human Rights (OHCHR) has outlined for the European Commission some recommendations and fundamental changes to be made to the European Parliament’s draft human rights and environmental due diligence legislation to better align it with the UN Guiding Principles on Business and Human Rights (UNGPs). Some key recommendations:
- “[Capture] the structure, sequencing and logic of human rights due diligence.” The EP’s model legislation (draft of 10 March 2021) does not “fully reflect” all of the elements of HRDD as outlined by the UNGPs. One particular concern is the draft legislation’s indication that a due diligence strategy “is somehow separate from the identification and assessment process needed in order to determine whether an undertaking is or may be causing, contributing to, or directly linked to actual or potential adverse impacts”—key elements of HRDD. In addition, the purpose of HRDD, with its focus on risks to people, is distinct from due diligence in other contexts. For that reason, “care will need to be taken to preserve the distinctiveness of human rights due diligence as a risk management activity.” Also, the EP model legislation underplays the role of leverage in mitigating human rights risks: “Article 4(7) appears to consider ‘leverage’ only as a limiting factor in determining the scope of human rights due diligence exercises; whereas, it is actually of critical importance in helping to define the different opportunities and responsibilities an undertaking may have to address potential and actual harms.”
- Align definitions of stakeholders and adjust sequencing of stakeholder consultation. The definition of stakeholders in the model EP legislation does not match the definition in a human rights context by including, for example, shareholders. This broader definition “frustrates the purpose of meaningful stakeholder engagement in human rights due diligence processes,” where stakeholder consultation is intended to focus on the perspectives of people adversely impacted by business activities—not on the perspectives of those entities who impact their human rights. In addition, the OHCHR takes issue with the sequencing of stakeholder consultation under the model EP legislation: “[T]he EP model legislation requires stakeholder engagement only after the identification stage. … As undertakings cannot accurately identify their impacts on human rights without seeking to understand the concerns of potentially affected stakeholders, failing to require stakeholder engagement at the identification stage can have deleterious consequences for the effectiveness of the law.”
- Corporate accountability and remedy. Many commentators have raised the point that there is a strong need for clarity and precision when determining when and how enforcement action will be taken for non-compliance. The OHCHR underscores that “legal regimes often rely on more than one type of enforcement” – for instance administrative sanctions for non-compliance, and civil liability to remedy harm. The OHCHR highlights that “an important issue for the Commission to reflect upon will be how civil enforcement of the proposed regime can complement other liability regimes under the domestic laws of member States (e.g. the law of tort), which are becoming increasingly utilized in business and human rights cases.”
For more, see Office of the UN High Commissioner for Human Rights, EU Mandatory Human Rights Due Diligence Directive: Recommendations to the European Commission (July 2021)