Week of 20 September 2021
A risk-based due diligence approach could be the vehicle to support companies in recognising the interdependence between climate change, social issues and human rights
Our key takeaway: Companies are still treating climate and human rights as separate issues—despite fundamental interlinkages—and their risk management approaches reflect this. A risk-based due diligence approach could be the vehicle to support companies in recognising the interdependence between climate change, social issues and human rights.
Authors Claire Bright and Karin Buhmann published ‘Risk-Based Due Diligence, Climate Change, Human Rights and the Just Transition’:
- Applying the concept of ‘risk-based due diligence’ to climate change: The authors note that the concept of risk-based due diligence is contained in the OECD Guidelines on Multinational Enterprises, which builds on the concept of human rights due diligence contained in the UN Guiding Principles, and “extends it to other areas such as the environment.” Per the authors, the concept of “risk-based due diligence in relation to climate change can provide a useful tool for companies to identity, prevent, address and remediate their climate-related impacts in a holistic way which takes into consideration their implications for the human rights of rights-holders as well as for the environment in and of itself.” The need for this is underscored by recent findings (from the 2020 Corporate Human Rights Benchmark) that “human rights and climate change are often treated separately” and that companies need to “take a holistic view, recognising the interdependence between climate change, social issues and human rights.” Risk-based due diligence has three interrelated facets: prevention, mitigation and remediation.
- Prevention of impacts: Prevention refers to “the positive steps that a company should take to prevent its potential impacts on climate change and its climate-related human rights and environmental impacts.” Specifically, it increasingly includes an expectation to set measurable objectives and targets. For instance, the first OECD National Contact Point instance related to a company’s climate policy (the 2017 Dutch instance against ING) found that ING and other commercial banks are expected to define concrete targets to manage their environmental impacts in alignment with national policies and international agreements – which includes the 2015 Paris Agreement. Judicial decisions are also increasingly expecting concrete climate targets of companies – including the recent 2021 landmark judgment against Royal Dutch Shell in the Netherlands.
- Mitigation and remediation of impacts. In relation to mitigation, risk-based due diligence entails two components: the need for companies to (1) “put in place climate mitigation strategies to avoid human rights and environmental harms in the future and contribute to the green transition” and (2) “identify and address the adverse impacts that may arise out of … mitigation strategies in order to contribute to the fair transition.” Applying a risk-based due diligence approach entails a specific emphasis on meaningful stakeholder engagement – focusing on individuals and communities who are disproportionately affected (by climate) and groups at heightened risk of vulnerability or marginalisation (for mitigation). When it comes to remediation of climate-related impacts, challenges include “issues of standing, identification and attribution of the share of responsibility for each individual contributor and causation.” Regardless, the authors note that stakeholders are “increasingly calling into question the accountability of corporations for their climate-related impacts and requesting remediation” in courts, suggesting a trend that companies should be prepared for.
For more, see Claire Bright and Karin Buhmann, Risk-Based Due Diligence, Climate Change, Human Rights and the Just Transition (Sustainability 2021, September 2021)