Week of 11 October 2021
Investors’ support for mandatory human rights and environmental due diligence is a neon sign lighting the direction of travel for companies
Our key takeaway: Investors are increasingly throwing their weight behind forthcoming legislation on mandatory human rights and environmental due diligence in the EU (and beyond). This is a signal that companies can’t afford to miss: the time to build robust HREDD systems is now.
As members of the Investor Alliance for Human Rights (IAHR), 94 global investors representing over $6.3 trillion in assets under management and advisement published a statement in support of key aspects of the forthcoming EU mandatory human rights and environmental due diligence legislation and calling for similar legislation in other jurisdictions:
- Irrespective of sector or size: The application of the law should be “cross-sectoral, covering all business enterprises and financial institutions, public and private, domiciled or based in, operating, or offering a product or service within the EU.” In recognition of the fact that they are part of the same global value chains, the law should cover both large and small companies, with companies of every size using their leverage “to ensure that human rights and the environment are respected in those global value chains.”
- Alignment with international frameworks: The legislation should be fundamentally grounded in the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. At its core, this means that fulfilling “due diligence” requirements under the law should obligate companies to “identify, prevent, mitigate, and account for how they address their potential and actual human rights and environmental impacts through an ongoing human rights and environmental due diligence process.” A key element of this is meaningful engagement with “actually and potentially affected stakeholders or their appointed representatives.”
- Accountability on multiple fronts: In line with the UNGPs, “legislation should ensure accountability for harms which businesses cause or contribute to and should enable and support the provision of adequate and effective remedy.” The legislation should build in “appropriate administrative and civil liability legislative provisions for human rights and environmental adverse impacts within their operations and throughout their global value chains.” Enforcement should come from EU Member States, but IAHR also calls on companies to self-monitor through “good corporate governance to ensure that mandated due diligence requirements are fulfilled.” Specifically, “[c]orporate boards should oversee and be accountable for the implementation of rigorous human rights and environmental due diligence processes; monitor, discuss, and report on their development; and ensure their results are reflected in forward-looking targets relevant for the prevention and mitigation of human rights and environmental risks and impacts and adequately considered and integrated in the company’s overall strategy.”
For more, see Investor Alliance for Human Rights, Investor Statement in Support of Mandated Human Rights and Environmental Due Diligence in the European Union (October 2021)