Week of 14 February 2022
Legislating human rights due diligence: will legislators push human rights respect, or incentivize companies to tick boxes?
Our key takeaway: The UN Guiding Principles and the OECD Guidelines started their lives as soft law instruments, governing the conduct of companies when it comes to human rights. As these expectations are becoming law (with the European Commission’s draft text due on February 23rd), concern is rising that human rights due diligence will become a tick-box exercise which doesn’t create meaningful change for those impacted by business. Staying true to the principles contained in the soft law instruments, for instance on meaningful stakeholder consultation, effective remedy and considering one’s own purchasing practices, will help.
OECD Watch members SOMO, Public Eye, ECCHR, and CCC have published ‘Respecting Rights or Ticking Boxes? Legislating Human Rights Due Diligence’ which “aims to help legislators, policymakers, and advocates correctly interpret due diligence concepts from the OECD Guidelines and UGNPs as they translate normative standards into hard law”:
- A paper tiger at best, new greenwashing at worst: The authors underscore that legislators are determining “how to turn the normative standards for HRDD contained in the UN Guiding Principles and OECD Guidelines into binding, hard-law obligations.” These standards “are principle-based and do not easily translate into law within different jurisdictions and legal traditions.” “While some degree of flexibility is inherent in HRDD, it also poses additional risks in terms of misinterpretation or misrepresentation. If lawmakers do not achieve the right balance between practical flexibility and normative rigidity, there is a significant risk that HRDD laws will become, at best, a paper tiger that yields no real positive impact for people and, at worst, a new greenwashing technique behind which businesses can hide while continuing to do harm.” To avoid this, the authors suggest “12 key interpretations of the norms that legislators must get right when establishing HRDD obligations.”
- Twelve challenges for legislators to consider when turning business and human rights standards into law: The authors signpost to 12 challenges for legislators to consider. 1) HRDD is a standard of conduct where results matter. Companies must demonstrate progress and results regarding specific risks and impacts. 2) The bar for “contributing” vs. being “directly linked” to impacts in the value chain. “Rather than tiers or proximity, factors such as foreseeability and effectiveness of due diligence should be considered in distinguishing between ‘contributing to’ and ‘directly linked’”. 3) The bar for being ‘directly linked’ vs. ‘not linked to human rights abuses through a business relationship. “Companies cannot ignore abuses committed by business partners, even if these are not directly linked to their products or services, because of the risk that the practices that led to them may carry over into the companies own line of products or services.” 4) Adequate provisions for disclosure, communication, and information. “Legislators must make it clear in the law what information companies are expected to disclose at minimum on their due diligence to demonstrate to relevant stakeholders and rightsholders that their due diligence is adequate.” 5) Prioritization in HRDD processes. “More clear-cut and prescriptive approaches to purchasing practices should accompany any HRDD legislation. Legislators should prohibit companies from buying under the cost of production and insist that they commit to existing orders, pay on time, provide reliable forecasting, as well as refrain from unfair trading practices.” 6) The ‘due’ in due diligence: resource/leverage constraints and what to do with small and mediumsize enterprises. “[R]egulators and courts can take a proportionate approach and account for factors such as leverage and size in terms of turnover and employees.” 7) Prevention vs. mitigation. “Mitigation and remediation are undertaken if prevention fails, not as a substitute.” 8) The meaning of ‘meaningful’ in ‘meaningful stakeholder engagement’. “Legislators should specify expectations for companies regarding meaningful stakeholder consultation as a necessary part of the quality of human rights due diligence.” 9) Responsible disengagement. “Companies must also be prepared to act upon this exit plan and responsibly disengage.” 10) Remedy, especially in cases where companies are contributing to or are directly linked to harm. “Legislators should ensure that companies have an obligation to engage with rightsholders in a legitimate process with the aim of providing remedy.” 11) State obligations and business responsibility: separate, but interconnected. “Companies should respect, encourage and support the state in executing its obligations.” 12) The role of auditing and certification in HRDD. “Legislation should state that audits and certification are not to be considered sufficient proof of human rights due diligence.” In short, “legislators should ensure the buck stops with the company itself.”
- Guaranteeing accountability: The authors underscore that “to truly be effective, mandatory due diligence legislation must be accompanied by a robust liability regime and strong enforcement measures that guarantee accountability for failure to perform due diligence, as well as provide access to justice and remedy for the victims of corporate abuse.”