The European debate on mandatory human rights due diligence (HRDD) has gained significant momentum in the last year. A number of national initiatives are coming to a head in late 2020, and the European Commission is launching a formal consultation on a potential EU-wide regime on mandatory human rights and environmental due diligence. We have seen growing business support for mandatory HRDD, from both individual companies and business associations, as well as an increase in joint calls by business and civil society for such measures.
October 2020 |
Opening Remarks by John Ruggie at the Conference “Human Rights and Decent Work in Global Supply Chains”
As we approach this critical moment, we have been working hard at Shift to support constructive discussions among government, business and civil society allies about the role and content of new regulation. In particular, we have been engaging with businesses that are supportive of new measures, but have concerns about what shape it might take and what the consequences might be.
In this briefing note, we explore what well-designed mandatory HRDD measures could look like, with a focus on the role of accountability – or consequences – for meeting a new legal standard of conduct. We set out three key considerations that we believe businesses that are committed to meeting their responsibility to respect human rights should keep in mind:
The legitimate role of liability in implementing the UN Guiding Principles
Incentivizing robust HRDD through accountability measures that go beyond liability
Assessing the quality of a company’s due diligence
This map illustrates the state of play of mandatory Human Rights Due Diligence initiatives, legislation and movements, across different countries in Europe. It is based on this resource by the Business and Human Rights Resource Centre, and was last updated in July, 2020.
In February, the European Commission began seeking stakeholder feedback to inform the revision of the EU Non-financial reporting directive (NFRD) as part of its strategy to strengthen the foundations for sustainable investment.
The first pillar of the Guiding Principles provides recommendations on how states can meet their existing international human rights obligations to protect against business-related human rights abuses by creating an environment that is conducive to business respect for human rights, including by:
Working to achieve greater legal and policy coherence between their human rights obligations and their actions with respect to business, including by enforcing existing laws, identifying and addressing any policy or regulatory gaps and providing effective guidance to business;
Fostering business respect for human rights both at home and abroad;
Taking particular measures where there is a close nexus between the state and business such as ownership or when a state conducts commercial transactions with business (such as through government procurement or the provision of trade or export credit support);
Helping ensure that businesses operating in conflict-affected areas do not commit or contribute to serious human rights abuses;
Fulfilling their duty to protect when they participate in multilateral institutions (e.g., World Bank, OECD) with other states.
Many thanks to the government of Finland for convening this timely and important conference.
It is timely because a new European
Parliament has been elected and a new Commission selected. It is
important because we live in a turbulent world that challenges
foundational premises we had been able to take for granted. The European
Union is one of the most significant governance innovations in modern
times. It all began modestly, with six countries coordinating their coal
and steel sectors in the wake of World War II. Today, the EU – whether
it is 27 or 28 – constitutes an economic and social superpower. Now more
than ever, the EU needs to think of itself in those terms.
I am pleased that Finland chose business
and human rights as the focus of its EU Presidency and of this
conference. It leads us to address the people part of the people and
planet challenges faced by all humanity. The conference agenda asks the
question: How do we most effectively advance action on the EU level? My
job this morning is to sketch out the backstory to our discussions and
suggest some strategic directions.
Let me begin with the most basic question:
What is business and human rights all
about? The answer varies depending on the vantage point. In big-picture
terms, it is about the social sustainability of globalization. Some
years ago, my favorite boss, Kofi Annan, said: “if we cannot make globalization work for all, in the end it will work for none.”
Today, people around the world are telling us that we have fallen
short, that the benefits and burdens of globalization have been
unequally distributed within and among nations. The result is public
resentment and loss of trust in institutions of all kinds.
When seen from the perspective of
enterprises, business and human rights is about ways they can recover
trust and manage the risk of harmful impacts. Undeniable progress has
been achieved by individual firms, business associations, and even
sports organizations. But not enough, and not by enough of them.
For governments, business and human
rights is at the core of new social contracts they need to construct for
and with their populations. This includes decent work and living wages,
equal pay for work of equal value, social and economic inclusion,
education suitable to the needs and opportunities of the 21st century, and effective social safety nets to buffer unexpected shocks to the economy or the person.
For the individual person whose rights
are impacted by enterprises, business and human rights is about nothing
more – but also nothing less – than being treated with respect, no
matter who they are and whatever their station in life may be, and to
obtain remedy where harm is done.
My second point is to remind us that
formal international recognition of business and human rights as a
distinct policy domain is relatively recent. At the UN level, the first
and thus far only formal recognition dates to 2011, when the Human
Rights Council unanimously endorsed the Guiding Principles on Business
and Human Rights.
The state duty to protect against human rights harm by third parties, including business; the responsibility of enterprises to respect human rights, regardless of whether states meet their own obligations; and the need for greater access to remedy
by people whose human rights have been abused by business conduct. The
OECD Guidelines on Multinational Enterprises quickly incorporated Pillar
II virtually verbatim.
The UNGPs comprise 31 Principles and
Commentary on what each means and implies for all actors: states,
enterprises, as well as affected individuals and communities. They are
not merely a text. They were intended to help generate a new regulatory
dynamic, one in which public and private governance systems, corporate
as well as civil, each come to add distinct value, compensate for one
another’s weaknesses, and play mutually reinforcing roles—out of which a
more comprehensive and effective global regime might evolve.
That brings me to the key issue of
strategy – how to reinforce and add to this transformative dynamic. The
Guiding Principles embody two core strategic concepts: advocating a
“smart mix of measures,” and using “leverage.” I’ll take them up in
We often hear the term “smart mix of measures” being employed to mean voluntary measures alone. But that gets it wrong. Guiding Principle 1 says that states must have effective legislation and regulation in place
to protect against human rights harm by businesses. Guiding Principle 3
adds that states should periodically review the adequacy of such
measures and update them if necessary. They should also ensure that
related areas of law, for example corporate law and securities
regulation, do not constrain but enable business respect for human
rights. So, a smart mix means exactly what it says: a combination of
voluntary and mandatory, as well as national and international measures.
A number of EU member states and the EU
as a whole have begun to put in place mandatory measures that reinforce
what previously was voluntary guidance to firms on corporate
responsibility. These include reporting requirements regarding modern
slavery, conflict minerals, and non-financial performance more broadly,
as well as human rights and environmental due diligence. Such
initiatives are aligned with the spirit of the UNGPs, and they are
important steps in adding “mandatory measures” into the mix. Still, many
leave a lot to the imagination – of company staff, consulting firms,
and civil society actors among others. More should be done to specify
what meaningful implementation looks like, in order to avoid
contributing to the proliferation of self-defined standards and
storytelling by firms. Also, with limited exceptions currently no direct
consequences follow from non-compliance. Nevertheless, the ascent of
Pillar I is underway.
A second key strategic concept embedded in the UNGPs is “leverage.”
Here are three examples of how leverage can play into the core question
of how most effectively to advance implementation at the EU level.
First, individual member states and the EU as a whole are economic actors: they procure goods and services, provide export credit and investment insurance, issue official loans and grants, and so on. Each agency involved has particular objectives of its own, to be sure. But in all cases, they should consider the actual and potential human rights impacts of beneficiary enterprises with which they engage.
Second, the UNGPs state that the responsibility of enterprises to respect human rights requires that they avoid causing, contributing to, or otherwise being linked to adverse impacts, and to address them when they occur. This extends throughout their value chains. Of course, all firms, including the suppliers of goods and services within global value chains, have the same responsibility to respect. But parent companies and companies at the apex of producer- or buyer-led value chains should also use whatever leverage they have in relation to their subsidiaries, contractors, and other actors in their network of business relationships. They should establish clear policies and operational procedures that embed respecting rights throughout their entire value chain system. Where leverage is limited it may be possible to increase it, for example by providing incentives or collaborating with other actors.
In turn, home, as well as host states of multinational enterprises, have significant roles to play through laws and regulations that enable and support private international ordering of this sort. Global value chains are exceedingly complex. If parent or lead companies fear that they may be held legally liable for any human rights harm anywhere within their value chains, irrespective of the circumstances of their involvement, it would create the perverse incentive to distance themselves from such entities. It is important that regulation gets the balance right.
A third way in which leverage can play into effective implementation at the EU level is by reinforcing positive trends already underway in the business community, but which need strengthening. Perhaps the most important instance today is ESG investing – investment decisions that combine environmental, social, and governance criteria with financial analytics. ESG investing now accounts for $31 trillion of all assets under management worldwide, or one-quarter of the global total. And while it may not be known to many investors themselves, the S in ESG is all about human rights. It seeks to assess how firms conduct themselves in relation to the broad spectrum of internal and external stakeholders – workers, end-users, and communities. It typically includes such categories as health and safety, workplace relations, diversity and social inclusion, human capital development, responsible marketing and R&D, community relations, and company involvement in projects that may affect vulnerable populations in particular.
But here is the problem: it is now
generally agreed that a major impediment to the further rapid growth in
ESG investing is the poor quality of ESG data provided by raters. Common
taxonomies and templates are still in their infancy and evolving
haphazardly even as demand for ESG products is increasing. This poses
problems for investors who seek ESG opportunities and may be paying a
high price for flawed data, as well as for companies striving to improve
their practices that go unrecognized. The problem is especially severe
in the S category – addressing human rights-related issues.
The EU has developed a comprehensive
taxonomy for investment on climate-related standards, indices, and
disclosure. That should have a significant impact for strengthening the E
in ESG. Also issuing official guidance to the S in ESG investing,
making clear its human rights bases, could have a transformative effect
on global capital markets.
In short, a great variety of
opportunities exists for exercising leverage in order to generate
further positive developments in business and human rights.
Allow me briefly to add two thoughts in closing.
The first is that business and human
rights, by definition, is a domain that requires horizontal vision and
cross-functional collaboration – whether within companies, governments,
or the EU. Within the European Commission the task has been largely left
to the External Action Service, with the support of other
directorates-general. That is too narrow a lens to do justice to the
broad array of challenges, and to have the impact that could be
achieved. One of the singular contributions of National Action Plans for
implementing the Guiding Principles is that they have required the
whole of governments, for the first time ever, to consider business and
human rights as a single policy space. The same holds true at the EU
My other concluding thought concerns the
ongoing negotiations on a binding business and human rights treaty in
Geneva. International legalization is both inevitable and desirable to
help level the playing field in a world of global business. In fact, at
the conclusion of my mandate in 2011, I proposed that governments
negotiate a targeted legal instrument addressing business involvement in
gross human rights violations, coupled with the need for greater
cooperation between states to provide remedy. Some parties objected on
the grounds that this did not go far enough, others that it went too
far. It became the only one of my recommendations that did not get
The current treaty process began in
2014. From the outset, I expressed my doubts about attempting to
shoehorn the entire business and human rights domain into a single,
overarching treaty. In my judgment, this is far too complex and too
contested a domain for such an endeavor to produce meaningful results.
Indeed, the risk is that if it were to “succeed” in the sense of being
adopted by some minimum required number of states, it would be by
locking in lower expectations and fewer incentives for innovative
practical approaches than exist today. Nothing I have seen in the five
years of negotiations suggest otherwise.
Having said all that, I do find it
puzzling that the EU has taken no substantive position in these treaty
negotiations. It is puzzling because the EU was an early supporter of
the “smart mix of measures” idea. This leads me once again to thank the
government of Finland for bringing business and human rights to the
forefront of its EU Presidency, with the aim of contributing to a common
agenda for action. I very much hope that Finland’s successors – as well
as the Commission and Parliament – will continue on this path.
Thank you for your attention, and I look forward to our discussions.
Under Pillar 1 of the UN Guiding Principles, all states “must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises”. To do so, states “should consider a smart mix of measures – national and international, mandatory and voluntary – to foster business respect for human rights.”
Yet despite this encouragement to consider them, mandatory measures have not been a central part of the mix considered by states in the initial years of UNGPs implementation, outside of certain reporting requirements. That is now changing, particularly in Europe. A growing number of states are actively considering the use of mandatory due diligence measures to advance business respect for human rights.
In France, the Netherlands, Germany, Finland, the UK, Norway and Switzerland, we see governments and legislatures adopting or exploring mandatory measures as part of a mix of policy tools to incentivize business respect for human rights. In a growing number of cases, these measures go beyond reporting obligations to encompass comprehensive human rights due diligence. Continue reading…
This pre-read for our April 26th consultation in London provides a brief overview of current thinking in behavioral science, and ways we might apply that thinking in a business and human rights context to improve outcomes for people.
A copy of this letter was sent to European Commission President Jean-Claude Juncker on February 24, 2017. Click the download link above to view the original letter.
Dear President Juncker,
I write as the former UN Secretary-General’s Special Representative for Business and Human Rights and the author of the UN Guiding Principles on Business and Human Rights, which the UN Human Rights council endorsed unanimously in 2011.
My reason for writing is to express concern that this agenda seems today to be increasingly set aside by the European Commission. An EU Action Plan on CSR/responsible business conduct that has long been promised is yet to emerge, despite two calls last year from all Member States for one to be issued. Indeed, work across Directorates-General that could and should support business respect for human rights appears not to have materialized, or has been stalled altogether.
In the past, leadership from the European Commission alongside other EU institutions has been exceedingly important, helping to drive action across Member State governments, industry associations, investor groupings and other institutions within and beyond Europe. In 2011 the European Commission exercised important leadership in its Communication on Corporate Social Responsibility (CSR), setting out a new, clear and simple definition of CSR, namely, “the responsibility of enterprises for their impacts on society.” The Directive stated the Commission’s expectation that all European enterprises should “meet the corporate responsibility to respect human rights, as defined in the UN Guiding Principles.” Among other actions, it announced plans for a legislative initiative on non-financial reporting, which resulted in the directive of 2014 that came into force in January, and which has widely been hailed as a significant contribution to supporting responsible business conduct.
Today, EU leadership is needed as never before. As I observed in my keynote remarks at a G-20 meeting on employment and labor rights in Hamburg just last week, former UN Secretary-General Kofi Annan warned already in 1999, in a speech to the World Economic Forum, that unless globalization has strong social pillars it will be fragile and vulnerable—“vulnerable to backlash from all the ‘isms’ of our post-cold war world: protectionism; populism; nationalism; ethnic chauvinism; fanaticism; and terrorism.” If we cannot make globalization work for all, he added on another occasion, in the end it will work for none.
The prescience of this statement is striking today. Now more than ever, we need governments and business to work together to ensure that those most vulnerable to negative impacts from business activities and globalized supply chains are protected and respected. Never has it been more imperative to understand that business’s single greatest contribution to the ‘people part’ of sustainable development should be through efforts to embed respect for human rights across their operations and value chains.
The G7 recognized this in its 2015 Elmau Declaration where leaders underlined the importance of promoting labor rights, decent working conditions and environmental protection in global supply chains. They expressed strong support for the UN Guiding Principles, welcomed efforts to set up substantive National Action Plans for their implementation, and urged the private sector to implement human rights due diligence.
At this critical time when the fate of globalization itself is at stake, the European Union’s voice is needed on the world stage to reiterate these messages clearly and constructively. Yet, as noted, the anticipated EU Action Plan on implementation of the UNGPs has still not been issued. Commission papers on the SDGs seem divorced from any understanding of the central role that respect for human rights must play in the private sector’s contribution to that agenda. And the Commission’s draft guidance to companies on the non-financial reporting directive dilutes and undermines the language of the UN Guiding Principles, provides negligible guidance on the human rights content of the directive, and fails to reference the sole reporting framework – the UNGP Reporting Framework – that is precisely tailored to help companies improve their human rights disclosure fully in line with the UNGPs.
The Commission’s past leadership on responsible business conduct, and in particular on business and human rights, had a catalytic effect on a whole range of actions, across the EU and beyond, that brought substantive progress in business practices. I respectfully urge you and your colleagues to renew that leadership and help build the foundations for a socially sustainable development without which neither our societies nor our businesses can thrive.
As you know well, we live at a pivotal moment in post-World War II history. Globalization itself is at risk unless and until its social pillars can be significantly strengthened. None of us, least of all the EU, should want a roll-back into the mercantilism that has had such destructive consequences in past eras. Responsible business conduct is a central building block of a socially sustainable globalization. And the EU can and should be a central actor in advancing this aim.
This resource, developed with support from Shift, explains the relationship between human rights and traditional environmental and social due diligence. It aims to provide fund managers with a practical introduction to human rights issues that may be relevant to their investments. It gives fund managers:
A clear understanding of what human rights risks and impacts are, why they are important and how they relate to traditional environmental and social (E&S) risks and impacts;
A practical approach to integrating human rights lens into existing E&S due diligence approaches, aligned with international standards.