Corporate Responsibilities and Human Rights: A Rapidly Changing Landscape - Professor Robert McCorquodale*
Recent legislation
Recently there have been major developments in national legislation in relation to corporate accountability for the human rights impacts of their activities, including their environmental impacts. This has included:
There are also some relevant UK legislation, such as:
In addition, there has been drafts in the United Nations of a legally binding treaty on this area. The most comprehensive legislation is likely to be at the European Union level, with the European Commissioner for Justice, Didier Reynders, announcing that the European Commission will develop legislation, to be introduced in 2021. This would require all businesses in the European Union to undertake mandatory human rights due diligence, including environmental (and possibly climate change) due diligence.
The concept of human rights due diligence is derived from the United Nations Guiding Principles on Business and Human Rights (UNGPs), which were endorsed by the UN Human Rights Council, an inter-state body, in 2011. Human rights due diligence is the core concept of corporate responsibility for the human rights impacts, which a company (or their subsidiaries) causes or contributes to. Furthermore the impacts to which they are linked by their business relationships (such as in their supply chains). The UNGPs expect businesses to identify actual and potential human rights impacts (usually initially through a human rights impact assessment), integrate these findings into their operations, track and communicate their actions to address such impacts. It is an ongoing process with a clear focus on the risks to all rightsholders, such as employees, communities and individuals (unlike traditional business due diligence which is usually one-off and focuses on the risk to the company) [1].
The UNGPs standard of human rights due diligence is applied to human rights as well as the environmental impacts of business activities by the OECD Due Diligence Guidance for Responsible Business Conduct, and is now found in other international documents, such as the International Labour Organization’s Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy 2017, the International Finance Corporation’s Performance Standards 2012 and the Equator Principles 2013.
All the recent legislation has the aim of putting into law this concept of human rights due diligence, so that it can be enforced nationally. Most of this legislation also provides for civil, criminal and/or administrative sanctions for various forms of failure to comply with human rights due diligence and/or for the human rights impacts of a company’s activities. Indeed, one criticism of the UK’s Modern Slavery Act is that it contains no effective sanctions mechanisms, and so that a large proportion of companies to which it applies do not comply with it [2]. At the same time, there is an increasing number of national court decisions, such as Lungowe v Vedanta before the UK Supreme Court, which are finding that parent companies can owe a duty of care for the actions of foreign domiciled subsidiaries whose actions have human rights or environmental impacts, including for climate change.
Corporate responses
It might be expected that companies would be very resistant to an imposition of these types of requirements in relation to their activities. However, many thousands of companies have supported the various pieces of legislation, and proposed legislation, on this area. This is consistent with a major empirical research project which was commissioned by the European Commission: Study on Due Diligence Requirements Through the Supply Chain (the study), and it was directly instrumental in the decision by the European Commission. The study surveyed 334 companies from a wide array of sectors and of varying sizes, as well as a further 297 business associations and industry organisations, civil society, worker representations or trade unions, legal practitioners and government bodies. In addition, the study included 50 interviews and informational clarifications, and 10 company case studies.
In the survey, a large majority (over 75%) of company respondents indicated that a human rights and environmental due diligence requirement at EU level would benefit business through providing a single, harmonised EU-level standard (as opposed to a mosaic of different measures at domestic and industry level). Less than 10% of companies disagreed with this proposition. That is a powerful response, which aligns with other empirical research in this area [3]. The study found that the core reason why there is considerable corporate support for this EU legislation is that it could provide legal certainty, coherence and consistency for companies, and what is often called (somewhat misleadingly) a “level playing field”. The companies which responded to the Study made it clear that the current legal landscape does not provide companies with legal certainty about their human rights and environmental due diligence obligations, and is not perceived as efficient, coherent and effective. Another recent study indicated that businesses experienced similar benefits as a result of the introduction of the UK Bribery Act 2010.
Interestingly, the study showed that industry or business associations, which purport to represent companies across sectors, were more opposed than individual companies to legislation and preferred voluntary guidance. As the legislative process develops, this potential contradiction may need to be addressed by industry associations and their members in order to feed coherently into consultation process. Further, despite some industry fears, the evidence from the study showed that, while there is likely to be some economic costs to comply with this new legislation, it would be likely to reduce reputational risks, and there would be no significant distortions in terms of competition and innovation, even in comparison with non-EU business.
Conclusions
The national legislation in this area is likely to keep increasing. It is also now no longer a matter of if but rather when EU-wide legislation on mandatory human rights due diligence will come into effect, perhaps even with some consequent increase in director’s duties. It is possible that the UK will follow suit as UK companies will be directly affected by any EU legislation in this area. Such legislation is clearly supported by a wide range of businesses, and the coherently expressed business views on the deficiencies of the existing legal landscape are evident. It is also supported by a wide range of investors, with increasing environmental, social and governance (ESG) approaches being taken by them. There is the possible application of these approaches to other areas, such as child rights, international organisations, artificial intelligence and online platforms.
The School of Law at the University of Nottingham is well placed to keep abreast of these developments and, at times, to be part of them directly due to their expertise.
July 2021
* Robert McCorquodale is Professor of International Law and Human Rights, University of Nottingham. He was a co-author of the Study for the European Commission which directly influenced its decision to being in legislation in this area. He also appeared before the UK Supreme Court in Lungowe v Vedanta and other cases on a parent company’s duty of care, as well as being an independent legal advisor assisting in the drafting of a potential treaty on business and human rights.
[1] For a fuller discussion, see Jonathan Bonnitcha and Robert McCorquodale, ‘The Concept of ’Due Diligence’ in the UN Guiding Principles on Business and Human Rights’ (2017) 28 European Journal of International Law 921.
[2] See, for example, University of Nottingham Rights Lab, briefing-–-modern-slavery-policy-and-practice.pdf (nottingham.ac.uk)
[3] Lise Smit, Claire Bright, Irene Pietropaoli, Julianne Hughes-Jennett and Peter Hood ‘Business Views on Mandatory Human Rights Due’. ‘Diligence Regulation: A Comparative Analysis of Two Recent Studies’ Business and Human Rights Journal (2020) at 1-9 (doi:10.1017/bhj.2020.10).