Staying ahead in the game: Developments in human rights due diligence

The focus on human rights due diligence is increasing. Many companies will be impacted, either directly or indirectly through their value chain, by the growing scrutiny of their due diligence practices. This emphasises the importance of having robust policies and processes to understand and address the negative impacts across a company’s operations and their extended supply chain.

The regulatory landscape [1] around human rights and supply chain due diligence has seen a shift towards mandatory due diligence obligations for companies, with key legislative measures being introduced globally. In 2024 alone, the European Union enacted two new directives, the Corporate Sustainability Due Diligence Directive and the Ban on Products Made with Forced Labour, whilst other human rights-specific regulations have recently been introduced and proposed in countries such as Canada, the United States and South Korea.

Simultaneously, companies are receiving increased pressure for transparency from stakeholders, including clients, investors and employees. Growing media coverage [2] of corporate labour practices and human rights abuses in supply chains has led to a growing awareness of these issues among consumers and investors. Increased stakeholder scrutiny means that companies developing and implementing effective due diligence approaches, and demonstrating best practices, are well-positioned to gain favour with investors, clients, employees, and other relevant stakeholders.

Often companies have a limited understanding of the full extent of their supply chain. This hinders them from creating meaningful policies and processes to understand their human rights and environmental impacts. Additionally, approaches to due diligence vary according to sector, size and even the individual company level. A company can get started to create a higher understanding of its impacts, as follows:

• Evaluate current processes by engaging with new regulatory expectations, or international standards such as the UN Guiding Principles on Business and Human Rights or the OECD Due Diligence Guidance for Responsible Business Conduct to identify gaps and areas of improvement.
• Map your value chain in as much detail as possible, including suppliers, sub-contractors, and other stakeholders.
• Conduct a risk assessment to identify potential human rights and environmental impacts. As a starting point this can be a high-level assessment, mapping impact across your value chain to create an understanding of how a company needs to set up systems to address and monitor these impacts.
• Set up meaningful engagement with affected stakeholders, both internally and externally, to ensure the risk assessment considers the severe and regular impacts that can occur in the business.

An example of fostering internal engagement is the Everyone’s Business [3] app. Developed through a collaboration of retail companies, the app encourages technical employees to identify risks at supplier sites. It serves as an informal due diligence tool for understanding and monitoring risks by training staff on recognising human rights impacts. This supports enhanced awareness and reporting of risks and impacts, across a company’s full supply chain.

• Refine existing processes, informed by a regular in-depth risk assessment, including audits, internal controls, and monitoring mechanisms

Companies that take proactive action to align their practices with evolving regulations will be better positioned to avoid reputational and financial repercussions. Now is the time to prepare for upcoming due diligence regulations and stakeholder scrutiny. By improving processes and engaging stakeholders, businesses can stay ahead of the curve, ensuring long-term sustainability and success. The urgency to act is clear, and those who adapt quickly will lead the way in ethical and responsible business practices.

To talk to our experts about your own human rights due diligence, just get in touch.

This article was written by Laurien Callens and Jamie Macfarlane

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References

[1] https://www.business-humanrights.org/en/big-issues/mandatory-due-diligence/

[2] https://www.business-humanrights.org/en/latest-news/wba-social-benchmark-2024/

[3] https://everyones.business/about