Business and Human rights: Investors call on the UK Government to mandate human rights and environmental due diligence
The expectation for businesses to conduct human rights and environmental due diligence (“HREDD“) is increasingly becoming mandated by legislators across the globe. As discussed in our earlier blog post, mandatory HREDD obligations are already in-place across Europe, including in France, Germany and Norway, whilst the EU is expected to adopt the draft Corporate Sustainability and Due Diligence Directive – which sets out a proposed mandatory HREDD standard – in 2023. Although the UK Government has announced its intention to introduce a new Modern Slavery Bill (see pages 83 to 84 of the Queen’s Speech briefing, published on 10 May 2022), the UK Government has not indicated that it intends to follow Europe’s lead in introducing a UK-level mandatory HREDD law.
As a result, in September 2022, 47 companies, investors, business associations and initiatives operating in the UK published a joint statement calling on the UK Government to “introduce a new legal requirement for companies and investors to carry out human rights and environmental due diligence“. This follows calls, in August 2022, from a group of 39 investors for the UK Government to bring forward a ‘Business, Human Rights and Environment Act’ to mandate all companies operating in the UK to conduct HREDD.
Calls from UK-operating businesses
The joint statement from the UK-operating businesses acknowledges that “mandatory human rights and environmental due diligence legislation has already been introduced, or is under discussion in a number of countries around the world and has gained substantial public support from businesses” and that “Some of this legislation, including the EU’s Sustainable Corporate Governance Due Diligence Directive, will apply to UK businesses operating in other jurisdictions“. The joint statement also acknowledges that “The Modern Slavery Act and the limited due diligence requirements of the 2021 Environment Bill have been steps in the right direction“, but notes that “a more comprehensive approach is urgently needed“.
This joint statement builds on previous, similar, calls for action from international businesses for HREDD legislation to be developed (see our previous blog post, for example).
Why have UK-operating businesses called for mandatory HREDD obligations?
The joint statement notes that: “Legislation can contribute to a competitive level playing field, increase legal certainty about the standards expected from companies, ensure consequences when responsibilities are not met, promote engagement and impactful actions between supply chain partners and, above all, incentivise impactful and effective action on the ground“. The joint statement also notes that”UK legislation with clear accountability should harmonise expectations towards companies, irrespective of where they operate; provide access to remedy for victims; and ultimately bring change of the necessary scale and speed to positively contribute to the lives of people and the planet“.
Picking-up on legislative trends in other jurisdictions, the joint statement further notes: “This issue should figure highly on the UK’s domestic and international agenda. Action in this area would allow the UK to show global leadership“.
Looking to the future
As discussed in our previous blog posts (which can be read here and here), the EU has published its draft Corporate Sustainability and Due Diligence Directive, which it expects to adopt as legislation in 2023. Combined with increasing calls from UK businesses for aligned mandatory HREDD obligations, the roll-out of further mandatory HREDD regimes across Europe and beyond may well increase pressure on the UK Government to adopt a mandatory HREDD regime of its own in the near future. UK-operating businesses should, therefore, keep a close eye on any such development.
In any event, UK-operating businesses should ensure that they have assessed whether or not they may fall within the scope of existing extra-UK legislation mandating HREDD. To align with existing legislative standards and international best practices, best-in-class businesses are already:
- Integrating human rights into their group policies and strategic planning processes;
- Disclosing how human rights considerations are integrated into their strategies, policies and procedures;
- Carrying out human rights impact assessments and taking proportionate counter-measures, as well as communicating internally and externally on what measures have already been taken;
- Reviewing and reinforcing their complaints mechanisms and speak-up programmes;
- Ensuring that they are well-equipped to deal with ‘crises’;
- Reviewing the extent to which their boards are equipped to address supply chain risks; and
- Reviewing the role, resources and expertise of the legal and compliance functions, who should play a key part in addressing these new challenges.
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