What are the business benefits of an effective human rights compliance program?
Reduced legal risk. In recent years, human rights due diligence and associated reporting requirements have increased dramatically around the globe. Cross-border human rights litigation involving multinational enterprises has also increased. And these trends will likely continue. To mitigate the increasing legal risk, businesses should have procedures in place to navigate the regulations to which they are subject.
Improved stakeholder relations. Society is asking for more from businesses. And customers have higher expectations. Human rights policies and procedures can help protect a company's reputation, brand value, workforce loyalty and customer base—while protecting community relations in the locations where a business has activities.
Securing investment and finance. The human rights track record of a company is critical for many investors and can impact its access to finance. A growing number of investors are assessing corporate performance against Environmental, Social and Governance ("ESG") criteria. Social factors include the effects of a company's operations or supply chain on the human rights of its workforce and/or local communities. In addition, financial institutions are increasingly being called on to play a key role in promoting responsible business conduct.
Mandatory Due Diligence – An International Legal Trend
The United Nations Guiding Principles on Business and Human Rights ("UNGPs") (2011) were the first globally accepted standard holding businesses and governments accountable for adverse human rights impacts. Under the UNGPs, businesses are expected to identify and avoid or remediate negative human rights impacts that their operations or supply chain can either cause or contribute to. In other words, under the UNGPs, businesses have a responsibility to conduct effective human rights due diligence.
The UNGPs have influenced and been integrated into a number of soft law international standards, such as the OECD Guidelines for Multinational Enterprises and ILO recommendations, as well as industry-specific guidance.
In recent years, however, there has been a trend at the domestic level to introduce legislation that incorporates elements of the UNGPs. For example, the UNGPs are reflected in mandatory human rights due diligence legislation in France and the Netherlands. There are national movements for mandatory due diligence legislation in countries such as Germany, Finland, Austria, Denmark and Switzerland. The European Commission has also committed to introducing a legislative initiative on mandatory human rights and environmental due diligence at the EU level. In addition, the UNGPs are reflected in legislative requirements for mandatory disclosure of a specific human rights risk—modern slavery in a company's supply chain—in the UK, Australia and California, with similar laws proposed in Hong Kong and Canada.
These existing and emerging laws on human rights due diligence all present different requirements and considerations for businesses. What is clear, however, is that a political will is growing across the globe to introduce mandatory due diligence measures. This political will was generated by the UNGPs and is being advanced by civil society, NGOs and certain multinational enterprises who see the business benefits of mandatory due diligence measures—for example, providing much-needed legal certainty and creating a level playing field.
As a truly global law firm, Mayer Brown has the capability to assist businesses in navigating human rights risks in this increasingly complex international environment.
Emerging Best Practices
Under the United Nations Guiding Principles ("UNGPs"), businesses are expected to identify and avoid or remediate negative human rights impacts that their operations or supply chain can either cause or contribute to. This is an ongoing risk management process that many businesses today are undertaking as a matter of best practice. In addition, mandatory due diligence legislation is set to expand across the world, and so businesses are anticipating future developments and mitigating human rights risks in their supply chains by aligning their policies and procedures with emerging best practices.
