HUMAN RIGHTS NAVIGATOR
2. Overview of the Emerging Regulatory Landscape
Human Rights Frameworks & Standards
The field of business and human rights is entering a new regulatory era. Two critical regulations for the industry are:
- The Draft EU Corporate Sustainability Due Diligence Directive (CSDDD), which calls for certain companies to set up mandatory due diligence practices, and seeks to harmonize EU legislation on human rights and environmental due diligence.
- The EU Corporate Sustainability Reporting Directive (CSRD), which, since January 2023, ensures that investors and other stakeholders have access to the information that they need to assess investment risks arriving from sustainability issues.
This new wave of regulations is expected to generate important momentum on crucial topics, ranging from the energy transition to protections for human rights; to equity, inclusion, and justice (EIJ); to reporting and disclosure. Against the backdrop of these developments, the following are some considerations:
- The uptick in regulatory frameworks marks a move from voluntary to regulated approaches—at both national and supranational levels. This reflects an increasing focus from regulators, investors and the public on accountability and transparency from companies, while business is becoming more mature in integrating human rights management into day-to-day operations.
- New regulations are making the connection between human rights and other ESG issues more prominent. The EU Corporate Sustainability Reporting Directive values sustainability metrics alongside environmental performance, with a particular attention to the “S” in ESG, considering human rights, but also workplace health and safety or diversity and inclusion. The increasingly popular concepts of just transition and climate justice are also translating a better understanding of human rights risks related to the extraction of minerals used in solar panels or electric vehicles and of the human rights implications of rising global temperatures (right to health, right to an adequate standard of living).
- Mandatory due diligence laws bring human rights into the boardroom. While in the past human rights were rather brought to the attention of the Board of Directors or C-Suite where a scandal or a crisis arose, now regulations are requiring leadership to proactively manage human rights issues across their value chain. The EU draft Corporate Sustainability Due Diligence Directive expands the directors’ duty of care obligations for EU-based companies to include accounting for the consequences of decisions on sustainability matters, as well as a director’s oversight responsibility to oversee implementation of corporate due diligence actions. Companies in scope for the Swiss Ordinance on Child Labor and Conflict Minerals or the Norway Transparency Act should issue annual reports that must be approved by their board.
- Regulations also address specific human rights issues. Forced labour bans now exist in various forms across North America, including Section 307 of the 1930 Tariff Act (US), the Uyghur Forced Labor Prevention Act (US), and the Tariff Act (Canada). In September 2022, the European Commission published its awaited proposal for a new trade instrument to ban products made with forced labour from being marketed, sold, or exported from the EU market, which is likely to enter into force in 2026. In September 2022 as well, the European Parliament approved a Directive introducing the principle of a minimum wage in the European Union. The Directive will not interfere with member states’ freedom to choose between setting minimum wages by law or promoting protection through collective agreements; it will rather promote collective bargaining on wage determination and adequate levels of statutory minimum wages and aim to improve effective access to minimum wage protection for all EU workers. It also requires reporting on minimum wage coverage and adequacy by Member States.
- Mandatory due diligence regulations build heavily on existing soft law frameworks, and notably the UN Guiding Principles on Business and Human Rights and on the OECD Guidelines for Multinational Enterprises. They can be lumped into three broad categories:
- Mandatory disclosure requirements, such as the EU Corporate Sustainability Reporting Directive or the California Transparency in Supply Chains Act.
- National-level mandatory due diligence and reporting requirements that cover all human rights, such as the French Duty of Vigilance Law, the Norway Transparency Act, and the German Supply Chain Act.
- Issue-specific legislation, including the U.S. and EU Conflict Minerals Rules, the UK and Australia Modern Slavery Act, the Dutch Child Labor Due Diligence Act or the US Uyghur Forced Labor Protection Act.
- Some specific aspects vary across the regulations—e.g., how leadership should be involved, whether employee representatives need to be consulted, which aspects of a company’s value chain / business relationships should be considered, information that should be disclosed externally—but so far there is a general alignment on the key components that companies need to consider.
- In line with expectations set out for companies in the UNGPs, these regulations all set out requirements related to:
- Commitment to respect human rights.
- Governance structure to manage human rights within the company.
- Due diligence to identify actual and potential human rights risks, involving stakeholder and rights-holder engagement.
- Implementation of measures to prevent and mitigate negative impacts on human rights and monitoring of their effectiveness.
- Access to remedy, including through appropriate grievance mechanisms.
- Disclosure of the above aspects through proper reporting.
- Even if the scope of topics they cover is broader, the OECD Guidelines for Multinational Enterprises are also a foundational framework for business and human rights regulations. They set out recommendations from governments to businesses for ensuring responsible business conduct in all areas where business interacts with society, including human rights, labour rights, environment, bribery, consumer interests, as well as disclosure, science and technology, competition, and taxation. In order to promote the effective observance of the Guidelines, the OECD has also developed sectoral guidance to establish a common understanding among governments, business, civil society and workers on due diligence for responsible business conduct—such as the Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The Guidelines were last revised in 2011 and the OECD Working Party on Responsible Business Conduct is currently working towards a targeted update of the Guidelines and Implementation Procedures to advance their uptake and promotion and to ensure they remain fit for purpose. BSR was one of the organisations consulted as part of this process, a summary report of the public consultation input is available on the OECD website.