Business and Human Rights: Immediate, Practical Considerations for Companies

The focus on “responsible business conduct” continues to grow—from the U.S. State Department updating and revitalizing the 2016 National Action Plan on Responsible Business Conduct (NAP RBC), to the Japanese Ministry of Economy, Trade, and Industry planning to adopt the Draft Guidelines on Respect for Human Rights in Responsible Supply Chains, and more. These efforts are a part of the continued focus on moving the needle on human rights issues by focusing on all stakeholders, including the private sector instead of only governments. This raises both immediate and long-term business implications that companies must consider in order to ensure their compliance and continued success in global markets.

Background

The public framework on sustainability derives from the 17 Sustainable Development Goals, set forth in the 2030 Agenda for Sustainable Development adopted in September 2015 by the United Nations General Assembly (UNGA). Those goals relate to: (1) no poverty, (2) zero hunger, (3) good health and well-being, (4) quality education, (5) gender equality, (6) clean water and sanitation, (7) affordable and clean energy, (8) decent work and economic growth, (9) industry innovation and infrastructure, (10) reduced inequalities, (11) sustainable cities and communities, (12) responsible consumption and production, (13) climate action, (14) life below water, (15) life on land and peace, (16) justice, and (17) strong institutions and partnerships to achieve the goals.

Additionally, the UN Guiding Principles on Business and Human Rights (UNGPs), endorsed by the UN Human Rights Council in June 2011, are meant to implement the UN’s “Protect, Respect, and Remedy” Framework for business and human rights. These principles help to identify standards the business community can apply to human rights considerations. Although the UNGPs are considered “soft law,” they may have a broader impact. Indeed, the UNGPs may become “hard law,” such as when any UNGP is adopted by contract or treaty.

This October, UN member states (including the United States) will reconvene and continue to engage in negotiations as part of an open-ended intergovernmental working group (OEIGWG). The goal of the United Nations Human Rights Council is the creation of an international legally-binding instrument to regulate the activities of transnational corporations in international human rights law. At the opening session of last year’s negotiations, the UN High Commissioner for Human Rights, Ms. Michele Bachelet, remarked that the world is witnessing a “growing consensus on the need of binding regulations on business and human rights.”

U.N. Global Compact: An Existing Opportunity (and Obligation)

The above examples illustrate the changing paradigm with regard to the role of the private sector in achieving global human rights; however, already in place is the UN Global Compact, a global initiative that over 16,700 companies have joined. The Compact’s mission is to recognize companies that align themselves with the Compact’s Ten Principles, which are drawn from existing human rights documents and advance the UN’s Sustainable Development Goals.

Companies that join the Compact agree with the proposition that the Compact ultimately benefits business, attracts investors, and further aligns the company with broader societal goals. This is not simply a public relations exercise. Rather, companies should appreciate that signing on to the Compact will result in tangible outcomes. Among others, Compact signatories agree to reporting obligations, including those with important consequences:

• Failure to report may cause the company to be ejected from the Compact;
• Failure to report honestly may subject a company to breach of contract and tort remedies in the civil arena; and
• If a company is required to provide certain certifications of compliance pursuant to its contract with another entity, then, if made as a representation, a breach would subject the party to damages, and, if made as a condition, a breach may invalidate the contract.

The list of companies that have signed on to the UN Global Compact is available online. It is important for businesses to confirm if they, or their business partners, have signed on, thereby creating potential legal exposure that should be evaluated and managed.

The Hardening of Soft Law

While it is tempting to continue to view efforts, such as signing on to the Compact, as soft law, legislative and regulatory actions in the United States and abroad are already taking effect, bringing direct legal obligations for global businesses. For example:

• The California Transparency in Supply Chains Act requires reporting of qualifying entities to disclose their efforts to address slavery and human trafficking in their supply chains.
• The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, has two reporting provisions that require companies to identify violations of human rights in two specific areas. Section 1502 of the Act amended Section 13 of the Securities Exchange Act of 1934 to call for regulations requiring annual disclosures as to conflict minerals.
• The U.S. Uyghur Forced Labor Prevention Act (UFLPA) went into effect on June 21, 2022, creating a rebuttable presumption that goods from China’s Xinjiang Uyghur Autonomous Region (XUAR) are made with forced labor and are banned from U.S. markets. Importers of record must now provide evidence that affected products were not made with forced labor.
• The 2014 EU Non-Financial Reporting Directive requires member states to implement domestic legislation requiring businesses with more than 500 employees to disclose their management of human rights impacts.

Consequently, this is an area where ignorance is not bliss, and what you don’t know can, in fact, hurt you. Companies need to be aware of the broad panoply of efforts to govern. There is a momentum building that is less tolerant of companies that are not moving with the times to address these issues. The activities of businesses will continue to be scrutinized closely, by governments, customers, business partners, and others. It is important for businesses to understand the growing societal and industry expectations they face so that they may adequately prepare for this evolving landscape.

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The views and opinions expressed in the article represent the view of the author(s) and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is intended to be a substitute for professional legal advice.