Last week I had the pleasure of discussing business and human rights on a webinar with a representative expert from Webber Wentzel and Business and Human Rights Centre for Applied Legal Studies, Wits. The session was moderated by Wendy Poulton as part of the ESG Africa conference
The discussion was lively and informative – covering both the law and best practices.
A recording of the webinar can be found here: https://tinyurl.com/4dc77xvp
Here are some of my takeaways:
- Due Diligence includes not only risk management systems and compliance programmes but extends to bringing adverse impacts to an end
- The concept of due diligence has 2 components. Business must:
- meet a standard of conduct and discharge its responsibility for human rights and the environment and
- it must have a process for assessing main responsibility.
- Whilst the UNGPs and other voluntary frameworks set global standards for corporates to manage their human rights impacts, many companies do not undertake due diligence to fulfil their ‘duty to respect’ . Voluntary action has not resulted in sufficient large-scale improvements, especially in high-risk sectors like garment, mining and agriculture: -there are still large-scale reports of child labour, inadequate workplace safety, and exploitation of the environment.
- Too few companies conduct human rights due diligence on their business partners and value chains
- The shift from voluntary standards-creating frameworks to mandatory human rights due diligence is seen as critical to fostering sustainable and responsible corporate behaviour throughout global value chains.
- The Corporate Sustainability Due Diligence Directive (CCS3D) aligns with main international human rights and environmental law standards and aims to translate soft law recommendations set by international organisations like the UN and the OECD, into hard law requirements. The annexe to the proposal sets out a list. Whilst the UNGPs and OECD represent a voluntary set of soft law standards they may contain the status of legally binding norms when referenced in legislation on mandatory due diligence. The new rules bring in legal certainty and create a level playing field.
- The transition to mandatory due diligence does not mean that voluntary efforts facilitated by private sustainability standards become irrelevant – or industry coalitions, multi-stakeholder initiatives as a part of a ‘smart mix of mutually supporting standards. They are still vital.
- Companies need to comply with corporate due diligence. They have to fulfil a set of requirements which includes ensuring that more effective protection of human rights is included in international convention e.g. workers having access to safe and healthy working conditions.
- Similarly, the CS3D will help avoid adverse environmental impacts e.g. companies will need to have a plan to ensure their business strategy is compatible limiting global warming to 1.5 degrees Celsius in line with the Paris Agreement.
- The CS3D aims to internalise the negative externalities they cause to the environment and society
- African companies should be considering the possible impact of bans on goods using forced labour. Africa’s main trade-in goods partner is the EU, which accounts for 15% of exports and 16 % of imports. Other countries are China, India, US and UAE. In September 2022 The EU Commission proposed a Regulation to prohibit products made using forced labour including child labour from entering the European market. The US has similar legislation and unless companies have effective supply chain due diligence systems in place, refuting the presumption against them under the import ban regulation is very difficult to achieve.
- To ensure that DD becomes part of the whole function for companies, directors of companies need to be involved. The proposal introduces director duties to set up and oversee the implementation of DD and integrate it into corporate strategy
What does this mean for business and the African market?
Transparency and accountability requirements are not diminishing. Business will need to ensure that they undertake a gap analysis to benchmark their current policies and processes to determine the gaps. There will also be a requirement to ensure that robust due diligence processes are developed. However, the risk to people should be considered as a key element of the development of human rights due diligence. Stakeholder engagement should be introduced at an early stage, particularly as embedding a corporate ‘duty to respect’ will require commitment across different functions within a business.
Businesses should also not be afraid to start their journey. Typically it will take a business more than a year to start embedding changes in response to any gap analysis and recognising that there is no overnight ‘quick fix’ or a simple ‘tick box’ approach to solve these issues.
Ardea is partnering with ESGAfrica conference and we will be discussing legal challenges and particularly the role of governance in addressing human rights at the ESG Africa Conference 4-5 October 2023.
Contact us to see how we can support you.