'Due Diligence' and Human Rights Risk

Whether or not there truly is a 'new social contract' between business and society, the trend towards grounding 'business and human rights' principles in national-level legislation continues to strengthen.

This week came news that over 20 significant companies and business organisations issued a joint statement welcoming the European Commission's April announcement that it is committed to exploring the introduction of mandatory corporate human rights (and environmental) due diligence laws.

There have been various calls for such laws, and some EU member countries have introduced or are exploring them.

No doubt this supportive, engaged stance by business actors is partly driven by the desire by leading firms both to cement their advantage and for a more level playing field: larger established firms (especially brand-sensitive ones) can only benefit requiring competitors or putative competitors to adhere to and invest in the same enviro, social and governance (ESG) standards as the incumbent players do. There are other incentives and drivers, not least the need for firms to incorporate systems to respond to the increasing orientation of institutional and other investors (e.g. see here). Some firms are also supportive out of a sense of inevitability: such laws are inevitable, we may as well have pan-EU coherence rather than a patchwork of national legislation. Some firms accept research that ties ESG performance with protecting or even increasing a firm's value.

Yet one question I ask my 'business and human rights' Masters students online this week is whether it matters, ultimately, if business / investor support for or engagement in legislative schemes is motivated by 'instrumental' (rather than 'intrinsic' value) considerations or purposes.

I ask this since a critical perspective might be that legislated 'due diligence' requirements (and perhaps more so mere reporting requirements that only imply undertaking internal due diligence processes) do not necessarily transform internal corporate management culture. At least, we remain unsure about the conditions under which this internalisation of values might take place, while such schemes can risk becoming process-oriented rather than preventive and problem-solving in nature.

There will be a robust debate about how such laws deal with penalties, and with remedy for affected groups -- but my ever-practical students are probably right in seeing support for such a regime as a very positive development.

Jo

See for example this blog series on mandatory human rights due diligence, and here for the recent comprehensive study in part underpinning the Commission's approach.