Are companies aware of what is a stake for them in mandatory Human Rights Due Diligence?
Updated: Jun 10
I am not sure companies and SMEs in particularly are aware of what is at stake for them, but I hope this article can give them some insights.
Understanding who is responsible for what.
States have the primarily obligation to protect their citizens and ensure that their human rights are not violated. This obligation does not come out of the blue. It is the natural consequence of the fact that all human beings are born free and equal in dignity and rights, and that is prior and irrespectively of any written law.
Supplementarily, companies have the obligation to respect the law in whatever place they operate and respect human rights in any of their activities because these rights are intrinsic to human nature. In this context, there is no room for a Human Rights' business case, precisely because human rights are "rex extra commercium", out of business.
I know that we live in a period of history where there is a trend to reduce Human Rights to mere perks given by States. However, it is important to come back to the basics.
Having clarity on the nature of Human Rights and on who is accountable for what will help us to assess the debate around mandatory human rights due diligence laws.
#1: It would avoid human rights are sacrificed for the sake of companies’ profits.
It is often argued, that human rights “should not be sacrificed for the sake of company profits and accumulation of wealth”, but it is less often pointed out that shortcomings can also come from public powers.
A mandatory Human Rights Due Diligence law that only concentrates in demanding certain behaviors from companies diverts from the hierarchical order that establishes States as the primarily responsible to protect citizens, and companies as their allies, in a supplementary role.
In fact, it is worth remembering that ‘technically’ companies do not ‘violate’ human rights in the legal sense, because they are not formally and directly bound by international human rights frameworks. Only States have ratified the International Conventions and Declarations on Human Rights and therefore only States are formally bound by this international framework. As mentioned before, companies are morally bound to respect human rights because these rights emanate from the human nature, but not because companies have ratified any International Convention.
If a State fails to provide the awareness and legal frameworks which should ensure the protection of their citizens, companies operating in those countries still have a moral responsibility to do all efforts to preserve the dignity of the human beings with whom they interact (from employees to communities), and remediate any abuse or adverse impact to human rights they may have caused or discovered. However, it is inadequate to impose a burden on companies about what is primarily States responsibility. Doing that disincentivizes States from strengthening their own legal frameworks and empowering their own citizens in the understanding of their own dignity. It also disables the international diplomacy in its efforts to address the ‘endemic issues’ linked to some States failure to protect their citizens. Lastly, by converting due diligence in mere compliance we eliminate the healthy tension that should always exist between the legal standard (which always tends to the minimum) and the moral aspirations (which always tends to the greatest).
#2: It would create a level playing field for companies.
Another argument to promote mandatory due diligence legislations refers to the opportunity to create a “level playing field for companies operating in and from the EU, so that those undertaking efforts to prevent and mitigate negative human rights impacts are not driven out of the market by other companies seeking a competitive advantage through the exploitation of human beings and their environment”. (Briefing 1 of the EU Parlament).
It is quite tempting to fall for this argument. In a very complex world full of bureaucracy, standards and barriers, any promise of simplicity sounds like music to most companies. It also suggests a promise of justice before what most companies feel to be unfair treatment.
However, can a mandatory human rights due diligence law deliver on such promises of justice and level playing field?
Although the argument is appealing, firstly, companies should be explained what exactly is expected from them and why.
It should be clarified how companies are going to contribute to the overall effort of eradicating human rights violations worldwide, making sure that companies will not absorb States responsibilities and that a clear hierarchy is defined between the mechanisms driven by States (e.g. Cross-border judicial cooperation) and potential areas where companies can or should contribute.
The argument of creating a level playing field is also used to portray that different countries have defined different scope in their respective laws, and thus creating duplication for companies.
However, this understanding demands be nuanced.
It is often argued that, there is no reason why a human rights due diligence law should limit its scope to one human right only, because human rights are universal and interconnected.
Although the line of thinking is correct, the problem with this argument is that it keeps forgetting that a) the primary responsible to protect human rights is the State and b) these laws only address companies.
Therefore, whereas it is valid to say that the State’s obligation to protect should cover the full spectrum of human rights , it is debatable that the same should apply for laws that only address companies. As allies (and not primarily responsibles), it is possible and even advisable, that mandatory Human Rights Due Diligence in different countries allow companies to concentrate only in certain rights.
Another reality to keep in mind when promising a level play field relates to the diversity in sourcing strategies, which make companies already playing in different levels.
The great diversity of geographical scope, sourcing strategies, supply chain constellations, product and human capital in each company, make it quite a delusion to come up with a fair level play field.
#3: Human Rights Due Diligence Laws should include n-tier suppliers along the value chain?
As if these difficulties weren’t enough, it is often recommended “that future HRDD legislation should make explicit its application not only to the company’s own activities, but also other business relations, including the supply chain.”
This includes not only first tier contract partners, but that a company’s obligations and influence must also extend to n-tier suppliers along the value chain.
The rational of this recommendation usually lays on the correct understanding that supply chains are interconnected and therefore, human rights abuses may cascade up and down through the supply chain. However, Is it feasible to believe that the scope of a law can be unlimited and multidirectional, regardless the country where companies are domiciled?
Is it reasonable to think that a law in Europe can make Company Alpha legally responsible for the actions and omissions committed by another legal entity part of its supply chain in n-tier, based in a foreign country?
Does it mean that Company Alpha would be legally owed to absorb not only the negligence of a different company from a different jurisdiction, but theoretically the indifference, or incompetence or negligence of a Sovereign State to protect their citizens and enforce its laws vis-à-vis the corporate responsibility of companies domiciled in its own territory?
The mandatory imposition of due diligence seems to me a contradiction in terminis that should be revisited with great attention and honest debate. We are debating the details while the big picture concerning the nature of human rights, the roles and obligation of each sector in society and the hierarchy and coherence of the norms seem completely disregarded.