Claire Bright is an Associate Professor at NOVA School of Law and Founding Director of the NOVA Centre on Business, Human Rights and the Environment.
The celebration of International Human Rights Day on the 10th of December 2024, is an opportunity to reflect on the importance of the ‘S’ – the ‘Social’ – or human rights – pillar in ESG, also often considered to be the forgotten pillar. This pillar focuses on how companies can respect human rights in corporate activities and across their global value chains.
Why does it matter?
Human rights concerns are widespread in business activities and value chains around the world. According to the International Labour Organization (ILO), nearly 18 million people are trapped in forced labour in the private sector. The ILO and UNICEF report that 160 million children are engaged in child labour – that’s one child out of 10 globally – with a particular increase amongst the number of young children between 5 and 11 years old working in hazardous conditions. In addition to these, poor working conditions and unsafe working environments, alongside many other human rights issues, are common in supply chains everywhere.
The Corporate Responsibility to Respect Human Rights
From a legal perspective, the regulatory framework has significantly evolved over the past few decades. In 2011, the United Nations (UN) introduced the UN Guiding Principles on Business and Human Rights (UNGPs) which were unanimously endorsed by the UN Human Rights Council. Although these principles are not legally binding, they have gained significant support from many actors worldwide – such as governments, companies, civil society organizations, etc. – and have become the key instrument of reference in the field at the international level. The UNGPs have clarified that companies have a responsibility to respect human rights in their activities and throughout their value chains which derives from social expectations. This responsibility applies to all companies, regardless of their size, and goes beyond complying with national laws; it involves considering internationally recognized human rights. The UNGPs also highlight that businesses should pay particular attention to the rights of vulnerable groups such as women, children, minorities, people with disabilities; indigenous peoples, and migrant workers and their families.
How to walk the talk: the Human Rights Due Diligence Process
The UNGPs provide companies with a clear way to meet their responsibility to respect human rights through their policies and processes. Firstly, they should adopt a human rights policy. Committing to respect human rights is important but it is not enough, companies need to walk the talk. In practice, companies can do so through the implementation of a human rights due diligence process which allows them to continuously assess and address human rights issues in their activities and value chains. Human rights due diligence includes four main steps:
- Identifying and assessing actual and potential human rights risks;
- Taking action to address the risks;
- Tracking the effectiveness of those actions;
- Reporting externally on how those risks are being addressed.
A key point is that companies are not expected to eliminate all human rights risks, and especially not all at once. What matters is that they are taking appropriate steps to become aware and to address the issues, and are able to show continuous progress. Once they have identified all the risks, they can prioritize the most salient impacts based on how many people are affected (scope), the severity of the impact (scale), whether it can be reversed (remediability), and how likely it is to happen.
Growing Legal Pressure and Global Action
The UNGPs have influenced national laws in several countries, such as France, Germany and Norway, which now require large companies to respect human rights in their activities and across their supply chains. Other countries like as Brazil, Tunisia and Thailand are considering similar laws.
In the European Union, on the basis of a study on due diligence requirements through the supply chain that we conducted for the European Commission, the Corporate Sustainability Due Diligence Directive (CSDDD) was put forward and entered into force on the 25th of July 2024. The CSDDD will require large companies in the EU to put in place human rights and environmental due diligence processes. Although this law applies only to large companies, smaller businesses working with these companies also need to prepare for these requirements.
Conclusion: Why human rights due diligence matters
By conducting human rights due diligence, companies can reduce reputation risks, avoid legal risks and strengthen relationships with stakeholders like consumers, investors, trade unions, NGOs, and society at large. Research shows that companies with strong human rights due diligence processes are more resilient during crises – such as COVID-19 pandemic, natural disasters or wars – which are always more frequent, and are better equipped to respond in a way that is more human-rights compatible.
Our study for the European Commission found that the cost of due diligence compared to the revenue of companies is low as these costs on average amount to less than 0.14% for SMEs and 0.009% for large companies. A small price to pay to ensure that human rights are uphold in corporate activities and across their global value chains!
This text was originally written for the newsletter “Have a Great and Impactful Week” of the Católica Centre for Responsible Business & Leadership.
Suggested Citation: C. Bright, ‘Respecting Human Rights in Business Activities: Why does it matter?‘, Nova Centre on Business, Human Rights and the Environment Blog, 15th December 2024