Mandatory Human Rights and Environmental Due Diligence

The long-awaited proposal for an EU Directive on mandatory human rights and environmental due diligence has finally been released, following the increasing global momentum towards socially responsible and sustainable business. A topic that in times like these is ever more relevant.

EU proposal for Directive on Corporate Sustainability Due Diligence
In February, the long-awaited proposal for a Directive on Corporate Sustainability Due Diligence (CSDD) was finally released by the European Commission. The proposed Directive was initially expected to be published in June 2021 and has for the past months been loudly requested by a wide range of companies, trade unions, non-governmental organizations, and citizens.

Respect for human rights and the environment in value chains
The Directive aims to foster responsible behaviour of companies operating in the EU, by enforcing them to conduct due diligence to identify, prevent, mitigate, and remediate adverse impacts on the environment and on the rights of workers throughout their global value chains. Examples of adverse impacts on human rights and the environment include child labour and exploitation of workers, as well as pollution and biodiversity loss.

The growing relevance of human rights due diligence
In the past, companies have been encouraged to take responsibility for their value chains on a voluntary basis, guided by international instruments such as the UN and OECD guidelines on human rights and responsible business conduct. However, voluntary action has not resulted in large scale improvement across sectors, stressing the need for a mandatory system.

“The increasing global momentum points to human rights due diligence as a key enabler for future success”

To date, there is an increasing global trend towards human rights due diligence legislation, where countries such as France, Norway and Germany have already adopted legislation within the area. Consumers are also increasingly holding businesses accountable for their sourcing practices, and human rights due diligence are becoming an even more important part of investment decisions.

Implications for companies moving forward
The next step is for the EU Parliament to review the proposed Directive, why companies should keep updated on the forthcoming legislative EU procedure. In particular, companies should also keep updated on the range of national legislation within the area, which is already entering into force and is likely to affect many multinational companies. Since due diligence processes take time to implement, companies do best in starting today by identifying their most likely and significant impacts on human rights and the environment, and by integrating due diligence into management systems, policies, and processes.

Sources

•The European Commission, Proposal for a Directive on corporate sustainability due diligence and annex, 2022-02-23
•The United Nations Office of the High Commissioner for Human Rights (UN OHCHR), UN Guiding Principles on Business and Human Rights, 2011
•The Organization for Economic Cooperation and Development (OECD), OECD Due Diligence Guidance for Responsible Business Conduct, 2018