The introduction of the UN Guiding Principles on Business and Human Rights – and more recently legislation such as the UK Modern Slavery Act – has acted as a catalyst for heightened scrutiny of commercial human rights issues. These are now very real forms of commercial, regulatory and litigation risk that all global businesses should be aware of.
In particular, clients need to consider business and human rights risk as a core part of their risk management processes (alongside e.g. ABC considerations), particularly those operating in certain high-risk sectors or in developing countries.
Importantly, the steps a company takes to manage human rights risk should relate not only to the company’s own business operations, but also to its supply chains. Companies should draw on the human rights due diligence, remediation and compliance framework set out in the UN Guiding Principles on Business and Human Rights to assist them in this regard.
There are six main steps a company should take in order to comply with this framework:
- Identifyany human rights reporting requirements which apply to the entities within the group structure(e.g. the UK Modern Slavery Act 2015 and the California Transparency in Supply Chains Act).
- Conduct a ‘heat-mapping’ risk assessment of business operations and suppliers. The company should list out its operations and suppliers (including all known indirect suppliers) and conduct desktop research to determine which are likely to pose the greatest risk from a human rights perspective - due to their location, industry or because of opaque supply chains - using e.g. press reports and commentary produced by governments and NGOs.
- Undertake systematic, detailed due diligence focused on potential human rights risks identified in the course of the heat-mapping exercise. This might include, for example, interviewing individuals within the business and sending due diligence questionnaires to suppliers.
- Conduct focused investigations, including on-site inspections and interviews with suppliers, to fully scope any human rights risks uncovered in the due diligence exercise.
- Take steps to remedy any human rights issue that is discovered. To deal with problems arising in relation to its own business, the company might conduct training, introduce new policies or terminate the employment of individuals involved. Where an issue occurs in relation to a supplier, the response will depend on the company’s leverage, but could include amendments to supply contracts, offering training, or (in some cases) terminating the supplier relationship.
- Embed human rights protections into the company’s on-going compliance procedures. The company should publish a high-level policy statement on human rights, amend policies, procedures and standard contracts to address human rights issues, roll out training internally and externally, and establish monitoring procedures such as whistleblower hotlines.