Effectiveness of mandatory human rights and environmental due diligence: Policy Brief

Effectiveness of mandatory human rights and environmental due diligence: Policy Brief

Effectiveness of mandatory human rights and environmental due diligence: Policy Brief

This Modern Slavery PEC Policy Brief is the second in a series of Policy Briefs to assess the
evidence base on the effectiveness of different regulatory interventions to address modern
slavery in global supply chains, a key research priority for the Modern Slavery PEC, as set out
in our Strategy. This Brief assesses the evidence base on the effectiveness of mandatory
human rights and environmental due diligence legislation, with a specific focus on the
implications of such legislation for addressing modern slavery.2

There is an ongoing interest from businesses and civil society in the possibilities of mandatory
human rights and environmental due diligence (mHREDD) legislation in the UK in light of such
laws recently being adopted in France,3 Germany,4 and Norway,5 and proposed, in February
2022, at the European Union level.6 This Policy Brief considers the existing evidence on the
background to these developments and their relevance in relation to the UK modern slavery
legal framework. It draws on an evidence review which considered academic literature, as well
as reports produced by NGOs, governments, and international organisations.

All emerging mHREDD laws create a legal duty that requires business enterprises to identify,
prevent, mitigate, and account for human rights and environmental harms in their operations
and supply chains. All such laws contain reporting requirements similar to section 54 of the
UK Modern Slavery Act, but go further by requiring companies to undertake human rights due
diligence (HRDD) and attach some form of legal liability for failure to meet these requirements.
The laws are aimed at businesses, and do not generally impose duties on public bodies.7
Under the UN Guiding Principles on Business and Human Rights (UNGPs, the most widely
accepted HRDD standards), HRDD consists of four steps:

  1. Identifying and assessing actual or potential adverse impacts;
  2. Taking integrated action to address these impacts;
  3. Tracking responses; and
  4. Communicating how impacts are addressed.

Key findings

There are multiple reports and case studies pointing to how HRDD can be effective at addressing modern slavery risks in practice, across a range of sectors. Evidence also suggests that there is a low level of voluntary implementation of HRDD by companies in the absence of regulation.

There is limited evidence on the actual effectiveness of mHREDD laws, apart from the French Duty of Vigilance law 2017, which is the only one of these laws to have taken effect so far.9 • Around 260 companies are subject to the French law.10 In the financial year after its introduction, 70% of companies started or revised their human rights and environmental risk mapping,11 and 65% of companies had dedicated human rights impacts identification processes (compared to 30% before the law).

  • A study by PWC and others on the French law found that 80% of SMEs (small and medium enterprises) are being required to take various steps to comply with human rights obligations by the large actors in their value chains, without receiving accompanying support (financial or otherwise) for such compliance.
  • In 2019 the first litigation commenced in terms of the Act, in cases where civil society actors have sought injunctions against individual companies for alleged non-compliance with the legislation. Although several preliminary hearings have taken place, to date there are no judgments on the merits.

There has been extensive pre-legislative investigation into the anticipated impacts of mHREDD laws, including survey evidence reporting the views of businesses and other stakeholders.

  • Reported anticipated benefits include: levelling the playing field, improving legal certainty, facilitating leverage with third party business partners and improving regulatory harmonisation. Businesses report a preference for regulation that applies to all human rights to allow them to prioritise and respond to the most severe risks. 9. Above n 3. 10. CCFD-Terre Solidaire and Sherpa ‘Third edition of the Duty of Vigilance Radar’ (7 July 2021). 11. Entreprises pour les droits de l’Homme (EDH), ‘Application de la loi sur le devoir de vigilance: Plans de vigilance 2018-2019’, (14 June 2019), at 7 and 12. 12. Ibid, at 5. For further studies on the implementation of the French Due Diligence Law see also EDH ‘Etude: Application de la Loi sur le Devoir de Vigilance: Plans de Vigilance Parus En 2019-2020’, (2020); Duthilleul and De Jouvenel ‘Evaluation de la mise en oeuvre de la loi n° 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre’ (2020), Rapport à Monsieur le ministre de l’économie et des finances; and the summary of the sources that consider the implementation of the French law in Bright, ‘Mapping human rights due diligence regulations and evaluating their contribution in upholding labour standards in global supply chains’ in Delautre, Echeverría Manrique and Fenwick (Eds), Decent work in globalised economy: Lessons from public and private initiatives, ILO, (2021). 13. PWC and others ‘Résultats de l’enquête “RSE: La parole aux fournisseurs!”’, (January 2020). Policy Brief: Effectiveness of mandatory human rights and environmental due diligence 3
  • Reported anticipated negative impacts on business include a potential cost burden of complying with mHREDD legislation. An economic impact assessment carried out to inform the European Commission draft legislative proposal found that surveyed businesses did not expect the costs of implementing mHREDD to be significant relative to overall revenue, but that these costs could differ considerably between businesses (e.g. due to different business models, sectors and market characteristics).
  • Potential wider impacts that have been raised include businesses considering divestment from high-risk source regions or suppliers, or exiting supplier relationships in response to identified issues. However, the accepted standards for HRDD require companies to exercise and increase leverage, and only terminate relationships as a last resort.

mHREDD legislation may (depending on design) overlap to some extent with legislation in related areas such as forced labour import bans or supply chain transparency. Further thought needs to be given to how a “smart mix” of these related regulatory tools may appropriately complement one another.

There has been limited research on the impacts of mHREDD laws on directly affected individuals (such as people with lived experience of modern slavery), and around the involvement of those individuals in the design of such laws.

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