BHR Symposium: The Requirement to Practice Due Diligence–A Floor Not a Shield

BHR Symposium: The Requirement to Practice Due Diligence–A Floor Not a Shield

[Olivier De Schutter is the UN Special Rapporteur on extreme poverty and human rights. He was until 2020 a member of the UN Committee on Economic, Social and Cultural Rights.]

One of the innovative contributions of the Guiding Principles on Business and Human Rights, endorsed by consensus within the Human Rights Council in June 2011, was to include the practice of human rights due diligence as part of businesses’ responsibility to respect human rights — the so-called “second pillar” of the GPs. The message then was clear: companies cannot merely abstain from conduct that might lead to human rights violations; they must also proactively seek to inform themselves about the impacts of their activities, and act on the basis of that information to mitigate any negative impacts. 

In other terms, in addition to negative duties to abstain, the Guiding Principles acknowledged certain positive duties to take action, in order to minimise the risks of abuses in the supply chain or in the multinational group of companies. This was professor J. Ruggie’s response to the invitation of the Human Rights Council to clarify how we should define the « sphere of influence » within which companies should act in order become a positive force for the protection and promotion and human rights.

The human rights due diligence requirement has figured prominently in the business and human rights national action plans adopted since the adoption of the GPs, and a growing number of States are now adopting binding legislation on this issue. Most recently, the European Commissioner for Justice has announced that the EU would take an initiative in this area in 2021, in order to harmonise the approaches adopted across the EU Member States. 

The formalisation of the requirement to practice human rights due diligence has been central to the negotiations on a new Treaty on Business and Human Rights since their start. As the « prevention » provision of article 6 the Draft Treaty confirms, it is proposed, in line with the expectations expressed by the Committee on Economic, Social and Cultural Rights in paragraphs 15-17 of its 2017 General Comment (No. 24) on this issue, that States should adopt a regulatory framework imposing human rights due diligence on companies, backed by the threat of effective sanctions (article 6.2.). 

There is an opportunity in this development: whereas the weight of large corporations in an increasingly globalised world is often seen as a threat, it could potentially become a force for the good, if the most influential of these actors effectively must use their leverage on suppliers and business partners and within the multinational groups they belong to to improve human rights compliance. 

But there is also a risk. Due diligence should not degrade into a box-ticking exercise, shielding companies from any form of liability provided they follow the standard list of « do’s » and « do not’s ». Consider, for instance, the 2017 French Law on due diligence. This law imposes on large companies domiciled in France or doing business in France, that they adopt and effectively implement a ‘vigilance plan’ (‘plan de vigilance’), which should include measures to identify risks to human rights, health and safety, and to the environment, that might be caused by the activities of the company itself, by those of the companies it controls, directly or indirectly, or by the activities of sub-contractors or suppliers with whom the company has a permanent business relationship (where such activities are linked to that relationship). Such ‘vigilance plan’ should be designed in consultation with the stakeholders of the company, and include five elements: a mapping of the risks; a procedure for the regular assessment of the subsidiary companies, the sub-contractors or suppliers with whom the company has a permanent business relationship; actions for the mitigation of the risks identified or the prevention (i.e., avoidance) of the most serious abuses; an alert mechanism, established in agreement with the representative unions, allowing for the identification of risks; a mechanism to ensure an adequate follow-up of the measures adopted and an assessment of their effectiveness. 

But what if a company does comply with this requirement, but nevertheless fails to effectively prevent a harm from occurring in the supply chain or in the group of companies? A plausible reading of the new regime is that, where a vigilance plan has been adopted in accordance with the requirements set out in the 2017 French Due Diligence Law, and a violation of human rights or an environmental harm nevertheless does occur in the group of companies or in the supply chain, the liability of the parent company or of the lead company cannot be engaged. If this reading prevails, then there shall be a strong temptation for the large companies to whom the French law is addressed to adopt the action plan, with its five components, and then to avoid imposing on its business partners or subsidiaries any further hindrances — after all, the more competitive the suppliers, and the more freely the subsidiaries can operate, the more profitable it shall be for the lead company. Is this the result we want to achieve?

This is why human rights due diligence and potential liability for violations occurring in the supply chain should be treated as two separate, albeit complementary, duties. The former is a duty to prevent the risk of human rights violations occurring within the supply chain or the corporate group. It is forward-looking, essentially imposing on companies that they seek information from their business partners or affiliates and that they act on the basis of such information to minimise the negative human rights impacts of their activities. The latter is a duty to accept liability where such preventative measures have failed, but where it can be shown that, should the company have done more, it could have avoided the harm from occurring. 

Even if human rights due diligence duties as prescribed under domestic legislation (in accordance with the « prevention » clause of article 6 of the Draft Treaty) are fully complied with, this should not result in a guarantee of legal immunity from civil liability claims, where it appears that the preventative measures have failed to avoid the harm from occurring. This is what the Draft Treaty now provides for, where it notes that sanctions for failure to comply with human rights due diligence obligations should be « without prejudice to the provisions on criminal, civil and administrative liability under Article 8 » (on remedies). Article 8.8 of the Draft is explicit in this regard, as it states that « Human rights due diligence shall not automatically absolve a legal or natural person conducting business activities from liability for causing or contributing to human rights abuses or failing to prevent such abuses by a natural or legal person as laid down in Article 8.7. The court or other competent authority will decide the liability of such entities after an examination of compliance with applicable human rights due diligence standards. » 

While this last sentence may be a source of confusion, the philosophy of these clauses is clear: once the victim has proven that the harm was inflicted and that it is in connection with the company’s activities, it should be for the company to rebut the presumption that it could have done more to prevent such harm from materialising. And it shall not be an excuse that the company has complied fully with whatever human rights due diligence obligations are stipulated in legislation: if the company could reasonably have done more to prevent the risk, it should have. 

Unless we keep human rights due diligence and legal liability separate, human rights due diligence, for the imposition of which so many actors have fought for so many years, shall become a formalistic exercise, leading companies to adopt a minimalistic approach simply to shield themselves from the risk of liability — in effect, buying legal immunity by ticking the boxes. We need the opposite: we need to incentivise corporate actors to permanently improve and adopt a « hands-on » and proactive approach to ensure human and environmental rights are fully complied with in the supply chain or the corporate group. Human rights due diligence is essential to ensure that economic globalization contributes to human development. It should not become a substitute for ensuring a right to remedy for victims of corporate negligence. 

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