Human Rights Due Diligence – Regulating through Reporting

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published on 29 June 2022 | reading time approx. 4 minutes

 

With increasing globalisation and the growing influence of markets and internationally active companies, the issue of human rights in supply chains is becoming increasingly relevant. In the area of business and human rights, the regulatory developments have failed to keep up with the rapid changes in markets over the past few decades. As international policies on respect of human rights, such as the Universal Declaration of Human Rights, do not generally establish direct obligations on companies, there are currently no generally binding regulations regarding a company's due diligence obli­gations in its supply chain. 




This lack of universal obligations has entailed catastrophes such as the collapse of the Rana Plaza textile fac­tory in 2013. It has also led to the emergence of a wide variety of regulations on the subject at the national level. The fragmented composition of existing and proposed regulatory measures has created a mosaic of different national obligations in the field. While a due diligence regulation is currently being elaborated at the European level, human right policies that are currently in place at national level differ greatly in terms of their scope, sanctions, and jurisdiction.
  
While Germany and Norway have only recently passed laws on human rights due diligence for companies, other countries, such as the United Kingdom, France or the Netherlands have already had binding regulations on this matter for several years. Still other countries have only implemented soft laws or have not enacted any regula­tions at all on the subject. 

But there are also major differences in existing laws. While for example the legislation in the UK focuses on slave labour, the Dutch law primarily targets child labour. However, the regulations differ not only in their focus, but in a myriad of ways, such as the obligations they impose on companies. 

The tables below intend to provide an overview of selected national human rights legislations currently in force. In addition to the legislations outlined below, there are countries such as Australia or the USA have passed laws on the matter. Furthermore, some of the countries mentioned have additional national policies in place that address the issue, such as the National Action Plans on Business and Human Rights or legislation like the Grenelle II Act in France or the Bribery Act in the UK.

 Germany – Act on Corporate Due Diligence Obligantions in Supply Chains (2021)

Scope of the Act

As of 2023:

  • Companies based in Germany or with a subsidiary in Germany, employing more than 3,000 workers in the country (including posted employees).


As of 2024:

  • Companies based in Germany or with a subsidiary in Germany, employing more than 1,000 workers in the country (including posted employees).

Key facts:


Focus on due diligence obligations and reporting.

Companies affected by the law must report on certain due diligence obligations as well as implementation range of risk assessment, prevention and remediation measures.

These measures include conduction a risk analysis, implementing risk management, defining responsibilities, publishing a policy statement, taking preventive and remedial measures as well as regularly reporting on the company’s due diligence obligations.

The law primarily covers risks arising directly from the company as well as from the operations of certain subcontractors and suppliers.

A violation of the obligations under this Act may result in administrative fines and exclusion from the award of public contracts.

 France – Loi de Vigilance (2017)

Scope of the Act

Valid for Companies that employ:
  • at least 5,000 employees within the company and its direct and indirect subsidiaries, whose head office is located on French territory.
  • at least 10,000 employees in its service and in its direct or indirect subsidiaries, whose head office is located on French territory or abroad.

Key Facts:


Focus on due diligence obligations and reporting.

Companies affected by the law must report on certain due diligence obligations as well as implementation range of risk assessment, prevention and remediation measures.

These measures include conduction a risk analysis, implementing risk management, defining responsibilities, publishing a policy statement, taking preventive and remedial measures as well as regularly reporting on the company’s due diligence obligations.

The law primarily covers risks arising directly from the company as well as from the operations of certain subcontractors and suppliers.

A violation of the obligations under this Act may result in administrative fines and exclusion from the award of public contracts.

 United Kingdom – Modern Slavery Act – Transparency in Supply Chain Provisions/section 54 (2015)

Scope of the Act

Any organization in any part of a group structure, if they:

  • are a body corporate or a partnership, wherever incorporated
  • carry on a business, or part of a business, in the UK
  • supply goods or services
  • have an annual turnover of £36 million or more

Key Facts:


Focus on slavery, servitude, forced or compulsory labour and human trafficking.

The Act establishes offences covering the aiding, abetting, counseling, or procuring of slavery, servitude, forced or compulsory labour, and human trafficking.

Companies affected by the law must annually prepare a slavery and human trafficking statement, including information about the organization itself and its supply chain as well as risks, policies and measures concerning slavery. 

The law affects commercial organizations and their supply chains.

The duties imposed by the law are enforceable and companies that fail to comply face injunction as well as fines.

 Netherlands – Child Labour Due Diligence Act (2017)

Scope of the Act

  • The law is expected to come into force in 2022 (passed in 2019 but has yet to take effect due to delays in the passage of required implementing regulations).
  • The Law applies to all nationally registered Multinational Enterprises and foreign companies that sell or supply goods or services to Dutch consumers more than twice in a calendar year.
  • Exemptions for sectors or companies with low risk of child labour will most probably be specified in the General Administrative Order.

Key Facts:


Focus on child labour occurring in the supply chain.

The Act requires child labour due diligence and reporting (by a significant number of foreign-based multinationals providing goods or services in the Netherlands).

Subject companies must investigate risks, adopt and implement a plan of action and declare that it exercises due diligence regarding child labour in its supply chain.

A company can be fined for failing to submit a statement as well as if it fails to carry out due diligence in accordance with the Act or to draw up a plan of action.

 Norway – Transparency Act (2021)

Scope of the Act

The act will enter into force 2022


All companies registered in Norway, and foreign companies selling in Norway, that meet at least two of the following three criteria:

  • at least 50 full-time employees or equivalent annual man-hours.
  • an annual turnover of at least NOK 70 million.
  • a balance sheet sum of at least NOK 35 million.

Key Facts:


Focus on due diligence and reporting.

The legislation mandates that liable firms be able to account for the human rights and fair labour practices, not only of direct suppliers, but of all indirect vendors and subcontractors.

Companies affected by the Act must conduct human rights and decent working conditions due diligence activities on both their internal operations and those of their suppliers and annually report on their due diligence strategies, practices and findings.

The law affects companies, their direct suppliers as well as their indirect suppliers.

A lack of observation of the Act will be pursued by sanctions such as enforcement penalties and infringement penalties.

 Italy – Italian Legislative Decree 231 (2001)

Scope of the Act


Corporate entities and companies and associations including those which are not corporate bodies


Key Facts:

 

Focus on administrative liability.

 

The decree introduces the regime of administrative responsibility of legal entities for crimes committed in their interest or to their advantage. It includes specific human rights violations, such as slavery, human trafficking or forced labour.

 

Companies can avoid liability by, e.g., identifying risk activities, providing specific protocols and decision-making processes for the offenses that are to be prevented or establishing procedures for managing financial resources to prevent the commission of crimes.

 

The Decree includes different types of sanction from pecuniary fines, disqualification sanctions, seizure of the proceeds or profit of crime and the publication of the sentence.

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