10 Years of the UN Guiding Principles on Business and Human Rights Sees Wave of New Human Rights Due Diligence. Is it Enough?

30 July 2021
Policy Innovation

Alice Eckstein  | Project Director - Delta 8.7
Angharad Smith  | Programme Officer - Delta 8.7

June marked the tenth anniversary of the UN Guiding Principles on Business and Human Rights (UNGP) — a milestone for a framework that has been at the core of progress on business and human rights. On that anniversary month, Norway and Germany passed legislation on corporate human rights due diligence through disclosure requirements. In passing these laws, Norway and Germany join several other States that have adopted, proposed or initiated discussion on reporting. Also in June, at the 2021 G7 summit, global leaders raised the issue of forced labour in supply chains, committing to its removal through implementing robust domestic and international cooperation — preceded by a Joint Communiqué from G7 Trade Ministers reaffirming their obligations under human rights law to addressing labour exploitation. The US will begin a process of revitalizing their National Action Plan (NAP) on Responsible Business Conduct. The EU is currently considering significant mandatory human rights due diligence (mHRDD) regulation. This wave of new legislation, much of it rooted in the UN Guiding Principles, will have important implications for business operations — and labour standards — around the world.

According to the 2018 Global Slavery Index, forced labour taints over USD 350 billion of goods annually in a wide range of industries. The diffuse and opaque nature of global value chains promotes inequality and rewards production that reduces labour costs, meaning businesses that exploit human labour operate at an advantage over competitors who follow ethical labour sourcing practices. The COVID-19 pandemic has further exposed the fractures in global value chains, and evidence from previous recessions suggests that workers will work longer hours, in worse conditions, and that informal work and child labour will increase — which is already being borne out. Are the new regulatory frameworks poised to address these fragilities?

Transparency legislation has been identified as one of the key tools through which States can enforce mandatory corporate reporting as part of the initiative to eliminate modern slavery, forced labour, human trafficking and child labour — Target 8.7 of the UN Sustainable Development Goals. Further, transparency regulation can act as learning tool, facilitating opportunities to define common concepts and share best practices. Legislation has spurred advancements in supply chain reporting technology as companies come under pressure to make their multi-tier supply networks more transparent. As more countries move to enact mHRDD laws, some financial institutions are strengthening their modern slavery risk management systems in anticipation of coming regulations. They are also developing more sustainable approaches to assets management, as when the Japanese Government Pension Investment Fund, in collaboration with World Bank, embarked on a research project to expand markets for sustainable investment.

Photo by Mathias P.R. Reding/Unsplash

The Norwegian Transparency Act (Proposition 150 L (2020-2021)), which is expected to enter into force on 1 January 2022, enshrines disclosures of human rights in law for Norway’s largest companies. This comprehensive Act builds on the UN Guiding Principles and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises. The Transparency Act sets itself apart from similar legislation through its requirement that companies respond to any formal public request for information about their human rights practices and in stipulating that the Norwegian consumer authority may issue injunctions and fines for non-compliance

The German Act on Corporate Due Diligence in Supply Chains, adopted on 11 June and entering into force in 2023, marks a turning point in Germany’s approach to corporate responsibility for human rights. In addition to obliging large (and eventually mid-sized) companies to conduct reporting on human rights and environmental risk, national authorities will be empowered to initiate administrative action or impose fines on companies that fail to carry out their obligations. While the bill falls short in implementing all components of the UNGPs — for example in lacking remediation provisions for affected parties ­— it nevertheless points to Germany’s commitment to enshrining mHRDD into legislation.

Beyond Transparency

Legislation on mHRDD is just one lever in achieving SDG Target 8.7, but it is an important one. Since 2015, when the United Kingdom passed the first Modern Slavery Act, we have seen countries build upon and improve legislation. For instance, France’s Corporate Duty of Vigilance Law (2017) requires companies to identify risks rather than just respond retroactively, and it provides avenues for remedy for affected individuals and communities. The Australian Modern Slavery Act (2018), responding to calls for greater accountability, details what businesses were required to do and to report, in line with the UNGPs. Political conversation in the United Kingdom, is now turning to updating Section 54 of the Modern Slavery Act. The Modern Slavery (Amendment) Bill recently introduced into Parliament proposes additional disclosure and substantive compliance requirement and would establish penalties for non-compliance with selected aspects of the Act.

What would a perfect mHRDD law look like? What should Member States, which pledged their commitment to Target 8.7 of the SDGs in 2015, seek to implement when considering new, or improving current, legislation? 

In a 2019 article for Delta 8.7, Genevieve LeBaron identified best practices for governments to strengthen existing modern slavery transparency legislation and further spur corporate accountability. These included annual mandatory reporting on standardized indicators, including on the effectiveness of their efforts, as well as the imposition of more stringent forms of corporate liability. These recommendations are supported by Goal Two of the Finance Against Slavery and Trafficking Blueprint which identifies promoting collaboration across the sector on human rights due diligence and social risk mapping. Central to these recommendations is a call to place greater onus on the right to seek remedy — a key component of the UN Guiding Principles — with many countries’ mHRDD legislation falling short on this issue.

Momentum building

Within the human rights landscape, there is real momentum for mHRDD, with governments making far greater use of legal tools to ensure businesses adhere to human rights and labour standards. The recent measures adopted by Norway and Germany build upon previous States’ achievements. When the European Union comes on board with mHRDD reporting, many more companies will be required to report; this will allow good-faith business actors to compete on a more even playing field. Consumers and investors can make better-informed choices as reporting becomes more transparent.

These mechanisms have never been more important: as national and global economies seek a rebound from COVID-19, the risks of labour exploitation will increase in global supply chains.  What will be needed, however, is consistency in these reporting requirements, as well as effective remedy for affected individuals and communities. These should be provided in current and future measures. The challenge now is to ensure mHRDD regulations are robust, accountable, prioritize the sharing of timely impact data and align with all components — Protect, Respect and Remedy — of the UN Guiding Principles.

This article has been prepared by Alice Eckstein and Angharad Smith as contributors to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the authors and do not necessarily reflect those of UNU or its partners.

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