6 Keys to Unlock Effective Human Rights Due Diligence
As someone who has been investigating slavery in supply chains for over 20 years and has talked to hundreds of businesses of all sizes about their human rights needs for the last 6 years, I've learned a few things about what's holding businesses back from effective human rights due diligence. And believe me, this whole thing is not as simple as it might seem.
The first and, IMO, most significant barrier businesses face is a bit of a “duck and weave” driven by a simple lack of awareness. Many businesses are not aware of their human rights obligations, and as a result, they do not take any action to implement due diligence processes. Beyond not knowing about those obligations except perhaps in the most general of terms, they are also widely unaware - and unaware they are unaware - of what is going on inside their own workplaces. We take for granted a CEO or any other kind of boss knows what conditions are like across their company. They simply, invariably, irrefutably don’t. I have rarely ever spoken to a business that even saw let alone would admit it had human rights issues of its own; they only worry about business partners having problems. This is a cocktail part denial, part arrogance, part ignorance. Awareness is a critical starting point for any business wanting or needing to launch out into the waters of being a human-centric company. That evolutionary journey is mapped according to the cadence: Awareness - Motivation - Capability. This is a significant - and probably the single most frustrating problem - because like in everything in life, someone who sees no fault in behaviour or thought cannot change either. It's one of the reasons why I am zealous about raising corporate awareness about the importance of human rights due diligence.
But raising awareness – if you ever manage to bridge this dissonance - is only the first step. The second barrier that businesses face is the cost – human and financial - associated with implementing human rights due diligence. For small and medium-sized enterprises (SMEs), the cost can be significant, making it difficult to justify the investment.
However, it's essential to recognise that the cost of not implementing due diligence processes is even greater. It can lead to reputational damage, legal action, and lost business. The cost associated with implementing human rights due diligence can indeed be significant, especially for small and medium-sized enterprises (SMEs). It can be challenging to justify the investment in a robust human rights due diligence process, given that many SMEs are often operating on a tight budget. However, the cost of NOT doing anything can be far greater. Inertia can result in consequences of not implementing due diligence processes can be severe, and the long-term costs of ignoring human rights can be far more significant. If you are an SME leader, and worry about this, search up my SME Playbook for Human Rights Due Diligence in Amazon.
One example of a company that has paid a price for their misapprehension, suffering significant reputational damage due to poor human rights practices is Nike. In the 1990s, Nike faced criticism for using sweatshops to produce their products, resulting in a significant public backlash. The company faced protests and boycotts, and their brand image was severely tarnished. In response, Nike implemented a range of measures to improve their human rights practices, including developing a Code of Conduct for their suppliers and creating a team of auditors to monitor compliance. The company has since become – some say - a leader in sustainable and responsible manufacturing, demonstrating that investing in human rights due diligence can ultimately benefit the bottom line.
Legal action is another significant cost that businesses can face for failing to implement human rights due diligence processes. The Rana Plaza disaster in Bangladesh in 2013, in which over 1,100 garment workers died due to unsafe working conditions, led to significant legal action against a range of brands that were sourcing from the factory. The incident raised the hairs on the backs of many business owners and prompted a few businesses to take a closer look at their supply chains and implement stronger human rights due diligence processes.
Lost business is another cost of failing to prioritise human rights due diligence. Increasingly, consumers are looking for products that are produced in a sustainable and ethical manner. Companies that are not transparent about their human rights practices or are found to be engaging in human rights abuses can quickly lose customers. For example, in 2021, Boohoo, a UK-based online fashion retailer, faced a significant backlash after allegations of worker exploitation were uncovered in their supply chain. The company lost a significant amount of business and was forced to implement measures to improve their human rights practices. Malaysian firm, Top Glove, lost all of their US orders for rubber gloves after forced labour stopped their exports to the US for a year.
Even if businesses are aware of the importance of human rights due diligence and are willing to invest the resources needed, they can still face significant challenges. The third barrier that businesses face is the complexity of the process. Human rights due diligence requires actual human rights expertise, and for businesses to identify and assess potential human rights risks and impacts, develop and implement a plan to address those risks and impacts, and monitor and evaluate their effectiveness. This can be a complex and time-consuming process, especially for SMEs that may not have the resources or expertise to undertake it.
Relatedly, to help businesses overcome these challenges, there needs to be more expert guidance available: the fourth barrier. While there are numerous international standards and guidelines, such as the Sullivan Principles, UNGPs, and SDGs, not one of them is actionable, and there is no one-size-fits-all approach. Serious human rights expertise is also sorely lacking; there are few high-quality experts out there and even if you lower the bar certainly not enough to go around the 10s of millions of companies out there. Amongst the global flood of measures, principles, laws, and “solutions”, businesses struggle to determine which guidance is relevant to their specific circumstances and will largely cherry pick; do what they know they are good at and avoid entering the more troubling sustainability alleyways. The SDGs are especially prone to cherry-picking by business.
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Businesses also struggle to negotiate the field because they equate sustainability with environmentalism; the human piece is missing. No sustainability staff can know enough about both to be equally strongly effective in both. One either have solid human rights expertise (through field experience), or one is really just an environmentalist. For evidence, just take a second to look at the many sustainability frameworks like the Planetary Boundaries and check for environmental/human rights balance. Balance is largely absent (see my earlier article about flying a plane with one wing). If human rights knowledge is purely book learnt, or from a 1-day unit in an EMBA program or law degree, IMHO they are not the right kind of human rights expert to get the job done with meaning. I know many scores of people in the “sustainability industry” who will readily admit they, and their bosses, are environmental experts only. But then, they have never been asked to be anything else. That's why I believe it's essential to provide experience coupled with expertise, and practical guidance, that businesses can use to implement human rights due diligence effectively.
The fifth challenge that businesses face is the limited enforcement mechanisms available to hold them accountable for human rights abuses. There is no stick. Carrots are all well and good, but sometimes, just sometimes, don’t we all know a little stick needs to be in the offing, even if never used? Brazil’s success on child labour, globally unparalleled, is only because of some stick. Enforcement mechanisms available to hold businesses accountable for human rights abuses are inconsistent; they vary considerably from country to country and even state to state in some cases like the US and Australia. In some countries, there may be strict laws and regulations in place that are effectively enforced, while in others, enforcement may be weak or non-existent. This lack of consistent enforcement can create a situation where businesses are not incentivised – read not driven - to take human rights due diligence seriously. And compliance time, complexity, and costs can very quickly weary even the most excitable compliance expert.
One example of limited enforcement mechanisms is the global use of forced labour in supply chains. Despite the fact that forced labour is illegal in many countries, has been for ages, and only now forced labour bans are starting to be used after many years just being “on the books”, it is still a prevalent issue in supply chains across almost every industry, including agriculture, manufacturing, mining, pharmaceuticals, apparel, services, construction, and technology. The global lack of effective enforcement mechanisms means that businesses can continue to use forced labour without facing serious – or any at all - consequences.
By way of an example, in the seafood industry there have been numerous reports of forced labour and human trafficking in supply chains, particularly in Southeast Asia. My own first child labour case involved seafood. Despite international efforts to address the issue, including the establishment of the Seafood Task Force, enforcement has been limited. In some cases, companies have been found to be complicit in the use of forced labour in their supply chains but have faced little to no consequences. Another example is the use of child labour in the cocoa industry. Despite the fact that child labour is illegal in many countries, including Ivory Coast and Ghana, which together produce more than half of the world's cocoa, it is still so prevalent an issue in the industry, a massive percentage of European chocolate – coming from the same one or two sources - carries child labour without any consequences at all. The lack of effective enforcement mechanisms means that businesses can continue to use child labour without facing any consequences.
Public procurement bans on forced labour are often handed up as a response to this. But it so far should be conceived of as a red herring. Public procurement agency staff have no expertise at all on which to judge bidder’s claims. Personal feedback to me from procurement agents confirms that, and from dozens of them also clearly shows they have no time at all to do anything but read the claims; there is no effective due diligence. There are no public data. Procurement agencies can rely on no database of problem companies, or subsidiaries, or supply chains, or producers. No data means no verification of claims. As a result, the veracity of claims is incredibly low and, if we can use modern slavery statements as the benchmark, many even craven. Any company that can put together a glossy modern slavery statement can submit the same quality to qualify for a public contract. It is invariably no standard at all to get excited about. So, sadly the model as currently implemented means next-to-nothing to any business bidding for those few points in the evaluation grid; compliance is all-too simple. To make public procurement an effective mechanism, there are 3 essentials that no buyer has: time, data, and expertise.
The sixth barrier is something of a bait and switch tactic that some (universally just the big) businesses use when it comes to human rights due diligence, and it's concerning because it is deception. The game afoot is on the one hand, publicly, to call for human rights due diligence laws, arguing persuasively that legislation is necessary to a) keep the playing field level, b) to avoid anyone being a lone first mover, c) for nobody to gain competitive advantage from not complying, and to d) give the CEO ammunition to argue with stakeholders that they have no choice. But then, once a legislative proposal progresses, those same businesses adopt a more private lobbying position to water the draft laws down, or bog them down in committee, to emasculate them. Classic battleground, bogging down issues in this process, as evidenced in the passage of the EU's draft Directive on Corporate Due Diligence, and the German Human Rights Due Diligence Law, include reporting thresholds, penalties, enforcement, geographic scope, and mandatoriness. This game that is played (someone should really come up with a name for it), which often comes to the surface as opposing views between Labour and Trade/Industry Ministries, undermines the effectiveness of the entire process and jeopardises the welfare of everyone in every workplace everywhere. Businesses that publicly call for hard laws but privately lobby against them are not only playing with the lives of people but also putting their own reputation at risk.
All businesses – big and small - need to realise that they have a responsibility towards society, and their actions impact people's lives. The call for hard laws is just an excuse to avoid taking any significant action towards human rights due diligence while being seen to be in favour. By hiding behind the veil of soft laws, businesses can continue to exploit people, wittingly or not.
It's clear that there are significant barriers to effective human rights due diligence in the business world. But we cannot give up. We need to work together to raise awareness about the importance of human rights due diligence, provide practical guidance to businesses, and hold them accountable when they fall short. Identifying, and turning, these 6 keys is the only way we can unlock progress.