Corporate due diligence expectations: A reason for optimism

Updated: 21 hours ago

Today is Human Rights Day 2021. Gabriel Webber Ziero, Head of Regulatory Advisory at ECOFACT takes a moment to reflect on human rights and corporate responsibility.



Every December 10th, the day the Universal Declaration of Human Rights was adopted, we reflect on the achievements made in the field of human rights as well as on the challenges still faced.


One element that has evolved since 2011 when the UN Guiding Principles on Business and Human Rights (UNGPs) were adopted, is that corporate actors are increasingly expected to ensure that rights are respected throughout their operations. Due diligence is a key instrument available to corporate actors that look to fulfill these responsibilities.



Stakeholder engagement

How due diligence emerged as a cornerstone of corporate responsibility is an interesting example of what can materialize when multiple stakeholders work together. Initially proposed by corporate actors before the UNGPs were adopted, due diligence has been embraced by civil society actors, which use the concept to inform and frame what they expect from companies.


In addition, governments and regulators have been looking to make mandatory human rights due diligence an obligation that companies must fulfill. In terms of due diligence regulation, 2021 has been a defining year that will serve as a foundation and inspiration for the years to come.


Corporate due diligence in 2021

Throughout 2021, we witnessed mandatory human rights due diligence obligations develop and then become applicable. For example, on January 1, 2021, key provisions of the EU Regulation on Supply Chain Due Diligence Obligations for Union Importers of Conflict Minerals started to apply, and countries like Japan and Mexico have started processes that will potentially lead to mandatory human rights due diligence laws. Moreover, laws have been adopted in Norway, Germany, and Switzerland that include due diligence obligations to be observed soon.

The reach of these laws and others being developed goes way beyond jurisdictional boundaries of the countries that implement them — the laws directly target the global value chains of companies’ operations. Considering this, it is not unreasonable to claim that human rights due diligence obligations are becoming a reality across the globe either via the direct actions of regulators or by these expectations being included in contractual obligations.


A reason for optimism

However, history demonstrates that legal obligations do not automatically lead to effective compliance. The 1930 ILO Forced Labour Convention is a striking example of this phenomenon; more than 90 years after the convention’s adoption, the scourge of modern slavery still plagues humanity. Enshrining human rights due diligence in law is only one step in a long and winding road toward making the world fairer and just for right holders. It is the effectiveness of the measures that is the compass to gauge success, not the mere existence of a law.


There is reason for optimism though. Evaluating the efficacy of due diligence processes is a key feature of laws recently adopted in several countries. For companies that aim to comply with these evolving obligations, two things should be front-of-mind: placing the rights of impacted stakeholders at the center of due diligence efforts, particularly when designing compliance strategies, and engaging with stakeholders in an active and adequate manner. Doing so will improve companies’ ability to effectively meet mandatory human rights due diligence expectations.


Dr. Gabriel Webber Ziero, LL.M.

Head of Regulatory Advisory at ECOFACT.

 

Gabriel is responsible for helping clients prepare and implement compliance strategies that address sustainable finance regulations, for example the EU Sustainability Taxonomy Regulation, as well as the mandatory due diligence obligations like those deriving from the German Act on Corporate Due Diligence in Supply Chains. He also leads the team that delivers ECOFACT’s Policy Outlook. Moreover, Gabriel has been a key player in drafting OECD due diligence guidance documents that focus on the financial sector and are frequently referenced by regulators.


Gabriel is licensed to practice as a lawyer in Brazil and holds a doctorate in International and European Law from Roma Tre University (Italy), as well as an LL.M. from Leiden University (Netherlands). He is a lecturer at the Certificate of Advanced Studies in Sustainable Finance program of the University of Zurich. Gabriel has also published the book “Business, Compliance and Human Rights Law: The Effectiveness of Transnational Private Regulations for Vulnerable Stakeholders”.


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