"We support companies to embed human rights and environmental due diligence"

OVERVIEW

A management system for human rights and the environment

Human rights due diligence (HRDD) is a management system that allows companies to proactively assess their human rights risks and impacts and take appropriate measures to address them. Rooted in the UN Guiding Principles on Business and Human Rights (UNGPs), HRDD aims to avoid and manage negative impacts on human rights associated with a company’s operations and business relationships. This concept is increasingly being expanded to include environmental considerations and is now often referred to as human rights and environmental due diligence (HREDD). This broader approach reflects the growing recognition of environmental impacts on human rights. Legal frameworks, such as the EU Corporate Sustainability Due Diligence Directive (CSDDD), require companies to implement HREDD.

International Standards: UN Guiding Principles and OECD Guidelines

The world is changing rapidly, creating new opportunities but also challenges for companies. Globalization, increased transparency of supply chains, digitalization, changing consumer and investor expectations, war for talents and other developments are impacting future business success.  

In 2011, the United Nations adopted the United Nations Guiding Principles on Business and Human Rights (UNGPs) to guide companies in this changing landscape. They have since become the internationally recognized framework providing a blueprint for concrete steps businesses should take to respect human rights and the environment (human rights and environmental due diligence). Many national action plans (NAPs) on business and human rights, legal frameworks (e.g. EU Corporate Sustainability Due Diligence Directive (CSDDD), Swiss Counter-Proposal to the Responsible Business Initiative, German Supply Chain Due Diligence Act (LkSG), UK Modern Slavery Act), international standards and initiatives (e.g. OECD Guidelines for Multinational Enterprises and UN Global Compact) now refer to the UNGPs.

The UNGPs apply to all companies, regardless of their size, industry or risk level. They encompass all international human rights and cover a company’s own operations, whole value chain and all business relationships. They do not expect companies to fully control and avoid every single one of their adverse impacts. Instead, they expect companies to prevent adverse impacts on human rights and the environment wherever possible, and address and remediate the impacts that have occurred.

Your questions

From our experience working within companies, we are familiar with the types of questions that arise when human rights and environmental due diligence comes onto the agenda. To read our answers, click on the questions below:

Chief Financial Officer

“How can I get started?”

Benefits of a systematic approach to due diligence

Implementing due diligence as outlined in the UNGPs allows companies to take a systematic approach to human rights and environmental management. This contributes to generating a higher and more sustainable added value for businesses in various ways: 

  • It leads to compliance with existing and upcoming due diligence laws  

  • It is part of operational risk management, as costly legal disputes, remediation action and reputational harm are identified and prevented  

  • It builds trust with key stakeholders, including business partners, clients, and investors who increasingly expect companies to respect human rights  and the environment

  • It improves the reputation which has a positive influence on brand value, employee satisfaction and retention 

  • It increases the likelihood to win public tenders that take into account responsible business conduct or human rights and environmental due diligence 

  • It leads to higher scores in ESG ratings or sustainability benchmarks, which in turn improves the company’s reputation and access to capital 

  • It allows for a strategic approach to manage and improve the social dimension of ESG 

  • Credible contents for the development of a convincing sustainability report

IMPLEMENTING DUE DILIGENCE

To ensure respect for human rights and the environment, companies should implement a management system with processes and policies in place that enable them to proactively identify and address adverse human rights impacts. According to international standards, like the UN Guiding Principles on Business and Human Rights (UNGPs), corporate management systems are guided by a policy commitment which demonstrates a company’s willingness to respect human rights and the environment and describes how it intends to do so. The implementation of due diligence processes allows companies to identify and address adverse impacts, embed human rights and environmental considerations in the organization, track progress and report on performance. Management systems should also ensure companies’ participation and collaboration in remediation processes, including operational-level grievance mechanisms. 

At focusright, we have created a practical guide to support companies in the implementation of pragmatic and effective due diligence processes in line with international standards.

Policy Commitment

Commitment of the company to respect human rights and the environment

The Policy Commitment lays out the basis of a company’s human rights and environmental due diligence (HREDD). The UN Guiding Principles’ requirements for the commitment include (UNGP Nr. 16):

  • Type: Standalone HREDD policy or integrated into other company policies and Codes of Conduct 

  • Adoption: Adopted at the most senior management level 

  • Dissemination: Effectively communicated internally and externally to all relevant stakeholders along the entire value chain  

  • Scope: Cover the whole value chain (upstream and downstream, as well as the company itself) 

  • Content: Specify the company’s HREDD expectations of staff, business partners and other relevant stakeholders; refer to relevant international human rights and environmental standards; commit to pay specific attention to and consult particularly vulnerable groups of people; assign clear responsibilities; commit to establish a HREDD framework  

  • Implementation: Commitment should be reflected in all relevant operational policies and procedures throughout the company  

 

Human Rights Risk & Impact Assessment

Identification of risks and adverse impacts on human rights

According to the UN Guiding Principles, companies need to “identify and assess any actual or potential adverse human rights impacts with which they may be involved either through their own activities or as a result of their business relationships.” (UNGP Nr. 18). The identification of risks and adverse impacts needs to: 

  • Identify and prioritize those areas where the risk for an adverse human rights impact is greatest (salient issues) 

  • Cover all internationally recognized human rights along the whole value chain 

  • Consider all possibly affected people 

  • Draw on relevant internal and external human rights expertise 

Salient issues are those human rights at risk of the most severe negative impact through the company’s activities and business relationships. To identify salient issues, focus must be put on risk to people, not the business. The severity of an impact (UNGP Nr. 24) depends on its: 

  • Scale: gravity of the negative impact on a human right 

  • Scope: number of people affected 

  • Remediability: ease with which the enjoyment of rights of the impacted people could be restored to the prior situation  

Cease, Prevent or Mitigate Impacts

HREDD action plan: implement measures to address the identified risks and impacts 

Once the adverse risks and impacts have been identified, companies need to allocate responsibility and resources necessary for implementing the measures to the appropriate level and function. Potential adverse impacts need to be prevented and mitigated; actual impacts that have already happened need to be remediated (UNGP Nr. 19).  If needed, actions can be prioritized according to the severity and likelihood of the identified human rights or environmental impact.

The appropriate action (how) to address an adverse impact depends on how closely the company’s operations are related to the impact, as well as on how much leverage the company has in addressing it. Leverage refers to the company’s ability to effect change in the practices of an actor that is causing a harm. A company can be related to an adverse impact in three ways. It can: 

  • Cause an impact directly through its own operations  

  • Contribute to an impact together with other actors 

  • Be linked to an impact through its business relationships 

 

Embed Respect for Human Rights and the Environment

Integration of human rights and environmental aspects in existing processes and practices

To ensure coherence between the company’s responsibility to respect human rights and the environment and the different policies that direct its operations, companies need to review existing policies and processes and embed human rights and environmental considerations in them (UNGP Nr. 16). Furthermore, they should set up a governance system to ensure integration and get buy-in of relevant functions.  

Process-oriented measures to embed human rights and the environment in the management system include e.g.: 

Success factors:

  • Assign clear roles and responsibilities for implementing HREDD 

  • Adapt processes, collaborate with process owners 

  • Get buy-in of the relevant functions 

  • Define a roadmap with goals and actions 

  • Foster understanding of issues related to human rights or the environment

Existing policies and processes:

  • Internal Audit 

  • Human Resources 

  • Recruitment 

  • Staff’s financial or performance incentives 

  • Procurement processes 

  • Lobbying practices  

Track & Communicate Progress

Monitoring the effectiveness of measures and reporting on HREDD performance

Companies need to track the effectiveness of the responses to make sure the adverse human rights and environmental impacts are being effectively addressed by the measures taken (UNGP Nr. 20).  Regular monitoring should include: 

  • Definition of appropriate qualitative and quantitative indicators to track progress 

  • Consultation of internal and external sources for feedback on the measures taken, including the people affected by the adverse impact 

  • Consideration of particularly vulnerable or marginalised stakeholders 

  • Integration of monitoring in the relevant internal and external evaluation processes (e.g. staff surveys, audits, supplier visits) 

Companies also need to communicate externally about their findings and actions taken to increase transparency and ensure accountability for their HREDD management processes (UNGP Nr. 21), e.g. in the form of a human rights or sustainability report: 

  • The communication should take place in a form and frequency that reflects the identified impacts and is appropriate for the different audiences.  

  • The information provided should be sufficient to evaluate whether the measures taken adequately address the identified impacts and ensure confidentiality to protect the sources of information from retaliation whenever needed. 

Grievance & Remedy

Ensuring access to grievance mechanisms and remediation for affected people

Where an adverse impact has been identified, the company should provide for or cooperate in its remediation through legitimate processes (UNGP Nr. 22). This means that the company should provide remedy to individuals or communities who have been harmed.  

Types of remedies include apologies, restitution, rehabilitation, financial or non-financial compensation and punitive sanctions (criminal or administrative, such as fines), as well as the prevention of harm e.g. through guarantees of non-repetition. 

Operational-level grievance mechanisms (UNGP Nr. 29) are communication channels offered or facilitated by the company, which allow stakeholders to raise concerns or provide feedback about adverse human rights or environmental impacts caused by its activities. They can be an effective way for companies to directly receive complaints from affected stakeholders and facilitate remediation. 

Grievance mechanisms can take a variety of forms but should fulfil the effectiveness criteria outlined in UNGP Nr. 31, which require them to be:

  1. Legitimate

  2. Accessible

  3. Predictable

  4. Equitable

  5. Transparent

  6. Rights-compatible

  7. A source of continuous learning  

  8. Based on dialogue and engagement  

GETTING STARTED

Assign responsibility and build expertise 

To start implementing human rights and environmental due diligence in your company, assign responsibility to a member of staff who will take the lead in the management processes. Allocate the appropriate resources and take the necessary steps to strengthen internal know-how and make use of external expertise wherever necessary.  

How to get human rights and environmental due diligence started

Evaluate the current implementation status of due diligence by conducting a gap analysis

Many companies have already taken various measures and processes in connection with human rights and environmental due diligence, for example in occupational health and safety or the prevention of discrimination or child labour. A good starting point for the due diligence process is therefore to conduct a gap analysis to evaluate the extent to which a company already meets international standards and legal requirements for human rights and environmental due diligence and to build on existing processes.

Map your operations, value chain and business relationships 

Developing a mapping of your company’s own operations, value chain and business relationship is the basis for identifying its potential and actual adverse impacts. Starting to work on the mapping also allows you to identify the information currently available to the company, as well as the additional information needed.

Based on the gap analysis and the mapping, the most relevant measures can be identified and an effective action plan to implement a human rights and environmental due diligence can be developed. focusright has developed tools to assist and support companies with our expertise and practical experience.