This year's UN Forum on Business and Human Rights focused on "effective change in implementing obligations, responsibilities, rights and remedies." In this alert, we highlight some key takeaways for business, drawing on panel discussions between the Forum's range of stakeholders, which included corporate representatives, governments, NGOs, legal practitioners, and rights-holders themselves.
1. The business and human rights legal landscape continues to grow.
There are a number of newly-enacted and proposed business and human rights ("BHR") laws that will create significant obligations for businesses. Various jurisdictions have approached this topic in different ways, but some of the most common legislative regimes include:
- Human rights due diligence laws: The EU's proposed Corporate Sustainability Due Diligence Directive ("CSDDD") was a key topic of conversation during several Forum sessions, including the potential scope of obligations that may be included in the final text and what those obligations will mean for the business community. The CSDDD sits against a patchwork of other human rights and environmental due diligence laws already in force, including Germany's Supply Chain Due Diligence Act and issue-specific laws such as the EU's Deforestation Regulation and Batteries Regulation. Forum sessions also focused on how the CSDDD's final provisions may or may not align with existing legislation.
- Other laws incorporating aspects of human rights due diligence: In addition to laws that focus specifically on human rights due diligence, there are a number of other legal regimes that do not explicitly mandate but effectively require or encourage a range of due diligence measures. These regulatory frameworks are varied and include forced labor import ban laws (particularly existing regimes in the U.S. and that proposed in the EU) and sustainability disclosure laws, such as the EU's Corporate Sustainability Reporting Directive ("CSRD") and accompanying European Sustainability Reporting Standards ("ESRS"). Speakers also discussed whether the EU’s incoming Artificial Intelligence ("AI") Act (final text not yet available) might effectively mandate certain forms of human rights due diligence related to the downstream impacts of AI.
You can read more about some of these laws in our previous alerts here, here, and here.
It appears likely that there will continue to be a proliferation of BHR laws in the coming years.
The potential legally binding instrument on BHR ("LBI") is still under negotiation and hotly contested. It was noted that despite a slight increase in participation by states in the recent ninth session of negotiations (from 66 UN Member State participants in 2022 to 76 UN Member States this year), progress in finalizing the LBI remains slow. There are still critical issues under negotiation, including the level of detail that should be included in the text, how best to draw from and align with the UN Guiding Principles on Business and Human Rights ("UNGPs"), and which companies would be in scope (indirectly). It is possible that the final text of the CSDDD may also influence the shape of the LBI.
2. Businesses are navigating variations between emerging legal regimes and international BHR principles.
Businesses have traditionally sought to align their approach to human rights due diligence with the UNGPs and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct ("OECD Guidelines"). Now, faced with forthcoming obligations under different laws, many businesses are facing implementation challenges related to variations in key definitions and other human rights due diligence concepts. For example, various laws and international principles diverge in their definitions of key terms (such as "supply chain") and other mandatory reporting criteria. Further, while some laws allow businesses to take a "risk-based" approach to addressing adverse human rights and environmental impacts, other laws prescribe detailed diligence steps with respect to prescribed products and/or regions, requiring businesses to focus efforts on such products/regions, even if they do not present higher levels of risk for the business. Finally, as companies seek to assess and address human rights impacts, there are challenges with defining "social impact," including in the context of setting key performance indicators and assessing the effectiveness of due diligence measures.
3. The ties between human rights and environmental impacts are central to the dialogue on due diligence.
Increasingly, there is a focus in regulatory and policy developments on the intersection between human rights and environmental impacts, including in the following contexts:
- The recent update to the OECD Guidelines provided further clarity around the concept of environmental due diligence in addition to updates on sections relating to human rights due diligence. These updates have come at a critical time, as businesses grapple with emerging legal expectations around implementing "environmental and human rights" or "sustainability" due diligence under regimes such as the CSRD and proposed CSDDD.
- Various laws require businesses to consider the social impacts of ensuring a just transition, such as in the extraction of raw materials that are necessary to manufacture sustainable technologies (e.g. those used in the renewable energy and electric vehicle sectors). For example, the CSRD may (depending on the outcome of materiality assessments) require reporting on the social impact of a company's planning for a just transition. Further, for strategic projects to receive support under the EU's Critical Raw Materials Act, projects would need to be implemented sustainably, including through the use of socially responsible practices that respect human and labor rights.
- As negotiations for a legally binding instrument on plastic pollution continue (see the 2023 draft text), Forum participants discussed the need for the treaty to be rights-respecting and aligned with the UNGPs, particularly with respect to vulnerable groups, such as indigenous communities, coastal communities, women, and children.
- There is also growing recognition of the concept of "environmental racism," whereby racism may deepen susceptibility to environmental and climate change harms, while also reducing protection against those harms. In a 2021 UN report published by the Working Group of Experts on People of African Descent, environmental racism was found to be a product of structural racism, exploitative economic models, and the legacy of the slave trade. Panelists emphasized that businesses can play a key role in recognizing and addressing these risks.
4. Businesses are seeking guidance on some of the new and challenging frontiers of human rights due diligence.
For years, there has been a focus by regulators and businesses on human rights due diligence with respect to supply chains. Conversations at the Forum this year demonstrated increased maturity in expectations with respect to human rights due diligence in some other challenging contexts.
The most recent version of the OECD Guidelines builds out guidance on due diligence of "downstream" impacts, generally understood to be impacts arising once a product or service "leaves" a company. The OECD Guidelines suggest that risk-based due diligence should take into account "known or reasonably foreseeable" circumstances related to the use (or reasonably foreseeable misuse) of a product or service. Specifically in the context of AI, building on the launch (earlier this year) of the UN B-Tech's Generative AI Project, panelists highlighted the importance of governments embedding human rights and leveraging the UNGPs in regulatory frameworks in order to drive rights-respecting AI regulation and policy coherence.
Another important discussion centered on human rights due diligence expectations in challenging operating contexts, including in situations of armed conflict. Drawing from guidance recently published by the Office of the United Nations High Commissioner for Human Rights ("OHCHR") participants addressed the need for businesses to perform heightened due diligence in situations of heightened human rights risk. This can include assessing the impacts of disengagement (or not) from challenging environments.
5. In the years to come, key BHR stakeholders are likely to be focused on the efficacy of emerging legal frameworks.
In the spirit of the theme of this year's Forum, a key takeaway was the need for all stakeholders to continue to assess the efficacy of different BHR legal frameworks. We are seeing the beginnings of this kind of scrutiny, for example with the Modern Slavery Policy & Evidence Centre's study on forced labor import ban regimes, and will likely see an increased focus on efficacy as laws begin or continue to be implemented. Various dialogues also recognized the need to monitor implementation for any "unintended consequences." For example, there is a concern that compliance burdens of complex due diligence regimes could ultimately push upstream actors (e.g., smallholder farmers) out of the market.
In conclusion, as highlighted throughout the Forum, BHR continues to be a fast evolving and increasingly legal issue for businesses across jurisdictions and sectors. If you have any questions concerning the material covered in this client alert, please contact a member of Covington's BHR practice.
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