What is mandatory human rights due diligence, and how could it make fashion more ethical?
Increasingly, governments around the world are moving to require corporations and businesses to take responsibility for the impacts they have in their supply chains by conducting what’s known as human rights due diligence. The European Union is considering requiring all large companies operating within its borders to conduct due diligence regarding their human and environmental impacts, and New York State is considering a law that would require large fashion companies to report on any due diligence policies they might have. But human rights due diligence is a mouthful. It’s not an easy-to-grasp concept nor is it widely understood by the public. This article aims to break it down and explain what due diligence requires companies to do, as well as delve into due diligence laws’ potential for lessening the impacts of the fashion industry.
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What is mandatory human rights due diligence (mHRDD)?
Human rights due diligence describes a process that companies undertake to understand, resolve and be accountable for any negative human rights impacts they cause, contribute to or are linked to throughout their entire operations, including their supply chains. The concept of human rights due diligence was established in 2011 by the UN Guiding Principles on Business and Human Rights (UNGPs), which acknowledged on a global stage that all business enterprises have a responsibility to respect human rights. While this process was voluntary at first, increasingly human rights due diligence is being mandated by governments, starting in some European nations.
Why is human rights due diligence an important development for fashion?
For decades, fashion brands were able to source clothing using long, opaque supply chains and factories they did not own without accountability. Any promises brands make to improve standards for factory workers or environments in supplier communities have been voluntary, and as a result, working conditions and the planet have suffered greatly. Mandatory human rights due diligence is part of a shift in thinking and approach in corporate governance, acknowledging that companies often cause and contribute to human rights harms all along their supply chain and they have an obligation to avoid these harms.
For example, in 2013, the Rana Plaza factory collapse in Bangladesh caused 1,132 people to lose their lives and thousands more to be injured. Despite the fact that many well-known brands operated in the factory, including JCPenney, Walmart and Joe Fresh, these companies were not legally responsible for what happened. If an effective mandatory human rights due diligence law had been in place at that time and applied to fashion companies, many experts believe this could have prevented the Rana Plaza accident from occurring, or at the very least, would have mandated that brands participate in remediation for survivors and victims’ families.
Increasingly, civil liability is considered a key mechanism to getting companies to comply with due diligence laws and incentivizing them to take action to avoid and mitigate harming people and the environments in their supply chain.
What are human rights and what rights are companies required to protect under mHRDD?
Fundamental human rights, as outlined in the United Nations Declaration on Human Rights, include a wide range of fundamental freedoms that all humans are entitled to, including freedom from forced labor, child labor and discrimination, freedom from environmental destruction and extreme degredation of the environment, protections for freedom to unionize, and freedom to have an adequate standard of living and social security, among others. However, due diligence laws vary in which rights and impacts companies are responsible for. For example, Germany’s Act on Corporate Due Diligence in Supply Chains, which goes into effect in 2023, requires that companies meet a living wage in their supply chain and avoid dangerous chemicals defined as highly hazardous by the Stockholm Convention. While other laws have a narrow scope, like the Netherland’s Child Labor Due Diligence Act, which covers just one human rights issue, albeit a very important one.
What makes due diligence mandatory? Can’t companies just commit to respect human rights on their own without new laws?
Human rights due diligence becomes mandatory when countries and regions require businesses by law to identify human rights or environmental risks throughout their operations and effectively prevent those risks from occurring.
HRDD laws vary in strength, with earlier bills only requiring companies to identify and disclose their environmental and human rights risks and policies to address these impacts. The turn towards mandatory laws started in 2017 with France’s Duty of Vigilance Law. The most progressive mHRDD laws allow for those harmed to sue for damages when a company fails to prevent or contribute to human rights or environmental harms, which France’s 2017 Duty of
Vigilance Law mandates for and remediation for victims is also includes in the EU’s proposed draft directive on due diligence.
As to why this is necessary for due diligence to be mandated: Multinational companies, including fashion brands, have been able to self-police their environmental and social impacts in other countries and throughout their supply chains for decades through voluntary initiatives. This approach has mostly failed. Voluntary measures by companies are not enough to prevent and remedy human rights violations and environmental harms.
Can you give some concrete examples of how mHRDD works?
Some of the most basic elements of mandatory human rights due diligence are considered to include the company committing to researching and knowing what the human rights risks are in the countries they operate within, as well as mapping their supply chain and developing a plan of action to mitigate those harms. Identifying human rights risks might include, for example, forced labor in cotton farms in Xinjiang, China, water pollution in leather factories in Bangladesh, child labor in India, sexual harassment in certain regions, and so on. However, as mHRDD is new regulatory terrain, how companies adopt these policies and put them into practice is evolving alongside the passage of mHRDD laws globally.
Why is liability for harms caused by an important part of mHRDD?
The earliest due diligence laws to pass did not include liability on companies for their human rights harms. Increasingly, civil liability is considered a key mechanism to getting companies to comply with due diligence laws and incentivizing them to take action to avoid and mitigate harming people and the environments in their supply chain. In France, there are five legal proceedings that are pending against corporations, using their Duty of Vigilance law, which includes civil liability on corporations. Two are against oil company Total for both failing to reduce its carbon footprint and for failing to comply with the law on oil and gas extraction in Uganda and Tanzania. Another lawsuit against energy company EDF is over land grabs of indigenous peoples in Mexico. The final is against a supermarket chain Casino for its links to illegal deforestation in the Amazon. However, because of ambiguities in the language of the French law, it’s unclear at the moment if the plaintiffs will win their case.
…although some bills have attempted to legislate some form of mHRDD, no mHRDD laws currently exist in the U.S.
What nations, regions and states have adopted mandatory human rights due diligence laws (mHRDD) or are considering it?
There are an increasing number of countries and regions introducing laws to require businesses to conduct human rights due diligence and some extending the requirement to environmental protections. France, Norway, and Germany, and the Netherlands have already passed legislation that requires companies to conduct mHRDD in some form. Of these existing laws, France’s Duty of Vigilance Law is the only one in force to date. Germany due diligence law will go into force in 2023. The European Union has also drafted mHRDD legislation that, when passed, will be significant as it will apply to large companies operating in the EU. New York State is also considering a bill, The New York Fashion Act, that applies exclusively to large fashion brands and that would require companies to have a human rights due diligence policy.
Here is a handy chart of all of the mHRDD laws that have already passed and how they compare.
What about the United States?
New York State is the first jurisdiction in the US to consider a law, The Fashion Sustainability and Social Accountability Act (The Fashion Act), that includes elements of human rights due diligence. But there is a wider debate in the US as to whether to follow Europe in mandating corporate due diligence versus pursuing laws that more directly hold corporations liable for the harms they cause. The United States has taken action towards curbing labor abuses in global supply chains, such as the Uyghur Forced Labor Prevention Act, and by leveraging tools, such as Withhold Release Orders, for products made with forced labor. A recent law passed in California, the Garment Workers Protection Act (in effect January 2022), also establishes third-party liability by making brands partially liable for wage theft that occurs throughout their California supply chain, even when they do not have direct ownership in the company. However, although some bills have attempted to legislate some form of mHRDD, no mHRDD laws currently exist in the U.S.
Does mHRDD only apply to the fashion industry?
No, but it depends on the law in each existing country. All existing mandatory human rights due diligence laws apply to all companies of a certain size (measured by either the number of employees or a specified threshold of annual turnover) in all sectors.
For many labor activists, mHRDD reflects one possible path forward towards increasing corporate accountability. Others feel that due diligence laws are too vague, leave too much to interpretation, and focus too much on the process instead of the negative impacts that companies have.
What fashion brands are in support of mHRDD laws?
Currently, fashion giants Adidas, Nike, ASOS, H&M, and Primark have all expressed support for mHRDD in Europe. You can find the most recent list of large business supporters (>1 bn € turnover) here.
Is mHRDD really enough to protect workers in fashion supply chains?
While many people believe that mHRDD seems promising, we don’t yet know whether or not it will be effective. MHRDD is a new concept in the legal field and only one country, France, has a due diligence law in effect, the impact of which is unclear. For many labor activists, mHRDD reflects one possible path forward towards increasing corporate accountability. Others feel that due diligence laws are too vague, leave too much to interpretation, and focus too much on the process instead of the negative impacts that companies have. There is also a concern that mHRDD laws could end up shifting obligations such as social welfare benefits that should be left up to the government (a democratically elected institution) to the company. Though it seems likely that mHRDD could be effective on paper, the specific language of each law, as well as the implementation of it, will impact how effective it is in practice. In short, it remains to be seen what kind of impact mHRDD laws will have.
GLOSSARY
mHRDD = mandatory human rights due diligence
mHREDD = mandatory human rights and environmental due diligence
Human rights = Human rights, as outlined by the United Nations, are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. They include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, the right to work and education, and more
ADDITIONAL RESOURCES AND READING
- Debating corporate due diligence: A reality check
- European Coalition for Corporate Justice – 11/21/2020
- Mandatory Human Rights Due Diligence in the EU: The Promise and the Risk
- Business & Human Rights Resource Centre – 11/24/2020
- Lawmakers push for European due diligence law on environmental, human rights
- Reuters – 1/27/2021
- Recommendations For New EU Legislation on Mandatory Human Rights and Environmental Due Diligence
- HRW.org – 6/24/2020
- Business and Human Rights: Mandatory human rights due diligence – European Commission to introduce a legislative initiative by 2021
- Mayor Brown 5/19/2020
- EU Mandatory Human Rights Due Diligence Legislation to Be Proposed in Early 2021
- Ropes & Gray – 5/26/2020
- EU Set To Introduce Mandatory Environmental And Human Rights Due Diligence Law
- JDSUPRA 3/24/2021
- UN Business and Human Rights Forum, Day 2: What’s New in Mandatory Human Rights ’Due Diligence’ Law?
- Sustainable Brands 11/17/2020
- European Union: The EU’s Proposed Mandatory Human Rights Due Diligence Law – What You Need To Know
- Mondaq 2/12/2021
- Why we need mandatory due diligence in supply chains for human rights, the environment and preventing corruption
- Voices.Transparency.org 4/23/2020
- EU Mandatory Environmental and Human Rights Due Diligence Law – What You Need To Know
- Bracewell 3/15/2021
- Pressure mounts on EU regulator to deliver on Mandatory Human Rights, Environmental and Governance Due Diligence
- JDSurpa 3/22/2021
- Rise of Environmental, Social, and Governance Due Diligence in Europe
- Sidley.com 02/2021
- Towards a mandatory EU system of due diligence for supply chains Briefing
- Corporate Social Responsibility & Responsible Business Conduct
- “Human Rights Due Diligence Legislation in Europe – Implications for Supply Chains to India and South Asia”
- Dr Daniel Sharma and Franz D. Kaps | DLA Piper
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