We are witnessing a regulatory avalanche relating to businesses’ respect for human rights. This update will keep you advised of initiatives of relevance for your business. We are also relentlessly chasing new tools for businesses to effectively address potential harm to people and environment. In the end, what protects people is also what best protects business.
“Sustainable Corporate Governance” should not require expanded regulation of directors’ duties The EU Commission has announced it will propose a “Sustainable Corporate Governance” regulation this year (consultation ending on 8 February). While there is broad support for mandatory human rights and environmental due diligence, there is less appetite for ideas around expanding directors’ duties. In fact, changing directors’ duties may not be necessary for the EU Commission to achieve its aim: that companies avoid harm to people and the environment in their own operations and throughout their value chains. The UN Guiding Principles on Business and Human Rights (UNGPs) were created to function within existing corporate governance regulations. And - effective due diligence will in any case require directors to apply their mandate in profoundly new ways. Professor John Ruggie eloquently explains this in his response to the EU consultation. The Swedish Government also suggests rethinking regulation of directors’ duties while moving ahead with an ambitious due diligence regulation.
Will the EU block the import of goods made by forced labourers? In its Trade Policy Review published 18 February, the EU Commission confirms the EU’s determination to address the world’s sustainability challenges – and to actively use trade policies and tools to this end. There are several substantive aspects to this. For the purpose of this Update, we note that the EU Commission refers to its proposal on sustainable corporate governance as one measure to ensure sustainable supply chains of EU-based companies. The EU Commission also suggests it may use import regulations to ensure that products entering the single market “comply with relevant EU regulation and standards.” Is this a hint that the EU is contemplating to follow the US and ban goods produced under duress outside the EU? Such an import ban would require companies who want their products to enter the single market to effectively identify and address indicators of forced labour – i.e. having an effective due diligence in place; and be prepared to remedy identified impacts.
How to effectively remedy worker paid recruitment fees Remediating forced labour often involves repayment of worker paid recruitment fees. Those who have attempted to, know that in practical terms it is a complex and challenging exercise. Helpfully, Impactt has provided us with a useful repayment standard. The standard is based on Impactt’s experience from working with partners to facilitate repayment of over USD 106 million in recruitment costs to over 70 000 migrant workers employed by 209 companies. It has been subject to extensive consultation with more than 60 stakeholders from government, international organisations, business, trade unions and civil society, including Malin Helgesen, Specialist Counsel on Business and Human Rights at Mannheimer Swartling. She has experience from working with Impactt in successfully accomplishing repayment to impacted workers. We can only say Impactt’s method has been very helpful.
If you have questions or want to discuss any of these issues, you can always reach out to your existing contacts at the firm. You are also welcome to contact the members of our Corporate Sustainability and Risk Management team, some of whom are listed at the bottom of this page.
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