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17 May 2023

RMIT University Business and Human Rights Centre; TraffLab ERC; and Labour, Equality and Human Rights (LEAH) research group, Monash Business School

Report analyses risks and opportunities of mandatory human rights due diligence laws for workers & argues worker engagement should be mandated and enforceable

"Mandatory Human Rights Due Diligence: Risks and Opportunities for Workers and Unions"

[...] Campaigns for mHRDD laws are bearing fruit in the Economic North. Human rights due diligence (HRDD) laws are now found in a number of OECD countries and are being debated in others. The EU has also released a proposed Corporate Sustainability Due Diligence Directive. While all these initiatives and proposed initiatives draw on the concept of HRDD found in the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines), they differ significantly in their scope, application and the obligations they impose on businesses.

This report considers these developments from the perspective of the risks and opportunities for workers and unions. It has two key aims. The first is to express concern over the current trajectory of HRDD legislation and its capacity to effect meaningful change for workers and trade unions. We recognise there are strategic reasons for supporting HRDD: it has momentum and currently may be the most viable ‘win’ from a legislative perspective. We also acknowledge that the concept is leading to important normative shifts and has the potential to be a positive development for workers’ rights. However, there is little evidence to suggest that HRDD laws, as currently conceived and popularised in OECD countries, are delivering real and tangible improvements for labour. In this report, we identify trends with respect to the design and implementation of HRDD legislation that, we argue, may serve to undermine rather than consolidate efforts to promote workers’ rights and interests in the global economy.

The second key aim of this report is to offer guidance on how HRDD could be legislated in such a way as to drive meaningful change for workers in transnational supply chains. This guidance is informed by experiences with national labour regulation across multiple jurisdictions, as well as with worker-driven approaches to transnational labour regulation that position workers as active agents of change rather than passive recipients of corporate benevolence. We caution against an exclusive focus on mHRDD legislation at the expense of alternative approaches. This report briefly discusses these alternative approaches and argues that HRDD laws should take into account, and be designed to complement, these alternative mechanisms that have been shown to be effective in improving the conditions of vulnerable workers in transnational supply chains.

The recommendations offered in this report are informed by five key principles.

First, the scope of HRDD laws should be consistent with the UNGPs and OECD Guidelines. This includes with respect to the companies to which they apply; the rights they cover; and the reach of the due diligence requirements.

Secondly, HRDD laws should secure greater transparency and traceability of corporate supply chains by requiring companies to trace their supply chains and make this information available publicly.

Thirdly, worker engagement in HRDD should be mandated and enforceable. Simply exhorting companies to engage in ‘meaningful consultation’ with stakeholders is inadequate. Inspiration should be taken from national labour law frameworks, and worker and trade union consultation should be included in HRDD laws as an enforceable right. The establishment of appropriate institutional structures to facilitate this engagement should be required by law. Such institutional structures should empower legitimate worker representatives throughout the supply chain and support multi-level collective bargaining.

Fourthly, HRDD laws should impose positive and non-delegable duties on entities to respect human rights. While current HRDD laws place HRDD at the forefront of efforts to combat human rights breaches, we insist on the original positioning of HRDD as a subsidiary operationalising principle to the basic corporate responsibility to respect human rights. Companies should be held to account for the extent to which they achieved this outcome. Failure to discharge the corporate responsibility to respect human rights should, in certain circumstances, give rise to civil liability. The report recommends a range of ways mHRDD laws should make claims less costly and more accessible for workers, and result in change in business behaviour as well as compensation.

Finally, the imposition of HRDD obligations must be accompanied by robust monitoring and enforcement mechanisms. The absence of accessible and effective state-based oversight and supervisory mechanisms has been a key driver of poor outcomes of HRDD laws to date. Supervisory authorities must be independent, properly funded, and authorised to conduct investigations. They should also be empowered to impose a range of sanctions on companies found to be non-compliant with HRDD laws, including for example, administrative penalties and exclusion from public procurement opportunities. Cross-border human rights breaches are especially complex, requiring high level expertise and sensitivity. Supervisory bodies must be structured and empowered to access expertise in labour-related problems. [...]