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Opinion and Comment

Companies Need Scope for Solution-Finding not Binding Human Rights Due Diligence Obligations

Text: Pierre Gattaz, BusinessEurope

Pierre Gattaz, President of BusinessEurope, recognises the responsibility businesses carry for human rights, but sees the risks associated with a binding EU-wide regulation aimed at creating a mandatory due diligence obligation for companies. Instead, he calls for companies to be supported in their endeavours to find solutions involving all actors.

BIO

Business acknowledges its moral duty and responsibility to respect human rights. Companies work continuously to find solutions to the complex human rights challenges they face by engaging in practical initiatives to implement the UN Guiding Principles on Business and Human Rights (UNGPs) and other standards. Actions include having a clear policy commitment to respect human rights, conducting human rights impact assessments, engaging with stakeholders and affected communities, as well as providing and participating in remediation processes.

The UN’s Guiding Principles on Business and Human Rights must be implemented consistently worldwide

To allow companies to continue to act in a responsible way towards societies and throughout their supply chains, it is essential to clearly distinguish between the state responsibility to protect and the business responsibility to respect. States have to put in place and enforce laws to protect human rights, and companies’ obligation is to comply with these laws. The EU has a role to encourage states around the world to improve legal and judicial systems so that they are able to implement and enforce their international obligations. This is essential in order to create a global level playing field for protection of human rights and to implement the UNGPs in a harmonious way. In this respect, future EU free trade agreements could put more emphasis on the parties promoting, realising and implementing certain international human rights frameworks, including the UNGPs.

„The EU has a role to encourage states around the world to improve legal and judicial systems so that they are able to implement and enforce their international obligations.“

No new binding EU legal requirements

While supporting the objective of protecting and respecting human rights, BusinessEurope does not favour new binding EU regulation on mandatory human rights due diligence. Making human rights due diligence mandatory, especially on a select number of European-based companies, would hamper foreign direct investment by discouraging companies from engag­ing in challenging environments. However well-inten­tioned a due diligence law may be, taking a prescriptive and punitive approach could also have unintended consequences for rights-­holders by dampening crucial investment flows to countries that face systemic development challenges, including conflict and corruption.

Commitments to human rights and labour conditions on voluntary basis

The focus should rather be on encouraging and supporting companies to work with stakeholders in a constructive way to create solutions to promote sustainable development, among other things in the area of voluntarily placing obligations on subcontractors and suppliers in their supply chains regarding human rights and working conditions. This has to be done in a way which does not put excessive burdens on small and medi­um-­sized enterprises (SMEs). BusinessEurope advocates for support and mea­sures which encourage companies to invest in countries, and through their investment contribute to im­provements there, despite complex and systemic issues. Binding human rights due diligence laws may have the opposite effect of companies actually moving out of countries where risks are more acute and no longer sourcing from them due to a fear of being seen as complicit in abuses. Support for and promotion of sectoral, including multi-stakeholder initiatives, is welcomed, as they can help improve conditions on the ground regarding common challenges.

„Support for and promotion of sectoral, including multistakeholder initiatives, is welcomed, as they can help improve conditions on the ground regarding common challenges.“

Compliance with standards can be best achieved through work at international level

Large enterprises operate in complex supply chains, often with thousands of suppliers, and therefore may not be in a position to ask all suppliers or subcontractors to comply with their standards and to monitor this. The international level is the best place to deal with this, where the UNGPs are the appropriate framework for companies to put in place due diligence measures to operationalise their responsibility to respect human rights.

Companies need to have scope for finding solutions

For companies to continue to conduct themselves in a responsible and sustainable way, they need space to devise solutions which fit their size, sector, operating markets, business model and di­verse stakeholder needs. They need to be able to focus where the risk of adverse impacts is highest. Overly prescriptive rules would hamper this flexibility. Whilst overlapping or contradicting legal requirements in different Member States can be burdensome for companies, binding EU-level measures would likely add to this patchwork of rules and, where measures are not taken by other world players, could harm the competitiveness of EU companies. Companies also need better provision of information on the situation locally regarding enforcement (or lack thereof) of human rights and social legislation.

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