Addressing human rights in business

Failure to address human rights issues undermines company reputation, purpose and values. This can also lead to regulatory sanctions, investor divestment, negative publicity and financial and reputational damage.

Regulators are ramping up their efforts to develop new laws to fight against anti-human rights practices such as: human trafficking; forced labor, child labor and other slavery-like practices; unsafe or unhealthy working conditions; displacement of local communities; discrimination by race, age, gender, sexuality and other protected attributes; and underpayment for labor or services provided.

On 23 February 2022, the EU approved a mandatory due diligence legislation following the Directive on Corporate Sustainability Due Diligence (CSDD). Consequently, companies^[1] are required to identify and, where necessary, prevent and/or mitigate potential compliance breaches of human rights across their value chain, including third parties such as suppliers, business partners, etc. The adoption of the proposal for the Directive is a strong signal to European-based companies to embed sustainability in their organization. In the first instance, the proposal will be referred to the European Parliament and Counsel for approval in due course in the coming months. Once adopted, Belgium will have two years to transpose the Directive into national law. However, considering the potential reputational damages, companies, whether in scope or not, have started taking concrete steps towards adopting anti-human rights violation measures and policies.

Additionally, human rights are considered a fundamental business responsibility today under the 2011 UN Guiding Principles on Business and Human Rights (UNGPs)^[2]. For Belgium, these Guiding Principles form one of the fundamental pillars of human rights protection in the context of corporate social responsibility (CSR).

Belgium adopted its first National Action Plan (NAP) – Business and Human Rights^[3] – in July 2017. In the context of the NAP, various resources were developed to provide additional explanations on how human rights can be integrated into the functioning of organizations, including the Human Rights Toolbox^[4], which provides a range of user-friendly tools to guide organizations and their stakeholders in implementing human rights obligations.

The EU has adopted regulations to ensure that European companies do not contribute (indirectly) to human rights or environmental violations, including:

• Directive 2014/95 on non-financial reporting^[5] requires large companies to provide specific information on how they operate and address social and environmental challenges.
• Regulation on conflict minerals^[6] ensures that EU companies do not import “conflict minerals” – or those mined through forced labor to fund armed conflict – and only import these minerals and metals from responsible sources.
• The action plan on sustainable financing^[7] was adopted by the European Commission to set out a strategy to make finance more sustainable through: (1) reorienting capital flows towards a more sustainable economy; (2) mainstreaming sustainability into risk management; and (3) fostering transparency and long-termism.
• In addition to the above, the introduction of the Corporate Sustainability Reporting Directive (CSRD)^[8] may introduce business and human rights requirements for organizations in scope.

• Do we fully understand our organization’s exposure to potential breaches of human rights – today and in the future? For example, have you performed a human rights risk assessment and identified priority business areas which may be exposed the most?
• What will be the impact to our brand of a future media or NGO human rights campaign, if we fail to manage our human rights risk?
• Are we compliant with the applicable national and international human rights regulations and guidelines?
• Does management fully understand the extent to which those in charge of governance are responsible for monitoring the applicable human rights requirements?
• Do we have adequate human rights policies, due diligence processes and systems (including grievance and whistleblowing mechanisms) in place?
• Are we confident that there are no unfair or unsafe working practices at our own operations, or at our contractors, suppliers or franchisees?
• What procedures do we have in place – and are they adequate – to ensure that our third parties (and their third parties, i.e. forth parties) are complying with the same set of human rights standards as those we have set ourselves?[9]
• Who in our organization is accountable for human rights issues (in the context of broader organizational ESG governance and strategy)?
• Have we developed a strategy to “do no harm” and proactively uphold human rights across our sphere of influence? Have we issued a statement on human rights?
• How does our business growth strategy take account of potential human rights risks?
• Are our merger and acquisition or joint venture activities exposing us to new human rights risks?
• Do we have the appropriate internal capability and expertise to identify and address human rights issues?
• What opportunities are there for our business to contribute to improving human rights and support the UN Sustainable Development Goals (SDGs)?

1. Set the right tone at the top by encouraging the board to sponsor and promote their commitment to the organization’s human rights standings and related values (e.g., as part of a broader ESG mandate).
2. Ensure the company has set up a cross-functional working group, including sales, procurement, operations, legal, ethics, health and safety and human resources functions to implement the human rights policy.
3. Perform a thorough assessment of your third-party risk management practices across the different third-party life cycles, including amongst others, human rights policies.
4. Integrate human rights risks into the risk management processes across different business functions.
5. Ensure there is a clear line of reporting to the board on applicable human rights risks and impacts, so issues can be escalated rapidly.

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_{1. All EU companies with 500+ employees and EUR 150 million+ in net turnover worldwide. Other limited liability companies operating in defined high impact sectors but have more than 250 employees and a net turnover of EUR 40 million worldwide and more. Non-EU companies active in the EU with a turnover threshold aligned with previous EU companies, generated in the EU.}
 

_{2. GuidingPrinciplesBusinessHR_EN.pdf (ohchr.org)}

_{3. plan_daction_national_entrepises_et_droits_de_lhomme_2017.compressed.pdf (sdgs.be)}

_{4. Toolbox Human Rights (business-humanrights.be)}

_{5. Corporate sustainability reporting | European Commission (europa.eu)}

_{6. Conflict Minerals Regulation - Trade - European Commission (europa.eu)}

_{7. Renewed sustainable finance strategy and implementation of the action plan on financing sustainable growth | European Commission (europa.eu)}

_{8. Taking the next step in non-financial reporting - KPMG Belgium (home.kpmg)}

_{9. Third-Party Risk Management outlook 2022 - KPMG Belgium (home.kpmg)}