Human rights due diligence (HRDD for fans) is the core instrument to fulfil the corporate responsibility to respect human rights. This responsibility is stipulated in Pillar II of the UN Guiding Principles on Business and Human Rights (UNGPs). This post gives you a short introduction with some signposts for detailed information at the end.
What Is Human Rights Due Diligence?
At its basic foundation, human rights due diligence is about companies duly paying attention towards the risks their actions pose on human rights. It is not about companies becoming responsible for the well-being of all people who have ever been and will ever be in touch with their products or services. To be crystal clear since there is so much fear around this topic in companies: the company is not responsible for ensuring that any employee or any supplier can enjoy all of their human rights to the greatest degree.
Instead, with human rights due diligence we are talking about the diligence which a company should duly pay to human rights. Companies already have different diligence duties which require them to check:
- Does my product fulfil certain quality standards?
- Do we have enough available funds to balance our expenses simultaneously?
- Do we take the necessary steps to respect applicable national law?
All of these diligence questions have one thing in common: they minimise the risks arising for the company from its own actions.
Companies exercising their human rights due diligence ask:
- Does the corporate action I am about to undertake have a negative impact on human beings?
How Does Human Rights Due Diligence Work?
As the UNGPs state: companies are different. They differ in seize, sector, field, ownership and legal structure. Consequently, there is no one-size-fits-all approach. All approaches have one aspect in common: they aim at preventing and/or mitigating the negative impact of a company’s action and/or omission on human rights.
This system may only apply to one or a specific kind of manufacturing base, or only regarding to a specific set of human rights across the whole company, or to the region where the company does most of its business. The details are open because the UNGPs only lay the foundations, they do not prescribe each and every step in detail. Examples from five different approaches companies have taken are presented in this study.
Due diligence for human rights has one common objective: minimising the risks arising for human beings from corporate actions.
Human right due diligence monitors the risk which the company poses to people, not the risk to the company.
Case Study: Blue Trousers
Imagine company TSY (Trousers Suit You)*: they produce trousers and deliver to retailers. Now, TSY have a contract offered by the very popular retailer BUY NOW. BUY NOW wants to buy an unusual huge amount of blue trousers. But they only want to make this lucrative deal if TSY delivers by the end of July. BUY NOW is planning on selling the blue trousers for the ‘blue trousers’- music festival end of August where over 25,000 people will be wearing only blue trousers for five days. BUY NOW knows that if they can get a sufficient amount of blue trousers already at the end of July, they can beat their competition. Unfortunately, TSY scheduled the first line of blue trousers to be ready for shipment only by the second week of August. They did so in line with past preparations for the annual ‘blue trousers’ festival. For TSY to meet BUY NOW’s request they would need to speed up production for at least two weeks.
This is a regular problem many companies in textile and clothing supply chains face. If TSY wants its first line of blue trousers to be finished two weeks earlier, it has these two options:
- Keep the current pace which allows for regular breaks, day-shifts only and weekends off and hire more workers in its overseas factories.
- Increase the working pace by increasing over-time including during the weekends.
There may be more options. I have kept this deliberately short, but if you think we have missed out a crucial one, email us.
Without there being a human rights due diligence process in place, TSY would check which option is more feasible based on logistics and calculate which one is financially more attractive.
If TSY opts for option 1, there are several problems it needs to solve. For instance:
Problem 1.1.: Is it legal to hire workers at such a short notice for a limited amount of time? Solution 1.1.: Circumventing problem 2 by taking recourse to subcontractors.
Problem 1.2.: Where should TSY put the workers at such a short notice? Solution 1.2.: Maybe some sewers could work at home. Subcontractors are excellent in taking care of these informal ways of employment.
Problem 1.3.: Colouring the trousers in this one shade of blue requires a specific paint, technology and factory environment. It is not possible to clone this kind of factory at such a short notice. Solution 1.3.: ? (Do you know one?)
Conclusion: Yeah, with subcontractors we can solve two problems at once. Except for colouring the trousers (unfortunately).
If TSY decides to take option 2, there do not seem to be so many problems. Unsurprisingly, option 2 is often the default solution for companies in TSY’s position. One core reason why option 2 is so feasible is that companies like TSY produce countries where there is a higher supply of people willing to work in the trouser-making business than there is demand. Also, local managers have ‘solutions’ to take care of small issues like workers wishing to leave before they have completed all of their overtime. TSY does not know more about these ‘solutions’, except that they are pragmatic and very successful.
If TSA had established its human rights due diligence process, it would need to look at managers’ pragmatic solutions. The company would be obliged to ensure that managers do no longer take measures such as locking doors which violate workers’ rights and increase risks for instance in cases of fire. Option 2 raises a lot of issues also because increasing the working pace leads to workers being overtired. This, in turn, increases the risk of work accidents especially for those operating with heavy machinery.
Regarding option 1, an analysis where workers may be negatively impacted by the decision of the company would also raise some issues.
HRDD issue with 1.1.: How can TSY be sure that subcontractors will not take advantage of the practical loopholes in labour law and promise workers longer employment to dump them after all blue trousers have been finished?
HRDD issue with 1.2.: working at home in many countries translates into informal work with high risks that labour standards, like regular breaks are not respected, especially if local subcontractors are charged with organising this.
Many Issues, No Answers?
There are no clear-cut answers and solutions in the very short example of TSY. Partly, because I crafted this case study at my desk and look forward to feedback from practitioners who have already encountered and solved comparable situations (yes, please!). Partly, because human rights due diligence is an ongoing process where there are often no easy answers, but balancing exercises of many different aspects. It is evident that this process increased the complexity of situations, thus also rising costs. The same applies to paying regard to environmental issues and fighting corruption – two fields which were once said to have nothing to do with business. If you want to learn why companies should engage with human rights – besides the evident ethical aspect – expect my upcoming post on the advantages of human rights due diligence.
How To Find Answers
As a first step to find answers to a company’s human rights due diligence, I recommend reading about the framework for corporate responsibility:
- For a short introduction to the UNGPs, check out our anniversary post.
- For a longer introduction, read the UNGPs , and
- the official commentary on corporate responsibility by the UNGPs.
For information on human rights due diligence, case studies and other guidance on how to implement it in a company:
* In this example we are not considering the complete supply-chain to keep it relatively short and simple.