The current state and future trajectories of human rights due diligence laws”

 

Claire Methven O’Brien and I have posted the Introductory chapter to the book we are editing:  The current state and future trajectories of human rights due diligence laws (Routledge, forthcoming 2025). To that end we were
excited to bring together some of the most innovative and
forward thinking
academics, practitioners, and commentators, from universities,
non-governmental organizations, business, and government to collectively
contribute to a deeper understanding of the emerging law of due
diligence, especially as it touches on the human rights and
sustainability elements of economic activities whether undertaken by
public or private organizations.  The abstract gives a sense of its
scope and direction:

Due diligence is an ancient concept with roots
in societal and cultural norms and expectations. It has been realized in
law, especially with respect to systems of assigning and shifting risk
of loss in private law and in the development of norms of corporate
governance. Since the endorsement of the UN Guiding Principles for
Business and Human Rights (2011), human rights due diligence has
captured an increasingly critical place in the institutionalization of
frameworks for embedding human rights, and now sustainability, norms in
economic activity. Composed of four core elements—identification and
assessment, integrating, tracking, and communicating—due diligence has
spilled far beyond its original role as the means through which business
entities could comply with their markets driven and state managed
responsibility to respect human rights. Today, due diligence plays an
important role in compliance, in the operation and development of
systems of prevention, mitigation, and remedy. It has acquired a
normative dimension as well—embedding principles of responsibility 
through the forms and premises of the diligence that is due and its
consequences.  Most recently, states have begun to draw on the
principles and modalities of due diligence to develop state based due
diligence legal orders.

We have posted a draft of the Introduction to the Book, entitled “The current state and future trajectories of human rights due diligence laws.” It follows below and may be accessed on the Project webpage here. Comments, suggestions and engagement always welcomed. Revisions will be posted as made until the draft is submitted to the publisher.

 

1
Introduction: The current state and future trajectories of human rights due
diligence laws

Larry Cata Backer

and Claire Methven O’Brien 

 

 

1 Introduction

 

1.1 The Concept of “Due Diligence” Before, Within, and
Beyond the UN Guiding Principles

 

If one searches for a thing using its name as a guide
(he will discover that) where the name is found the thing is not found also. .
. So we know: things are not real, they are just symbols.”

 

Due Diligence
serves as the formative conceptual framework around which the responsibility to
respect human rights is to be understood and applied by business entities under
the U.N. Guiding Principles for Business and Human Rights.
John Ruggie emphasized that point in 2008 when he introduced the concept within
the three pillar protect-respect-remedy framework that was to serve as the
structure of the UNGPs. “To discharge the responsibility to respect requires
due diligence.”
It has been suggested that the use of the term might well have been meant as “a
clever and deliberate tactic” meant somehow to bridge the application gap
between “human rights lawyers” and “business people.”
That, in turn, continues to reflect the unfortunate, and perhaps also
deliberate conceptual divide between the principles and premises of business
law and norms, and those of human rights/sustainability law and norms;
a divide that continues to produce an inability to speak across the gap in
mutually comprehensible ways. 

 

And yet a closer
reading of “due diligence” within the UNGP framework, not merely as a tool for
realizing a business entity’s responsibility to respect human rights, suggests
that the concept of due diligence does not merely exist as an object-tool within
the 2^nd Pillar but is intricately woven into the fabric of the UNGP
as a whole. Due diligence sits at the heart of the role of States in setting
expectations for business entitles and others within the scope of UNGP
Principle 2.
Due diligence lies at the heart of the role of States in the context of
conflict affected areas as developed in UNGP Principle 7.
 Due diligence is also woven  into the structures of non-State based
nonjudicial remedy within the UNGP’s third pillar.
Indeed, the Commentary to UNGP 29 embeds these grievance mechanisms into the
identification of adverse human rights impacts at the heart of the UNGP’s human
rights due diligence structure.
That weaving, then, both within the conceptual framework of the UNGP, and now
increasingly through the UNGP’s application in the rules, behaviors and
expectations of State, international organizations, business enterprises and
other stakeholders, is the subject of the essays in this volume.

 

Indeed, human
rights due diligence occupies a space at the heart of the current state and
future trajectories of the business and human rights project. Due diligence
lies at the heart of contemporary efforts to develop national and regional
regulatory structures built around the legal effects of undertaking economic
activity through interlinked global or at least transnational supply and
production chains. That has certainly been the European approach as exemplified
first in the French Supply Loi de Vigilance and then by the
German and Norwegian Supply Chain Due Diligence provisions.
Their scope, purpose, and authority remain highly contested, especially outside
academic circles.  Moreover, their application in the Global
South may follow different paths.
Equally contested was the extent of the projectability of due diligence beyond
the State.
Due diligence is also embedded to some extent in the more impact specific and
disclosure focused modern slavery acts, for example in the U.K. and Australia.
It bears noting that even without a comprehensive regulatory framework, due
diligence impulses may be realized in markets driven systems through the
evolution of tort principles, for example,
or disclosure based rules.

 

It is possible to
read into the concept of “due diligence” a strong alignment with, and the
expression of the way in which, both the business enterprise responsibility to
respect human rights is operationalized and, as well, the forms in which
the State duty to protect human rights can be institutionalized. Due
diligence internalizes the notion of state supervision within structures of
state supervision that may be expressed in ways that conform to the
contextually based governance orders. These supervisory or compliance
governance elements (realized through due diligence) may be undertaken in
markets (by enterprises) through an elaboration of the notion expressed by Mr.
Ruggie of a social license to operate,
which may be overseen by state based administrative  or compliance oriented institutions and through
disclosure systems.  Or supervisory and compliance measures may be
based on mandatory measures directed or overseen by the administrative
apparatus of a State, which requires a distinctive form of collaboration
between State and enterprise.
This follows a trend in which diligence itself is a part of the internal
quality control measures of a State with respect to its own delivery of
services, and in this context with respect to appropriate delivery on its duty
to protect human rights.  To understand these multiple layers of
meaning and application, it makes sense to explore briefly and in more depth,
the underlying sensibilities and principles that lie beneath the term “due
diligence” and that points to the assumptions and practices around its use in
both the UNGP and in the discretionary and mandatory measures being built
around the concept.  

 

1.2 The Concept of “Due Diligence” and its
Manifestations.

 

To better understand the meaning embedded
into the term and concept of due diligence, it is quite useful to start by
detaching the term from its human rights context. That exercise serves to more
explicitly extract the basic cultural premises deeply embedded in the term and
on that basis to better understand the way that the term can be better
understood and applied in the specific normative context of international human
rights.
As a general matter, the term “due diligence” is a protean concept with a long
history of usage. To a large, and perhaps overwhelming, extent, the concept of
due diligence serves as a reference for, and can be made to contain, a quite
broad spectrum of meaning and application.

 

It might be useful to start by considering
the term, its text. To that end, it is useful to consider the meaning of
diligence by starting from its linguistic roots. Diligence draws meaning from
its roots in diligentia—denoting attentiveness and carefulness –and
ultimately from the notion of gathering together what was apart.
The traditional meaning survived into modern day Spanish. Diligencia, as
understood in Spanish, and as used in the Spanish version of the UNGP, has as
its contemporary principal meaning “cuidado y actividad en ejecutar una cosa (care or action in executing something;”
but also agility, speed and promptness in that execution (“prontitud, agilidad,
prisa”).
In contemporary English it is defined as “the quality of working carefully and
with a lot of effort.”
Its meaning in English has lost its sense of speed which is retained in the
Spanish.
The inclusion of the term carefulness denotes a quality element in the concept
of diligence.  It is not enough to be
attentive; one must be attentive in a careful manner. Quality is then woven
into the meaning of the term.

 

The concept of what and how much is due
is related from the notion of what is owed. Its etymology suggests a derivation
from the Latin debere, signifying a thing or action that is owed, or an
obligation.
The word retains its form and meaning in contemporary Spanish, including that
used in the Spanish language version of the UNGP. It connotes not merely a
financial obligation, but also a legal, moral or religious one.  The Oxford English dictionary notes that with
respect to a person and as an adjective, the word denotes “under obligation to
do something.”
The obligation can be both specific (and based on law) or more general, in the
later sense more in the form of an expectation that is contextually significant.
In either case that object of obligation is understood as a quantity—for example
of effort, of objective, or of a thing or value—which is measured by the object
to which it is directed.

 

Due diligence, then, as a general matter, combines
an expectation or obligation with respect to a matter or action that combined
with a sense that this attentiveness is owed by reference to the nature of the obligation.
It incorporates a union of two related but distinct premises. The first,
diligence, touches on attentiveness or care with respect to a matter. That
includes expectations of attentiveness in all matters requiring attention—objects,
care, actions, decisions, and the like.  The
second, due, touches on the amount of diligence that is expected to be applied
to a particular matter, condition, decision, and the like. That is, due
diligence touches on the amount and forms of attention that a person ought to
apply in a given situation or when faced with a decision or choice in any
action necessary or to avoid harm to other persons or to their property,
rights, or interests. Indeed, the words due and diligence have been
combined  to reinforce each other, at
least in its English usage. For example, “diligence” emerged in its
contemporary English language legal sense as an “attention and care
due from a person in a given situation” or that expected from the parties from
the 1620s.
 With respect to an obligation, or
expectation, then, the fundamental conceptualization of the term “due diligence”
has linguistically deep roots in the connection between (1) attentiveness/carefulness,
(2) obligation or expectation, and (3) quantity/quality measures.

 

The nature of that duty is highly
contextual–with reference to the person on whom the duty falls, the actions
undertaken that produces a risk of harm, the nature of the harm, and the
expectations of harm minimizing action that ought to be undertaken.  Generally, the concept of due diligence can
be broadly understood as a manifestation of a form of, or a structure for, responding
to perceived harm. That, in turn, is broadly connected to John Stuart Mill’s
harm principle,  principle at the heart of a liberal theory of
political philosophy.
From the concept of “harm” or “adverse impact” from that of “due diligence.”
The former speaks to the normative context; the later speaks both to the means
(attentiveness) by which that normative context is applied and to the quantum
of attentiveness (what is due) that is required to achieve or approach the
achievement of the fundamental objective—to do no harm (the normative element).
Yet, it is important to distinguish among these meanings, principal among which
are of “due diligence” as a tool, as a method, as the expression of the norms
it operationalizes, and as a platform for the production and consumption
of  its objectives and methods. One can gets
a sense of the concrete manifestation  of
these impulses through a brief review of the application of the concept of due
diligence as the fulfilment of expectations built around the normative concept
of harm aligned with quite specific expectations about risk and risk bearing.

 

If one starts with the concept of due
diligence as a measured means to fulfil an obligation to avoid a specified harm
(defined in normative terms) then it is possible to trace due diligence in
terms of consumers and producers of diligence, as well as the platform on which
such production and consumption of diligence is undertaken. First, one starts
with the object of obligation.  Due
diligence requires an actor to undertake diligence in a form and quantity which
is due. Natural and legal persons (but also states) are responsible for the
harms they cause, whether that responsibility is denominated as a legal
obligation (for example the international legal obligations of States that
define the minimum scope of their duty under the UNGP)
or a social expectation (for example in markets based behaviours). Second, that
responsibility identifies the functionally differentiated field within which
the obligation of attentiveness is defined. The diligence that is then due,
the amount of attentiveness and its ends, is a function of that responsibility.
For example, under the UNGP, that diligence is directed toward the avoidance of
human rights infringement.
In this way means are aligned with expectations. Third, the diligence that is
“due”, then, is one that is required under the circumstances and as a function
of the actors affected and the character of the action which may produce harm,
or more comprehensively, a risk of harm.

 

The concept and application of due
diligence grounded in a no harm principle did not arise with the crafting of
the UNGP.  The notion in its present form
emerges in the 17^th century as a set of normative expectations of
parties around legal disputes between parties who were expected to take
reasonable steps to protect their own interests. By the 19^th and
early 20^th centuries the notion of taking reasonable care in the
circumstances had crossed over into international law,
embracing a  no harm principle.
Much of contemporary development emerged after 1945 and under the aegis of the
UN International Law Commission.
Among the relevant of the principles developed within a public law diligence
concept was that it “implies the obligation to act in good faith. It applies to
each state when facing its international duties, whether to act or, more
significantly, to prevent a given action from taking place.”  At the same time, international legal
obligations respecting diligence can also serve as a framework in which the
State might shift expectations of diligence to individuals and consumers.
 These trajectories of development
ultimately informed notions of State duty.
It was especially important respecting the core principle in the UNGP to “prevent,
investigate, punish and redress (human rights) abuse through effective
policies, legislation, regulations and adjudication.”
This was reflected in the South African experience in the context of human
rights related diligence, one which suggests that corporate leadership commitment
combined with public regulation and private expectations by institutions such
as stick exchanges, developed methods for framing and shaping diligence forms
and requirements.
And it is reflected in similar ways as well in the experience of State fulfilment
of its duty to protect human rights.

 

The emergence of diligence notions around
private transactions took a different route. 
In private law the advance of due diligence was bound up in notions of
risk allocation and has ancient roots. At its base was the commercial contract
and the principle of risk shifting among parties to a commercial contract. A
critical construction of that risk shifting was built around concepts of caveat
emptor and caveat venditor—that is around the choice between a
fundamental premise that the buyer had the obligation of diligence to protect
their interests as against  the
fundamental premise that the seller had the obligation of preventing harm by
undertaking diligence built around warranties and guarantees of quality,
service and the like. The issue remains a lively one in private law,
one with global reach.

 

The expectations of
diligence built around the concept of obligations flowing from risk allocations
in transactions expanded to become a baseline practice in business
transactions.  But the scope of the
concept was limited to the understanding of those forms of risk that were then
privileged–generally financial risk as it might be evidenced  or extracted from the financial reporting of
economic actors. The relationship between the diligence that was “due” and the
underlying normative framework (to whom or under what circumstances is
diligence due) for privileging the scope of actions that merited attentiveness
were thus nicely interlocked. Since the financial scandals in the United States
after 2001, the notions were internalized into the operations of business,
especially with respect to financial reporting.  But it has also expanded to include
monitoring and diligence obligations with respect to trustworthiness in business
management. The risk of trustworthiness has been aligned with the risk of
liability to directors and others for breach of their managerial obligations.

 

In the financial and business sphere, due
diligence has long been understood as a process of verification, investigation,
or audit connected to an economic transaction.
 In this context the allocation of risk
was shifted from the buyers of securities to the seller though the device of
integrated and periodic reporting, the completeness and veracity of which was
to be guaranteed, as a matter of law, by the seller. The change then shifted
the diligence obligation from the person seeking to buy securities to the
person or institution selling them. The quantum or scope of the diligence owed was
in this context set by law. That transposition from notions of generalized
harm, and the assignment of social expectation of risk mitigation or prevention
in the face of socially privileged harm, was most influentially undertaken in
the first third of the last century.  The
concept was embedded in legal requirements for reasonable investigation in the
US Securities Act of 1933
as a “due
diligence” defense, which could be used by broker-dealers when accused of
inadequate disclosure to investors.
That effectively moved from a caveat emptor to a caveat venditor
regime built around the concept of risk and mitigated by the structures of
diligence and disclosure. Labor was treated
differently.

 

The forms and expectations
built around the allocation of risk and the imposition of diligence
requirements in securities markets were then transposed again to the management
of financial systems in the first decades of the 21^st century.
Then, in the
context of a global financial crisis, the United States enacted due diligence
as the foundational concept through which it would order and manage its
financial markets. 

 

The concept was embedded in legal
requirements for reasonable investigation in the US Securities Act of 1933
as a “due
diligence” defense, which could be used by broker-dealers when accused of
inadequate disclosure to investors.
The forms and expectations built around the allocation of risk and the
imposition of diligence requirements in securities markets were then transposed
again to the management of financial systems in the first decades of the 21^st
century.
In specialized
fields of activity, it was especially relevant for the conduct of private
equity funds.
Due diligence was an essential element of contract law, especially with respect
to corporate or business acquisitions and divestments.
Due diligence is especially essential in certain forms of sensitive government
contracts.
 

 

Due diligence—the responsibility to
exercise a certain level of attentiveness with respect to an action or decision
or situation carried to ascertain and minimize risk–was deeply embedded in the
practices and expectations of business,
and in the realization of the consequences of due diligence as an expectation with
legal effect.
It was moving into tech driven new economic sectors and its financing.
Its most interesting expression was as an embodiment of conduct expectations
around the responsibilities of members of corporate boards of directors to
appropriately monitor enterprises especially with respect to legal compliance
risks (though to a lesser extent business risk). Risk based diligence was
expanded to include environmental impacts assessments  and ;  audits.
These expectations were  embedded in the
development of principles of monitoring obligations, for example as part of the
director fiduciary duty of care in the United States.
In this context that scope of the duty quickly expanded to also bring in
notions of good faith and loyalty. At the same time, due diligence notions were
also, and to some extent remarkably, brought into public administrative culture
as federal prosecutors in the US Department of Justice increasingly developed
informal guidance for the exercise of prosecutorial discretion grounded in
expectations of the development and operation of compliance systems that met
certain minimum requirements.

 

By
the beginning of the 21st century, then, the principles of due diligence had
become both deeply engrained in business practice, and increasingly tied to
public law sensibilities respecting compliance oriented expectations of
institutionalization of due diligence in systems of monitoring based decision
making. The practice of due diligence also became enmeshed in the sensibilities
and techniques of digitization, digitalized analytics, and detachment from the
institution with the primary diligence obligation.  Technology made it possible to transpose
diligence from  an in house and highly
contextual operation to a digitized process flow of information to which big
data analytic could be applied to assess data and aid in diligence based
judgment. When detached form the entities to which primary responsibility was
assigned, the operation of due diligence could be rationalized through
platforms where consumers and producers of diligence based data and analytics
could interact (state, enterprises, and non-governmental entities)
especially with respect to digital enterprises.

 

While this development was originally
tightly contained with the arena of legal compliance, it was also clear that
the practices and institutions of due diligence in business could also be
applied to business risk and market expectations, as well as any expansion in
legal compliance regimes. At the same time, the institutionalization of
compliance and accountability principles around the concept of due diligence suggested
that while some risk  might be
encouraged, other categories of risk might not be.  It is in that context that the debate about
the expectations of economic activity with negative human rights impacts began
to develop in the late 1990s and early 21^st century.   At the heart of the debate were two
issues.  The first was the utility of
using concepts and practices of due diligence to capture risk and costs beyond
financial risks and costs of production. 
The second was the extent to which such an expansion was better realized
through private activity (in and thought markets) or through public regulation
(overseen by the administrative bureaucracies of states). It is at this point
that the debate converged in the failed Norms project
(public international law based mandatory measures) and re-emerged in what
became the UNGP (hybrid framework embracing both mandatory public and
discretionary private law driven diligence and oversight systems). 

 

This fundamental conception drives the
increasingly dense network, some might say patchwork, of human rights,
sustainability and other related rights, obligations and expectations to which
due diligence is directed and by reference to which it is to be measured and assessed
in specific instances of application. The approach to due diligence for public
bodies may differ from that of private enterprises or even of non-governmental organizations
and religious institutions.  But the
reflex and structure will not vary in substantial respect. Due diligence
touches on the amount and forms of care and attention (the diligence) that a
person (natural or institutional) ought to apply in a given situation or when
faced with a decision or choice in any action which is sufficient to prevent,
mitigate or remedy the risk to which diligence is directed.  The appropriate amount of diligence owed (or
necessary), and the system of consequences (legal, regulatory, markets based,
civil, criminal, compensatory or precautionary) is contextual. The identity of
both the person or institution to which the risk to which diligence relates is
also contextual and can shift depending on the expectations of the social
organizations with the authority to mediate or assign diligence obligations;
and these choices are by no means fixed or natural or eternal. What does appear
to be fixed, natural, and eternal at least with respect to consequences for the
human person and human social relations are variations of the harm principle—the
premise that humans and their institutions or collective actions must avoid
harm to other persons or to their property, rights, or interests. The nature of
that duty is highly contextual–with reference to the person on whom the duty
falls, the actions undertaken that produces a risk of harm, the nature of the
harm, and the expectations of harm minimizing action that ought to be
undertaken.  Due diligence, then, cannot
be manifested in the absence of normative orders; and normative orders increasingly
manifest  their allocation of risk and
risk avoidance for harms through systems that impose duties of care and
attentiveness on specified individuals or classes of human or institutional
actors. Once this is understood as the basic premises, usually taken for
granted, the application of due diligence in the human rights field becomes
clearer—as do the issues around the values advanced, the choices in assigning
responsibility, and the creation and enforcement of expectations with respect
to the forms and quantity of diligence that is owed and the consequences of
success or failures of diligence.

 

1.2 “Due Diligence” the United Nations
Guiding Principles for Business and Human Rights and Beyond

 

In the context of business and human rights,
SRSG Ruggie, almost from the start of his mandate aligned the core essence of
the harm principle to what became the three pillar (protect-respect-remedy)
framework. To that end he drew lessons from environmental and social impact
assessments.  These were crystalized in his 2008 Report
unveiling the Three Pillar Framework in the “do no harm” principle: “To respect
rights essentially means not to infringe on the rights of others – put simply,
to do no harm.”
From the first, then, due diligence was understood both as a method with
specific objectives, as an operating style for routinized business operation,
and as the underlying normative framework against which its effectiveness would
be measured.  

 

SRSG Ruggie and his team focused the
sensibilities, principles, and operational structures and cultures of due
diligence primarily on private sector responsibilities—within and in fulfilment
of the expectation of markets.
The core of the constitution of due diligence—as process, method, and norm, was
to be embedded as part of the norms-based operational systems of business.  

 

This concept
describes the steps a company must take to become aware of, prevent and address
adverse human rights impacts. Comparable processes are typically already
embedded in companies because in many countries they are legally required to
have information and control systems in place to assess and manage financial
and related risks.  (Ibid., ¶ 56).

 

SRSG Ruggie captured the essence of due diligence in its
transposition to human rights affecting economic activities of business. That
included its character as a prudential principal, one that triggered greater
attentiveness on the risks of human rights harms. That attentiveness would be
contextually framed and deeply grounded in the social expectations of the
international community and its normative principles built around the
International Bull of Human Rights. These were to be realized through the
development and use of systems built on overarching policy, impact assessments,
the integration of diligence into the decision processes and risk assessments
of economic activity, and tracking.

 

To a significant degree, the approach
represented a revolution in the way in which business would approach the issue
of risk, it represented the coordination of economic and administrative
sensibilities around the curation and toleration of risk, –from encouraging
business risk to systems of risk aversion grounded in the approach, borrowed
from public law and public administrative culture of “prevent, mitigate, and
remedy.” At the same time, it suggested a core set of principles within which
such due diligence could be legitimated. Those principles, and especially
control of the narratives of interpretation and application, continues to be an
object of debate,
as well as the context for control of the narrative subject of the normative
responsibility and operational expectation.

 

In its final form, the essence of the UNGP’s
responsibility to respect human rights centers on avoiding infringing on the
human rights of others and on addressing adverse human rights impacts—both
of which together define the core normative concepts against which human rights
due diligence systems are measured.  Harm
and impact measures and assessment are deeply embedded in the UNGP themselves. The
Commentary to UNGP Principle 7 speaks, for example, to the way in which
responsible businesses seek State guidance “to avoid contributing to human rights
harm” in the context of operation in conflict affected areas. Due diligence is
offered as a means of reducing the risk of complicity liability triggered by a
“contribution to a harm.”
The essence of an adverse human rights or human rights abuses impact is a harm
to another, the prevention, mitigation and remediation of which lie at the
heart of the UNGP itself in all three of its pillars. Indeed, the issue of the interactions
among a State duty to protect human rights and a corporate responsibility to
protect human rights has to some extent touched on the relationship between the
State and business around human rights due diligence.
The potential spillover effects of the UNGP in general and human rights due
diligence in particular was noted from the time of the endorsement of the UNGP.

 

Due diligence is a central element of the
UN Guiding Principles for Business and Human Rights and the UN Framework’s
Second Pillar, corporate responsibility to respect human rights.
Its driving idea has been to align corporate activities with international
normative human rights and sustainability standards, hence addressing
governance ‘gaps’ associated with globalization and promoting economic activity
that treats all parts of global value chains with equal respect. The specific
objectives of human rights due diligence in the UNGPs are to identify, prevent,
mitigate, and account for how companies address their adverse human rights
impacts. The process includes assessing actual and potential impacts,
integrating, and acting on those findings, tracking responses, and
communicating with others about how those impacts were addressed.  In addition, human rights due diligence would
make it easier to adopt appropriate policies of prevention, mitigation, and
remediation, by identifying classes of activities with potential for human
rights impacts, and the people or institutions the adverse impacts of the
rights of which can trigger due diligence.

 

The essence of the UNGP, and especially in
the context of due diligence as an instrument and method, is to encourage a
flexible structure around the shifting of risk for human rights harms among
States (with a duty to protect), business (with a responsibility to respect),
and the systems in pace for the realization of economic activity.
That flexibility was bounded at a minimum by the international legal obligations
of States,
and the international bill of human rights risk and the principles concerning
fundamental rights set out in the International Labour Organization’s
Declaration on Fundamental Principles and Rights at Work for enterprises.
Around that, enterprises were to craft a human rights due diligence system, the
broader international legal implications of which were to be managed through
the development by States of a “smart mix of measures,”
the range of which was described in UNGP Principle 3. To those ends a
public-private partnership was to be undertaken, currently manifested through national
action plans.

 

                  At the
same time, for many, the decision to focus this due diligence on the private
sphere appeared to leave room for improvement. 
That improvement would focus on the transposition of the concepts and
approaches, as well as the principles, of human rights focused due diligence in
eco nomic activity, from the private to the public sphere and from the structures
of the market to the institutionalized administrative regulatory framework of
the state. That ambition, to extend the larger project of legalization of
economic activity to the business of human rights effects, and to do it under
the risk parameters of the prudential prevent-mitigate.-and remedy principles,
has begun to be realized at the State and international levels.  That then wraps back to the incorporation of
human rights due diligence efforts and structures within traditional legal
frameworks for diligence.

 

States have increasingly sought to legalize
some or all of the responsibilities of business to respect human rights.  And in many cases States have sought to
effectuate that project of legalization through the device of human rights due
diligence. The result points to a new sort of public-private partnership.  It is one in which public bodies serve as the
norm-objectives providers and the auditors of compliance, but in which the
operationalization of due diligence regimes and the systems needed to undertake
the practices far onto business throughout their global production chains.  Since the endorsement of the UNGP in 2011,
the issue of human rights due diligence as a matter for State regulation, as
part of what UNGP Principle 3’s Commentary described as a “smart mix of
measures”,
has extended the regulatory orbit of the UNGP well beyond markets and the 2^nd
Pillar.

 

Some influential European States have
enacted statutes imposing due diligence requirements for the activities of
large enterprises.  These include France (Loi
relative au devoir de vigilance, 2017) and Germany (Sorgfaltspflichtengesetz,
2021). Other EU
Member States (Belgium, the Netherlands, Luxembourg, and Sweden) are planning
to do so in the near future. In addition, other regulatory efforts, like the
Non-Financial Reporting Directive (Directive 2014/95/EU) require companies to
report on how sustainability issues affect their performance, position, and development, as well as how
such issues impact people and the environment. Dur diligence has been built
into functionally differentiated reporting efforts, most notably the so-called
Modern Slavery provisions of the U.K. and Australia. While these require
disclosure and explanation of the form or absence of effective measures to
eradicate modern slavery from supply chains, the process effectively encourages
a form of due diligence. Disclosure is meant to create incentives to produce
and operate systems of modern slavery risk mitigation about which companies are
required to report.
 

 

At the international level, Until the
second decade of the 21^st century, many of the most influential
efforts were guidance measures which encouraged States to use their authority
and private enterprises to invoke private law in responding to normative expectations
around risk and diligence measures to be undertaken to minimize that risk.
Among the most significant were the Organization for Economic Cooperation and
Development (OECD) Guidelines for Multinational Enterprises,
now extended to “due diligence expectations on the development, financing,
sale, licensing, trade and use of technology, including gathering and using
data.”
The OECD’s pioneering efforts included more specifically directed guidance
around the concept of due diligence.
The two worked in tandem. The OECD’s due diligence guidance was created “provide
practical support to enterprises on the implementation of the OECD Guidelines for
Multinational Enterprises by providing plain language explanations of its due
diligence recommendations and associated provision.”
The universe of adverse impacts with respect to which a human rights due
diligence system include workers and industrial relations, environment, bribery
and corruption, disclosure, and consumer interests.”
In the context of the OECD Guidance, due diligence becomes embedded in a
self-referencing loop of attentiveness/care obligation owed by the enterprise
with respect to harms that can be characterized as touching human rights, the
sufficiency of which can be examined and guided through a National Contact
Point Specific Instance process.
Regional human rights courts have also addressed the issue by reference t their
own international instruments, especially in the context of the due diligence obligations
of States where non-state actors interfere with rights under international human
rights law.

 

But also of significance were frameworks
such as that embedded in the International Organization for Standardization (ISO)
Standard 26000 (social responsibility).
ISO 26000 was aligned with the normative baselines of the UNGP and were structured
to complement human rights due diligence (the “due” part) by providing a
framework for enterprise self-assessment (the “diligence” part) of its operations,
reflecting an “organization’s commitment to the welfare of society and the
environment.”
 The guidance reflects the core of the
conceptualization of due diligence described in Section 1.2—the imposition of a
measure of attentiveness and care which is owed by the enterprise to societal
others and the sufficiency and quality of which is measured against the
standards and expectations, the principles, described in the ISO 26000
standard.

 

More formal efforts have also produced some
potentially significant developments. Among them, the effort to create a
binding international instrument for business and human rights has been an
ongoing project since 2014.
It is a project that has divided the business and human rights community.  And it appears to have taken up, again, the
project once thought abandoned with the discarded Norms project.
Supra-national efforts have achieved the greatest success within the European
Union. On 25 July 2024, the Directive on corporate sustainability due diligence
(Directive 2024/1760 (CS3D)) entered into force.
Human rights due diligence based on the UNGP framework was a central element in
the elaboration of CS3D. In proposing a Directive on Corporate Sustainability
Due Diligence, the European Commission explained:

 

Using the existing
international voluntary standards on responsible business conduct, an
increasing number of EU companies are using value chain due diligence as a tool
to identify risks in their value chain and build resilience to sudden changes
in the value chains, but companies may also face difficulties when considering
to use the value chain due diligence for their activities. . . Mostly large
companies have been increasingly deploying due diligence processes as it can
provide them with a competitive advantage. This also responds to the increasing
market pressure on companies to act sustainably as it helps them avoid unwanted
reputational risks vis-à-vis consumers and investors that are becoming
increasingly aware of sustainability aspects.

 

When the Corporate Sustainability Due Diligence Directive was
approved in 2024, the processes and methods of due diligence served as key
instruments in the fashioning and fulfilment of the core objectives of CS3D as
explained on the website of the European Commission: “to foster sustainable and
responsible corporate behaviour in companies’ operations and across their
global value chains (and) ensure that companies in scope identify and address
adverse human rights and environmental impacts of their actions inside and
outside Europe.”
CS3D specifies the objectives of due diligence targeting adverse impacts both
in terms of the effects on rights holders but also for its consequential obligations
to conform or transform their business practices—and in the aggregate the expectations
of the market—to conform to economic transactions driven by and for the human
rights impacts.

 

So as to comply with the
obligation to bring to an end or minimise the extent of actual adverse impacts
provided for in this Directive, companies should be required to take the
following appropriate measures, where relevant. * * * To conduct their due
diligence in an effective and efficient manner, companies should also make
necessary modifications of, or improvements to, their design and distribution
practices, to address adverse impacts arising both in the upstream part and the
downstream part of their chains of activities, before and after the product has
been made. Adopting and adapting such practices, as necessary, could be
particularly relevant for the company to avoid an adverse impact in the first
instance. Such measures could also be relevant to address adverse impacts that
are jointly caused by the company and its business partners “

 

Interestingly, adverse human rights impacts under CS3D are
defined as an abuse of rights specified;
abuse, on the other hand “should be interpreted  in line with international human rights law.”
Abuse is then elaborated in part in the CS3D annexes.

 

                  One
comes full circle here. Due diligence owes its appeal, and its power, to the
fundamental principles built into its terms. One speaks here at attentiveness
and care attached to an assignment of obligation or expectation with respect to
that attentiveness and care. Standing alone all this does is define a method
and describes the shape and qualities of an instrument. But also inherent in
the fundamental understanding of due diligence is its intimate connection to
the measure of attention and the sufficiency of care that is owed. That, in
turn, transforms what had been an instrument as an expression or elaboration of
a normative framework in action. To that ends due diligence is animated not
merely by an attachment to a normative framework (for example human rights),
but also by the allocation of risk, and the definition and measurement of the
object or consequence of risk to which diligence/care must be applied.

 

For human rights and sustainability, in
turn, that suggests a movement from a caveat emptor principle of allocation—where
the risk is allocated to the rights bearer or society—to a caveat venditor regime, one in which the producer
effectively must not merely warrant action and objective against normative
objectives, but must affirmatively undertake positive measures to ensure that
such “warranties” are effective.
This moves the concept of due diligence a long way from its origins even as it
preserves its fundamental character. There is much to learn in that movement at
the theoretical and practical level as well as from the perspective of the
specific fields in which it is now manifested.
In this context experience and theory may produce synergies—and
return  the consideration of due
diligence to its UNGP foundations in principled pragmatism.

 

2 The idea and the content of this volume

 

The theory and application of due diligence and their manifestation
in the field of human rights and environmental sustainability serves as the foundation
for the essays in this volume. Important contemporary trends underscore the
importance of due diligence as both method and compliance-accountability norm.
Due diligence is rapidly becoming a powerful tool in efforts to embed human
rights and sustainability norms law in the activities and decision-making
processes of economic actors–corporations, financial institutions, and other
entities—and their oversight, in one way or another, by the State and through international
law and norms.
But it is also one the implications of which may destabilize substantively
powerful frameworks for the organization and operation of the legal regulation
of economic activity,
as well as theories of sovereign rights.

 

For all the recent activity, these
developments are in their infancy and their interactive complexity are now
being explored.
 These developments point to further
revolution not merely in the context of the incorporation of human rights as a
cost-value of economic activity, but also in a number of other respects.  These include the way in which law is
understood and applied, in the role of private law within companies now vested
with a legal duty of due diligence, and in the very nature of the concept of
the legal as systems of due diligence increasingly become data driven in order
to fulfil their function as a means of accountability to both internal and
external stakeholders, including the state and its administrative organs. But
at the same time they point to the possibility of the need for balancing rights,
especially in the context of development.
A deeper exploration of the emerging systems of due diligence legalization,
especially in the context of human rights and business, then, is both timely
and necessary.

 

It is to that task that this volume is
directed. This volume brings together some of the most innovative and forward
thinking academics, partitioners, and commentators, from universities,
non-governmental organizations, business, and government. Their objective,
collectively, was to contribute to a deeper understanding on the emerging law
of due diligence. More specifically, contributors were asked to explore,
from their own perspective on the ways in which due diligence as a legal
concept touches on the human rights and sustainability elements of economic
activities whether undertaken by public or private organizations.  In each case, and from a variety of
perspectives, each of the contributors explores the rich possibilities of due
diligence within the business and human rights environment. Each explores the
level and forms of attentiveness (diligence) as a function of the quantity and
focus requires (the diligence that is due) in a variety of context that are
defined both by the legal environment in which it is embedded and the normative
principles that due diligence is meant to fulfil. The structuring is important—while
one cannot ask due diligence to do more than it is capable—conceptually—one can
certainly exercise a judgment about the way that one applies values and
societal objectives within its somewhat capacious possibilities. With that fundamental
understanding of structure, form, character, possibility, and limitation, no
really useful understanding of, or effective application of due diligence is
possible.

 

2.1 Organization

 

The work is divided into four broad sections. In the first
section, the project editors undertake a deeper conceptual study of the
phenomenon of the legalization of due diligence and seek the frame the issues
and future course of the development of due diligence as a concept, as a
process, and as a tool of policy and implementation of this project.  Section 2 explores the sources of human
rights due diligence in and beyond the UNGPs, with a focus on public international
law, international human rights law, international environmental law, and civil
law. 

 

Section 3 
then shifts the lens to a deep interrogation of contemporary efforts at
legalization within domestic legal orders. The focus here is on supply chain
due diligence laws (France, Germany, the EU); US measures that embed due
diligence measures into trade, sanctions, and foreign relations law; its
insertion into contract provisions; its reception in the domain of public
economic activity, including state procurement; the role thematic due diligence
laws and non-financial reporting laws in promoting due diligence; and how the
OECD Guidelines contribute to the legalization of due diligence in domestic
legal order and practice.

 

Section 4 ends the volume with a
consideration of tendencies, tensions, opportunities, and challenges in the
legalization of corporate human rights due diligence. Human rights due
diligence, which started as a way for enterprises to proactively manage potential
and actual adverse human rights impacts in a markets-driven compliance
environment, has become a quite flexible tool used by states, enterprises, and
other actors to both frame the normative structures for corporate compliance
and the means for its elaboration as well as the environment in which economic
activity is legitimately and responsibly undertaken.

2.2 The Essays

 

Part I of this volume includes this essay. Our object in this
initial chapter, was to undertake a deeper conceptual study of the phenomenon
of legalization of due diligence. They then seek the frame the issues and
future course of the development of due diligence as a concept, as a process
and as a tool of policy and implementation of this project.  In the process they situate due diligence
within the broader conversations about the governmentalization of private
actors, the projection of state power as participants in private markets, the
relationship between due diligence, state regulatory authority, and compliance
oriented  systems, and lastly the
development of specific instances of state, international and private measures
to apply these concepts on the ground. The contributions in the volume are then
synthesized and from then a set of core insights are derived.

 

Part II, HRDD In & Beyond the UNGPs,
considers the sources and frameworks of human rights due diligence and its
potential for legalization. It consists of four essays. The first situates
human rights due diligence within the UNGP framework. The second considers
human rights due diligence in international law more generally. The third,
examines HRDD in international environmental, climate, and sustainability law.
The last looks to human rights due diligence and its connection to civil and
tort law.

 

In Chapter 2,
Larry Catá Backer situates the concept of due diligence from its origins in the
UN Guiding Principles for Business and Human Rights. The development of the
concept is examined with reference to its development between 2006 and the
start of the mandate of John Ruggie as Special Representative to the UN
Secretary General to the unanimous endorsement of the UNGP in 2011 by the Human
Rights Council. The transformation of the concept from an operational level
mechanism at the core of the corporate responsibility to respect human rights in
the UNGP 2nd Pillar to its key role as the embodiment of compliance based
legality respecting the management of global production is then considered. Due
diligence has become more than a method for more efficient operation of markets
driven nudging (and thus disciplining) of economic behaviors. Due diligence has
assumed a normative role as well. It serves as the means through which economic
actors may become embedded in complex webs of interlinked administrative
legalities that start with international normative projects, their
transposition into domestic (or multilateral) legal orders, and their
delegation first to the national administrative apparatus and then in its
operational elements to the private actors who are expected to serve as the
front line administrators of a global multi-layered system.  The relationship between the precisely drawn
2nd Pillar due diligence concept, and the 1st Pillar state duty to protect
human rights, along with the 3rd Pillar remedial obligation is considered.  The transposition of these mechanisms to
other regulatory frameworks is then explore.

 

In Chapter 3,
Maria Monnheimer, considers human rights due diligence in international law
frameworks. Due diligence is among the most ambiguous terms employed in
international law. While being referred to in a growing number of international
legal instruments and proceedings, no overall definition has been agreed upon.
Especially in the business and human rights context, “due diligence” is at the
heart of many controversial debates and very recent political developments. It
is exactly in the business and human rights context, though, that the term “due
diligence” is used even more ambiguously than in other areas of international
law. This is due to the fact that two different forms of obligations lie at its
core: due diligence obligations of states to respect, protect and promote human
rights on the one hand; and due diligence obligations of businesses to adequately
address human rights risks within their supply chains on the other. Important
international and domestic legal instruments invoke both forms of obligations
without clarifying their precise content and relation to each other. Such
confusion creates uncertainty about the extent of the respective obligations
and responsibilities. To ensure the effective implementation of business and
human rights instruments, it is, therefore, necessary to explain how due
diligence emerged as a standard of conduct in public international law as
opposed to its rather procedural understanding in the private business context.
Clarifying these different concepts of due diligence will allow us to discuss
how they influence and complement each other in the business and human rights
context and to determine in a more precise manner what is expected of states
and business to ensure effective human rights protection.

 

In Chapter 4,
Sara Seck considers human rights due diligence in international environmental, climate,
and sustainability law. The concept of due diligence has a long history in
international environmental law. It is often associated with the ‘do no harm’
principle expressed in 1972 in Principle 21 of the Stockholm Declaration and
moderately revised in the 1992 Rio Declaration on Environment and Development:
‘States have … the sovereign right to exploit their own resources pursuant to
their own environmental and developmental policies, and the responsibility to
ensure that activities within their jurisdiction or control do not cause damage
to the environment of other States or of areas beyond the limits of national
jurisdiction.’ While this principle could be interpreted to impose an
obligation of result, it has generally been understood as an obligation of due
diligence. It is often described as a norm of customary international law and
has been incorporated into many multilateral environmental agreements. The do
no harm principle also underlies the influential work of international legal
bodies, notably the International Law Commission’s Draft Articles on the
Prevention of Transboundary Environmental Harm. This chapter will trace the
history of due diligence in international environmental law, beginning with the
do no harm rule but moving beyond to consider related principles including
precaution (Rio Principle 15), environmental impact assessment (Rio Principle
17), and procedural environmental rights to information, participation, and
justice (Rio Principle 10). The chapter will then consider the relationship
between due diligence and related norms of international environmental law
(climate law, biodiversity law, and pollution law – the triple planetary
crisis) and the emergence of human rights due diligence laws in the business
and human rights context.

 

In Chapter 5,
Carola Glinski looks to human rights due diligence and its connection to civil
and tort law. Human rights (and sustainability) due diligence of corporations
and other economic actors have for long been discussed in the international
arena but has only recently, with national codifications based upon the UN
Guiding Principles led to binding legal outcomes, such as in France (2017),
Germany (2021) and the EU (draft). At the same time, long-standing attempts to
hold companies liable under tort law for damages caused by their subsidiaries
or suppliers abroad are now seeing some success, following in particular the
English rulings in Chandler v. Cape and Lungowe v Vedanta. Indeed,
the duty of care in the tort of negligence has always provided for a doctrinal
basis and for relevant criteria to hold companies liable for not having carried
out due care (or due diligence) within their sphere of impact, and thus for a
valuable source of law for human rights due diligence. In its first part, the
chapter highlights the doctrinal parallels and the mutual impact between human
rights due diligence and tort law, as discussed in literature and case law. In
its second part, the chapter turns to the new due diligence laws. These take
different approaches to the issue of liability, by either codifying liability,
excluding liability, or remaining silent on the issue. The chapter analyses the
changes caused by these codifications in the relation between human rights due
diligence and tort law.

 

                  Part
III, The Legalization of HRDD In Domestic Legal Orders, turns to an examination
of national legislative efforts. It consists of ten essays.

 

In Chapter 6, Jeremie Gilbert and Cannelle
Lavite examine France’s Vigilance Law. It will offer an analysis of its
contents and mechanisms and adopt an ‘in practice’ approach by analyzing some
of the ongoing cases concerning its implementation and interpretation by the
courts. The chapter will focus on issues of enforcement, extraterritoriality,
and causation, and examine some of the ongoing cases brought on the basis of
this law concerning the action of French companies abroad. It will notably
focus on the Unión Hidalgo case against EDF which illustrates many of the
challenges faced by individuals affected by corporate misconduct in global
supply chains in claiming remedy and rights before the courts.

 

In Chapter 7, Brigit Spiesshofer considers
the Supply Chain Due Diligence Law in Germany.

On July 22, 2021, the Act on Corporate Due Diligence
Obligations in Supply Chains (Supply Chain Act) was published in the German
Federal Law Gazette and will come into force on Jan. 1, 2023. Roma locuta,
causa finita? Not at all. The German Supply Chain Act is only a further
milestone in the regulatory program laid down in particular in the UN Guiding
Principles on Business and Human Rights (UNGP), the OECD Guidelines for
Multinational Enterprises, and the National Action Plan for Business and Human
Rights (NAP) – international and national soft law – and paves the way for
corresponding EU supply chain legislation and its Europe-wide implementation. The
Act establishes the responsibility of companies for the implementation of human
rights and environmental due diligence in their own organization and group of
companies as well as in their supply chains as their own duty of care, the key
elements of which are laid down in §§ 3 et seq. Supply Chain Act. The human
rights and environmental due diligence introduced by the Supply Chain Act
raises many questions, both in principle and in detail. One of the key issues
is whether the due diligence obligations are (merely) procedural obligations,
in particular, whether they require (only) to undertake best efforts, or,
whether at least some of the provisions contain a duty to achieve results.

The draft EU Corporate Sustainability Due Diligence Directive
takes up the basic conceptual features of the Supply Chain Act. However, it
does contain significant deviations that may lead to an adjustment and revision
of the Supply Chain Act.

 

In Chapter 8, Claire Methven O’Brien considers
the HRDD portions of the EU’s Corporate Sustainability Due Diligence Directive
(CS3D). This chapter first presents the background and context for these
proposals, both of which anticipate due diligence duties for large companies
relating to corporate harms to human rights and the environment, as well as
climate change. This part also addresses the process relating to the draft laws
in the EU Regulatory Scrutiny Board. Next, the chapter outlines the main
features of the HRDD related portions of CS3D, evaluating the Directives’
approach on important elements from point of view of human rights standards,
including the UNGPs, as well as wider European human rights jurisprudence and
tort law. Finally, the chapter identifies key transformations and deformations
implicit in the EU’s putative approach to the legalization of the corporate
human responsibility to respect human rights and due diligence and highlights
associated challenges for implementation, remediation, and accountability.

 

In Chapter 9, Rachel Chambers and the late Eric
R. Biel examine US Measures on Human Rights Due Diligence. Much of the
examination of emerging legal regimes on human rights due diligence (HRDD) has
focused on activities in the European Union (EU), centering on the European
Commission’s adoption in February 2022 of a draft directive on “corporate
sustainability due diligence” – as well as initiatives at the member state
level, notably in Germany. This in turn has led to a natural interest in
whether the United States might at some point develop a similar HRDD model as a
centerpiece of a broader strategy to promote and enforce standards for
responsible business conduct. Their analysis of U.S. measures to give legal
effect to HRDD concludes that any expectation of a U.S. legal framework similar
in structure to that of the EU is unlikely for a variety of reasons.  Rather, the U.S. approach to advancing the
objectives of HRDD to date has been – and in our view will continue to be –
driven by a series of separate initiatives, only loosely and informally
coordinated under the ambit of a National Action Plan (NAP) on Responsible
Business Conduct due to be finalized by mid-2023. (This will be the second U.S.
NAP, following one issued at the very end of the Obama Administration in
December 2016.) Key elements of the U.S. approach include trade measures such
as enforcement of Section 307 of the Tariff Act of 1930, as amended in 2016;
the Uyghur Forced Labor Prevention Act, signed into law in December 2021; and
the novel factory-level “rapid response mechanism” procedure under the
US-Mexico-Canada Agreement. Another area currently receiving increased
attention – including in the context of the NAP – is public procurement, where
there can be both “carrots” and “sticks” to incentivize and/or punish corporate
performance. These, of course, differ considerably from an EU-type reporting
and disclosure model.   In the United
States, reporting and disclosure efforts have been led at the state level,
notably in California. However, there now is a range of work at the Securities
and Exchange Commission (SEC) centered on the different pillars of
Environmental Social and Governance (ESG): the criteria used in particular by
investors to assess companies’ “sustainability” behavior and the attendant
risks of investing in them.   SEC
regulatory activity is much further along to date on the “E” and “G” elements –
environmental and governance – with the “S” as a significant laggard. But there
is now a heightened focus on what has been termed “human capital” disclosure –
which, depending on its scope, could reach beyond a company’s own operations to
also cover labor rights issues in its supply chains. If sustained advocacy from
civil society organizations succeeds in prompting greater interest from both
executive and legislative branch officials, and if some businesses see focused
human rights/labor measures as in their own interest (as has happened in the
EU), we could see an SEC-enforced HRDD disclosure process as a more focused
U.S. approach that is most comparable to the EU’s regulatory measures.

 

In Chapter 10, Susan Maslow, David Snyder,
and Patrick Miller continue the examination of U.S. measures by considering
HRDD in Contract Law. Human rights due diligence norms can be legalized, as
well as operationalized, through contractual commitments. The contractual
obligation is binding as a matter of contract law regardless of whether any
obligation is imposed by legislative act or judicial decision. By entering into
contracts requiring HRDD, companies can turn soft law, or even mere norms, into
hard-law obligations.  To facilitate
these contracts, a working group of the American Bar Association Business Law
Section published Model Contract Clauses reflecting the UN Guiding Principles
and the OECD Guidance on HRDD, enabling companies to make HRDD “legally
effective and operationally likely.” This chapter will explain the role that
contracts can play in providing enforceable HRDD obligations. While in many
cases these contractual obligations may be considered self-imposed, several
jurisdictions now explicitly or implicitly require the use of HRDD contracts.
Even older strict liability laws (like the US import ban for goods made with
forced labor) effectively push parties toward HRDD contracts: traditional
contractual approaches centered on “representations and warranties” and
infamous “tickbox” questionnaires are notoriously ineffective, meaning that
import will be prohibited.  Moving
contracts to the more effective HRDD regime allows for better supply chain
control. The greater effectiveness derives in part from the operational as well
as the legal role of contracts: HRDD contracts set forth the parties’
expectations, telling the supplier what it must do, and often how to do it, in
order to be paid. Such contracts and the HRDD reporting requirements they
impose increase the likelihood of compliance, successful import, and better
human rights outcomes.

 

In Chapter 11, Justine Nolan and Shelley
Marshall turn their attention to sector and thematic due diligence laws. They assess
the extent to which  HRDD is being
institutionalized in such a way to foster robust mechanisms to address human
rights abuses in supply chains, particularly in regions human rights are not
respected and enforced. They consider the power of HRDD regulation as a
stand-alone mechanism or as a complement to other approaches. The emergence and
development of HRDD in the business and human rights field in the last ten
years has led to some subtle and not-so-subtle shifts in approaches from
government, business, civil society, trade unions, and workers in how they
identify and communicate risk and impact around human rights. For some, HRDD
might be seen as a transformative concept that can revitalize and formalize
corporate accountability for human rights, but for others, it might be viewed
more as a risk management tool that will superficially but not substantively
address rights abuses in supply chains. 
What is clear, is that while the concept of HRDD has increased in
prominence in recent years, there remains significant ambiguity around its
preventative value and potential to address corporate human rights harms in
supply chains. The development of HRDD stems from decades of increasing
pressure on companies and states to tackle labor rights abuses in supply
chains. Business and human rights regulatory approaches have long been
dominated by a reliance on self-regulation and broad top-down approaches that
often fail to substantively engage rights holders or consider sectoral
synergies and dissonance. Will emerging HRDD initiatives be any different? HRDD
was first formally articulated in the United Nations Guiding Principles on
Business and Human Rights in 2011 as an expected standard of conduct for
business, but its form and implementation are open to multiple interpretations.
It has since been incorporated into subsequent regional and international
documents in the business and human rights field, as well as mandated in
national legislation. Several of these initiatives have a sector-specific or
thematically focused approach.

 

Chapter 12, Olga Martin-Ortega turns the
volume’s attention to HRDD in public procurement. Global supply chains are
organized to deliver goods and services in a fast, efficient, and
cost-effective way. They are not designed to protect human rights or fulfill
decent working conditions and decent lives for those working on them. Complex
processes and stages, often with hundreds of companies and entities involved
across a number of states and jurisdictions involve millions of workers exposed
to hazardous working conditions, excess—and often compulsory—overtime, low
wages, discriminatory practices, and abusive and fraudulent labor recruitment,
which even lead to bonded labor, forced labor, and human trafficking. To
address these issues, which the international human rights and international
labor rights regimes have so far failed to resolve, it is essential to devise
how to extend human and labor rights protection beyond individual states’
borders and how to remedy violations that take place away from where the
decision maker sits. Human Rights Due Diligence is currently being relied upon
as a regulatory instrument to fulfill corporate responsibilities to protect
human rights beyond their direct impacts, including for the actions of their
business partners and in their global supply chains. However, there are no
similar provisions for states, even if states’ supply chains overlap with
private supply chains; human rights abuses are linked to the products the
private sector buys as much as those that the state purchases. In international
law, states’ duties to protect human rights from violations caused by third
parties, including businesses, continue to be restricted to protecting those
under their jurisdiction. Whilst the UNGPs contain a non-committal reference to
extraterritoriality, which could be argued has done more harm than good to the
development of the role of the state in regulating and monitoring global supply
chains, they contain a provision that is often overlooked and, this chapter
argues, could hold the key to the use of public procurement as a tool to
protect, promote and potentially remedy such abuses. Associating the award of
public contracts to the protection of human rights and promotion of decent work
in supply chains provides a clear opportunity for states to exercise their duty
to protect human rights. The question arises, do states have an obligation to
procure goods,  services, and works that
are delivered under conditions that respect human rights? And if so, what does
it entails and how should it be articulated in the framework of a legal system,
public procurement law, which prioritizes efficiency, non-discrimination of
economic actors, competition, and value for money? This chapter considers
whether the state-business nexus can extend to public procurement and how can
due diligence in public supply chains be articulated to promote human rights
protection beyond states’ borders through purchasing from companies that ensure
human rights are respected throughout the whole supply chain contribute to
supply chains which do not violate human rights.

 

In Chapter 13, Rachel Chambers and Anil
Yilmaz Vastardis examine HRDD and disclosure regimes. In this chapter, we
address the legalization of human rights due diligence (HRDD) via disclosure
requirements, the interactions between these areas, and the consequences of
their conjunction. Within business and human rights, disclosure and
transparency measures were among the first standards to be legalized through
legislation, such as Dodd-Frank section 1502 (2010), EU Non-Financial Reporting
Directive 2014, and the California Supply Chain Transparency Act 2012. It was
expected under these laws that companies would carry out HRDD prior to issuing
disclosures. The experience with the legalization of disclosure standards
provides valuable lessons for understanding the impact of legalization itself
and the effectiveness of various types of legalizations in this area, but also
for understanding how far mandatory disclosure requirements can go in
indirectly imposing HRDD requirements on companies. In order to analyze the
relationship between disclosure rules and HRDD, this chapter will consider this
early conjunction between disclosure and HRDD, and the latest iteration, namely
disclosure obligations as part of HRDD laws such as the French Law on the
Corporate Duty of Vigilance. With the seeming progression of legalization of
business and human rights norms from disclosure obligations to process
obligations (HRDD), there remains an enduring role of disclosure, for instance
in securities laws in the United States. We ask: how can disclosure promote
HRDD, and how can HRDD elevate the quality of disclosure?

 

In Chapter 14, Jernej Letnar Černič examines
HRDD in the context of the OECD’s system under the Guidelines for Multinational
Enterprises (2023). Doing business increasingly requires meeting minimum human
rights and environmental standards. In recent years, states have adopted
National Action Plans to implement the United Nations Guiding Principles for
Business and Human Rights. Rights holders have in the past faced difficulties
in enforcing accountability for business-related human rights abuses.
Therefore, much effort in business and human rights has been placed into
measures preventing human rights violations. In the last decade, human rights due
diligence have become an emerging standard of responsible business conduct.
Human rights due diligence create an obligation of conduct for companies to
identify, manage and respond to human rights risks. OECD Guidelines for
Multinational Guidelines are pioneering international documents regulating
business conduct in human rights, environment, and anti-corruption. They
required corporations based in OECD member states to respect and protect human
rights when doing business extraterritorial. In the past decade, OECD
Guidelines have propelled the development of sectoral human rights due
diligence guides. Also, the OECD Guidelines have established a unique
quasi-judicial mechanism to enforce its potential violations in the form of a
National Contact Point placed in the public administration of the OECD Member
State. This chapter discusses the normative framework of due diligence under
the OECD Guidelines. After that, it analyses the recent case law of the
selected National Contact Point concerning human rights due diligence. Equipped
with the knowledge, the chapter proposes some normative ideas for strengthening
human rights due diligence processes in practice.

 

Lastly, in Chapter 15, Lucas Roorda
considers HRDD and foreign liability claims. An increasing number of states are
adopting mandatory human rights due diligence (mHRDD) legislation, a
development which may gain a significant boost once the European Union adopts
its Directive on Corporate Sustainability Due Diligence. The current proposal
for the Directive contains a provision that would allow victims to sue parent
or lead companies within the scope of the Directive for harms arising out of
insufficient due diligence policies or practices, regardless of where those
harms actually took place. The Directive is still under negotiation and its
scope and content may be subject to change, but in broad terms, civil liability
for failing to do proper human rights due diligence has broad support: not just
in the EU, but also globally given its inclusion in drafts of the proposed
binding instrument on business and human rights. This contribution maps the
potential impact of such provisions on existing litigation against corporate
human rights abuses, which mostly consists of ‘foreign direct liability’ (FDL)
lawsuits. Specifically, it discusses how civil liability for violating mHRDD
provisions affects procedural obstacles in FDL cases: adjudicative
jurisdiction, applicable law, disclosure and access to information, and
financing. While none of these obstacles are intentionally or explicitly
addressed by the proposed Directive, nor by other domestic mHRDD instrument,
the construction of their respective liability provisions can result in
indirect impacts on how victims experience and overcome such obstacles. The
contribution identifies which parameters determine the effectiveness of these
indirect impacts from the perspective of the victims’ right of access to court,
and closes with a general reflection on the desirability of these indirect
results versus more explicit amendments to civil procedure and practice.

 

The volume concludes with Part IV. In its
single essay, Larry Catá Backer and Claire Methven O’Brien look to the future
of the project of due diligence legalization. 
The object here is to take stock of measures and regulatory trajectories
that have emerged especially in the second and third decades of this century.
That stock taking then serves as the basis for considering where these
legalization trajectories may take the project. 
Here one explores the relationship between due diligence as stand along
legislative projects and their attempted embedding in an international
instrument for business and human rights. 
One here considers, as well, the value of a focus on human rights in a
context in which human rights itself may be operating within a broader
regulatory ecology of sustainability, climate change, and biodiversity.
Lastly  the relationship between this due
diligence legalization project and the transformation of the structures,
manifestations, operations, and conceptualizations of globalization must be
taken into account.  The old project
grounded in the fundamental principle of legalized co vergence, since the start
of the second decade of the 21st century appears to be giving way to a more
fractured and regionalized set of systems. 
The issues then are reframed from one seeking a single centre around
which due diligence may be conceptualized and applied, to one based on a
multi-polar framing and a priority focus on the way these systems may be
coordinated.