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Corporate due diligence

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Assumption of responsibility for human rights in supply and value chains

Enterprises have a responsibility to respect human rights. Corporate due diligence constitutes the second pillar of the UN Guiding Principles on Business and Human Rights. Enterprises are important players in society and influence local structures and the lives of individuals through their business activities and relationships. They bear the risk that their corporate activities can, directly or indirectly, have an adverse impact on human rights. One reason for this is the growing connectivity of business activities across the globe and the fact that supply chains have become longer and more complex over the last several decades.

Being aware of this risk is part of corporate responsibility. The question is: which activities have the potential to adversely impact human rights and at which points in the supply chain could human rights be adversely impacted? How likely are negative impacts and how serious would they be? Businesses can prevent or mitigate adverse effects only when they have identified and know the risks.

Yes, when it comes to human rights, the state bears the greatest responsibility. It must respect, protect and ensure human rights. In other words, human rights are not only negative rights that make it possible for individuals to defend themselves against arbitrary actions on the part of the state such as torture or forced disappearance. The state must also ensure that people are not harmed through the actions of others – for example, enterprises. This follows from the Universal Declaration of Human Rights of the United Nations, the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights (ICESCR). These UN conventions, together with the ILO core labour standards, provide the framework for assessing the impact of business activities on human rights.

Consequently, there are many ways in which corporate activities can adversely affect human rights (see also the guide "Menschenrechte achten – ein Leitfaden für Unternehmen" (Respecting Human Rights – a Guide for Enterprises)). Examples here include

  • insufficient fire safety in subcontractor factories in the textile industry (Article 7, ICESCR; ILO Convention 152);
  • respiratory diseases in persons living in coal mining areas, a situation in which effectuation of the right to an adequate standard of living and the right to the highest attainable standard of health is either hampered or prevented (Articles 11 and 12, ICESCR);
  • labour exploitation in the nursing care field (Articles 6 and 7, ICESCR)
  • invasion of privacy (Article 17, International Covenant on Civil and Political Rights [ICCPR]) when discount stores monitor employees with the help of miniature cameras and detectives;
  • adverse effects on the right to freedom of expression (Article 19, ICCPR) when European telecommunications companies sell wiretapping equipment to authoritarian governments;
  • infringements on the freedom of association (Article 22, ICCPR) when employees are prevented from organizing in workers’ councils;
  • the employment of private security firms which perpetrate violence against employees or the local population and, by doing so, put the right to life and physical integrity in jeopardy (Article 6, ICCPR).

Not only major global players, but also small and medium-size enterprises create jobs, buy goods and services in other countries, use local resources and, in doing so, have an impact on the living and working conditions of their employees, and on other stakeholders: customers, suppliers, local residents, the social environment, the economic context and the environment. This applies to the individual company's production operations as well as its entire supply and value chain.

This responsibility of enterprises for human rights in their supply chains extends beyond social or environmental corporate responsibility and attendant audits which many enterprises already conduct as part of their corporate social responsibility activities. Adverse effects on the environment have a human rights dimension in many cases. For this, it is important to understand the potential effects of business activities from the perspective of the persons whose rights are affected. Seen from this angle, it is no longer simply a question of, for example, whether the limits for water pollution are adhered to, but rather whether the people concerned have access to clean drinking water and whether they can realise their right to water in this way. What means of redress or grievance do they have when their access no longer exists and private players are responsible for this? Do they have access to effective remedies?

The international community has meanwhile acknowledged that enterprises have a responsibility to respect human rights. It expressly enshrined this in the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

The principles that underpin human rights – participation, transparency and freedom from discrimination, plus empowerment – serve as points of reference for the implementation of human rights and the UN Guiding Principles for Business and Human Rights.

  • Participation denotes the involvement of all parties in political, cultural, religious and economic areas of life. For example, the UN Guiding Principles also call for including persons who are (potentially) affected in business decisions pertaining to their living environment, such as in the case of construction or mining projects which call for people being relocated.
  • Transparency means making easily accessible and comprehensive information available and is closely linked to accountability. Consequently, an important part of corporate due dilligence is not only to know one's human rights-related risks but also to clearly communicate them.
  • The principle of freedom from discrimination aims to ensure equality of opportunity for all and demands that special account be taken of all disadvantaged persons and groups. The UN Guiding Principles therefore call for enterprises to consider additional standards when groups or populations that require particular attention will be potentially impacted (UN Guiding Principle 12).
  • Empowerment means enabling affected persons to demand their rights. The persons affected must have access to remedy.

Human rights are therefore not just a set of rules for which compliance has to be ensured. They also contain principles which all enterprises can accept and integrate into their corporate culture, irrespective of their size, location or products.

In order to meet their responsibility to respect human rights, business enterprises should, in the long term, focus on five elements that constitute the core of corporate due diligence. A detailed description of these five core elements can be found here.

Federal Government expectations

The Federal Government expects all enterprises to introduce guidelines and processes to fulfil their human rights due diligence obligations - in Germany and in their operations abroad.

Five core elements of due diligence

The due diligence obligations of companies concerning human rights are described in detail in the NAP and consists of five core elements.