A Decade on from the Guiding Principles on Business and Human Rights (UNGPs): Is consensus still

A Decade on from the Guiding Principles on Business and Human Rights (UNGPs): Is consensus still lacking?

RAFFAELE PICCOLO, HUMAN RIGHTS COMMITTEE

This year marks 10 years since the release of the Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework (UNGPs).1 While but another example of “soft law”,2 the UNGPs remain a significant instrument in efforts to address the impact of business activity on human rights. First, the UNGPs created an “authoritative focal point” that had otherwise been lacking in this area of concern.3 And secondly, the release of the UNGPs heralded an outbreak in activity (“a wave of lawmaking and standardsetting”) in efforts to address the impact of business activity on human rights.4

Notable among the wave of lawmaking are the various state legislative initiatives which impose “human rights due diligence” obligations upon business entities.5 These legislative initiatives typically require business entities to report and disclose efforts made (if any) to address the impact of business activity on human rights. The “indirect” aim of such legislative initiatives is to cause business entities to take action to address those impacts.6 Examples include the Modern Slavery Act 2015 (UK), the Duty of Vigilance Law (France), and the Modern Slavery Act 2018 (Cth).

This article will briefly consider the background to the release of the UNGPs, before outlining the notable legislative initiatives that states have adopted in furtherance of the UNGPs. This article concludes that a decade on from the UNGPs, consensus is still lacking on how to effectively address the impact of business activity on human rights.

PROTECT, RESPECT AND REMEDY: A FRAMEWORK FOR BUSINESS AND HUMAN RIGHTS

Secretary-General on the issue of human rights and transnational corporations and other business enterprises (SpecialRepresentative). In 2009 the Special Representative proposed “a common conceptual and policy framework, a foundation on which thinking and action can build” to address the impact of business activity and human rights.7 The framework developed, referred to as “protect, respect, and remedy”, comprised of three core principles: 1. the State duty to protect against human rights abuses by third parties, including business; 2. the corporate responsibility to respect human rights; and 3. the need for more effective access to remedies.

The three core principles were described as complementary to each other; each principle supported each other principle in achieving sustainable progress.8

Release of the UNGPs

At the request of the Human Rights Council of the United Nations (‘Human Rights Council’), the Special Representative was then tasked with operationalising the framework.9 The UNGPs are the culmination of that task.10 In June 2011, the Human Rights Council endorsed the UNGPs.11

The UNGPs clarified that business entities have a responsibility to respect human rights, and that this responsibility requires business entities to exercise “human rights due diligence”. In this regard, “human rights due diligence” refers to the processes undertaken to identify, account, prevent and mitigate the impacts of business activity on human rights.12 The more notable examples of states implementing such “human rights due diligence” are considered in turn below. CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT OF 201013

It is unclear whether the California Transparency in Supply Chains Act of 2010 (CTSCA) formed part of the wave of lawmaking that succeeded the UNGPs; the CTSCA was developed and adopted in the intervening period between the announcement of the framework (“protect, respect, and remedy”) in 2009, and the release of the UNGPs in 2011. Nevertheless, the significance of the CTSCA cannot be overlooked in the activity of the past decade. The CTSCA set a precedent, upon which others have drawn, in the implementation of the UNGPs.14

Commencing in 2012, a business entity (retailers and manufacturers) doing business in the state of California, which has annual worldwide gross receipts that exceed US$100 million, must report on the efforts of the business entity to eradicate slavery and human trafficking from the direct supply chain of the business entity for tangible goods offered for sale. Reports must be made on an annual basis. A business entity must disclose the extent to which the business entity engages in verifications and audits of suppliers, the internal control mechanisms in place, and training offered to staff. The exclusive remedy for non-compliance with the obligation to report and disclose is for the Attorney-General to seek injunctive relief.

NON-FINANCIAL REPORTING DIRECTIVE (EUROPEAN UNION)15

Adopted in December, 2014, a business entity (referred to as “Large undertakings which are public-interest entities”) that has on average in excess of 500 employees during the financial year must include in the management report of the business

entity a non-financial statement. The non-financial statement must set out the impact of the business entity on respect for human rights (and other matters, such as environmental, social and employee matters, anti-corruption and bribery).

The non-financial statement must include information regarding the business model, policies and due diligence process implemented in relation to respect for human rights, the outcomes of those policies, principal risks related to respect for human rights, and non-financial key performance indicators.16 Where a business entity does not pursue policies in relation to one or more of those matters, the nonfinancial statement must “provide a clear and reasoned explanation for not doing so.”17

More recently, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive. Relevantly, if adopted, the proposal would (a) extend the scope of the reporting requirements to all “large companies and all companies listed on regulated markets (except listed micro-enterprises)”, (b) require audit of the information reported, and (c) introduce “more detail reporting requirements”.18

MODERN SLAVERY ACT 2015 (UK)

From October, 2015, a business entity (wherever incorporated) which carries on a business, in any part of the United Kingdom, supplies goods or services, and has a total turnover of not less than the amount prescribed by regulation (currently £36 million),19 must prepare a slavery and human trafficking statement for each financial year.20

A slavery and human trafficking statement must outline the steps the business entity has taken during the financial year to ensure that slavery and human trafficking was not taking place in any of the supply chains of the business entity, and in any part of the business entity.21 The slavery and human trafficking statement may include information about the structure of the business, policies and due diligence processes in place, parts of the supply chains where there is risk of slavery and human trafficking and the steps taken to assess and manage that risk, and training available to staff.22 If a business entity has not taken any such steps, then the statement should state that the business entity has not taken any steps.23

The duties imposed upon business entities are enforceable by the Secretary of State bringing civil proceedings in the High Court for an injunction (or, in Scotland, for specific performance of a statutory duty).24 A business entity which fails to comply with an injunction will be in contempt of a court order, and liable to punishment of a fine of an unlimited amount.

DUTY OF VIGILANCE LAW (FRANCE)25

Commencing from 2017,26 a business entity incorporated or registered in France that either, employs at least 5,000 people (including through French subsidiaries), or employs at least 10,000 people (including through subsidiaries located in France and abroad) must establish, and implement, a vigilance plan. The vigilance plan and a report on the implementation of the vigilance plan must be publicly disclosed on an annual basis, and included in the annual management report of the business entity.

The vigilance plan must set out mechanisms to identify and mitigate against violations of human rights and fundamental freedoms, severe bodily or environmental damage, or health risks resulting directly or indirectly from the activities of the business entity (including business entities controlled by the business entity, and subcontractors and suppliers). The vigilance plan must include processes for regular evaluation of subsidiaries, subcontractors and suppliers, actions to mitigate risk and prevent severe impacts, alert and whistleblowing mechanisms, and mechanisms for monitoring and assessing the effectiveness of the measures implemented.

Initially, the law provided for a civil penalty of up to €10 million where a business entity failed to establish, publish, or effectively implement, a vigilance plan, and a penalty of up to €30 million where the failure resulted in harm or injury. The Constitutional Court of France found this aspect of the law unconstitutional, and thus null and void.27

If a business entity fails within three months after having received notice to comply with the obligation to establish, implement, or publish, a vigilance plan, any person with “legitimate interest” can apply to a court for an order directing the business entity to comply. The business entity is also liable to a periodic penalty payment.28 In the event that a breach of the obligation results in harm or injury, the business entity can be held liable, and will have to compensate for the harm that proper fulfilment of the obligations (to establish, publish, or effectively implement, a vigilance plan) would have avoided.29

MODERN SLAVERY ACT 2018 (NSW)

This Act is yet to come into force. A business entity that has employees in New South Wales, supplies goods and services for profit or gain, and has a total turnover in a financial year of not less than $50 million, must prepare a modern slavery statement. A modern slavery statement must be prepared for each financial year of the business entity.30

A modern slavery statement must outline the steps taken by the business entity during the financial year to ensure that its goods and services are not a product of supply chains in which modern slavery is taking place. This may include information about the structure of the business entity, supply chains, due diligence processes in place, parts of business and supply chains where there is a risk of modern slavery taking place and the steps taken to assess and manage that risk, and training available to employees.31

A business entity is liable to a penalty of up to 10,000 penalty units ($1,100,000)32 if the business entity fails to prepare, or publish, a modern slavery statement.33 A person is liable to a penalty of up to 10,000 penalty units if a person provides information in connection with the preparation of a modern slavery statement that the person knows, or ought reasonably to know, is false or misleading in a material particular.34

MODERN SLAVERY ACT 2018 (CTH)

From 1 January, 2019,35 a business entity that has an annual consolidated revenue of at least $100 million, and is based or operating in Australia, must give to the Minister a modern slavery statement.36 A modern slavery statement must describe the structure, operations and supply chains of the business entity, the risks of modern slavery practices in the operations and supply chains, actions taken to address modern slavery practices, including due diligence and remediation processes, and the manner of assessing the effectiveness of such actions.37

If the Minister is reasonably satisfied that a business entity failed to comply with the requirement to give to the Minister a modern slavery statement, the Minister may give a written request to the business entity to do either or both of the following: (a) provide an explanation for the failure to comply, or (b) undertake specified remedial action in relation to that requirement. If the Minister is reasonably satisfied that a business entity failed to comply with any such written request, the Minister may publish, the identity of the entity, the details of the explanation or remedial action requested, and the reasons why the Minister is satisfied that the entity failed to comply with the request.38 CHILD LABOUR DUE DILIGENCE ACT (NETHERLANDS)39

Adopted in 2019 (and likely to come into force in mid-2022) a business entity that sells or supplies goods or services to Dutch consumers, no matter where the business entity is based or registered, must investigate whether the goods or services the business entity offers have been produced using child labour. A business entity must implement due diligence measures to assess whether there is a “reasonable suspicion” that child labour is present in the supply chain or activities of the business entity, and where such a suspicion exists, must design and establish an action plan to prevent and mitigate against the risks of child labour. The business entity must also submit a disclosure statement to the relevant regulator affirming that the business entity has exercised an appropriate level of supply chain due diligence in order to prevent child labour.40

A person may file a complaint with a business entity alleging non-compliance with the law. If the business entity does not resolve the alleged non-compliance within six months, then the regulator may intervene, and issue a direction ordering the business entity to comply. Failure to comply with the direction may result in fines, or additional penalties. Noncompliance with the obligation to submit a declaration can result in a fine of up to €4,350. Failure to implement adequate due diligence measures, or an appropriate plan to prevent child labour in the supply chains of the business entity, can result in a fine of up to €870,000, or if such a fine is not deemed appropriate, a fine of up to 10% of the turnover of the business entity. In addition, a company director is liable to punishment by imprisonment for up to two years if a business entity receives two fines for breaching the law within five years.41

As of March, 2021, consideration is being given to a similar law, the Bill for Responsible and Sustainable International Business Conduct. The Bill proposes to replace the Child Labour Due Diligence Act, to impose a duty of care on all business entities that are either registered in the Netherlands (subject to certain criteria), or sell products or services to Dutch consumers, to prevent negative impacts on human rights (and the environment, including the climate) in the supply chains of the business entity.42 DIVERGING APPROACHES

These state legislative initiatives have markedly different approaches to “human rights due diligence”. The approaches differ in terms of the: (1) size of the business entity (to which the “human rights due diligence” obligations apply); (2) frequency of reporting; (3) nature of the obligations; and (4) means of enforcement.

The size of the business entity encompassed ranges from any and every business entity which sells or supplies goods or services to a local consumer (regardless of where the business entity is based or registered) (Child Labour Due Diligence Act (Netherlands)), to those which have a certain number of employees (Duty of Vigilance Law (France), Non-Financial Reporting Directive (European Union)), to only those which meet a certain annual income threshold (CTSCA, Modern Slavery Act 2015 (UK), Modern Slavery Act 2018 (NSW), Modern Slavery Act 2018 (Cth)).

Of the examples considered, other than the Child Labour Due Diligence Act (Netherlands), most legislative initiatives require a business entity to report on an annual basis.

The nature of the obligations varies considerably. From a mere requirement to report on efforts (if any) to address human rights impacts identified in supply chains (CTSCA, Non-Financial Reporting Directive (European Union), Modern Slavery Act 2015 (UK)), Modern Slavery Act 2018 (NSW), Modern Slavery Act 2018 (Cth)), to requiring business entities to act (implementing plans) to prevent or mitigate identified risks (Duty of Vigilance Law (France), Child Labour Due Diligence Act (Netherlands)). The former relies upon potential damage to reputation to encourage business entities to address any negative impacts of business activity on human rights.43

Finally, the means of enforcement range from publication of non-compliance (Modern Slavery Act 2018 (Cth)) to injunctions (CTSCA, Modern Slavery Act 2015 (UK)), fines (Modern Slavery Act 2018 (NSW), Child Labour Due Diligence Act (Netherlands), Duty of Vigilance Law (France)), and imprisonment (Child Labour Due Diligence Act (Netherlands)). The responsibility of commencing enforcement action also varies, from government authorities, to private citizens (Duty of Vigilance Law (France), Child Labour Due Diligence Act (Netherlands)).

Despite the diverging approaches of states, one should not overlook the continued efforts for a uniform approach to addressing the impact of business activity on human rights (in the form of a single legally binding international instrument).44 However, such a proposal is not without controversy.45

CONCLUSION

The lack of consensus as to the implementation of the UNGPs is evident in the markedly different approaches and legislative initiatives of states to “human rights due diligence”. However, one must acknowledge that the authors of the UNGPs never intended to settle such differences.46

What do these Guiding Principles do? And how should they be read? Council endorsement of the Guiding Principles, by itself, will not bring business and human rights challenges to an end. But it will mark the end of the beginning: by establishing a common global platform for action, on which cumulative progress can be built, step-by-step, without foreclosing any other promising longer-term developments.47

A decade on, the next challenge is to harness that same energy and focus that lead to the creation of the UNGPs, and to build consensus around how to effectively eradicate, prevent, and remedy the negative impacts of business activity on human rights. B

Endnotes 1 Human Rights Council, Human rights and transnational corporations and other business enterprises, 17th sess, 33rd mtg, Agenda Item 3, A/HRC/

RES/17/4 (6 July 2011, adopted 16 June 2011) (‘Human rights and transnational corporations and other business enterprises’); John Ruggie, Report of the

Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, 17th sess, 33rd mtg, Agenda

Item 3, A/HRC/17/31 (21 March 2011) (‘Report of the Special Representative (2011)’). 2 “Soft law” is any material that is not intended, or capable of, generating legal rules, or imposing legally binding obligations. Such materials include declarations, resolutions, and guidelines, adopted by international organisations, or assemblies of States: Stephen Hall, Principles of

International Law (LexisNexus Butterworths, 3rd ed, 2011) 72 [1.202-4]. 3 But see Ruggie, Report of the Special Representative (2011), A/HRC/17/31 (n 1) 3 [5]; John Ruggie,

Report of the Special Representative of the Secretary

General on the issue of human rights and transnational corporations and other business enterprises, 8th sess, 28th mtg, Agenda Item 3, A/HRC/8/5 (7 April 2008) 4 [5] (‘Report of the Special Representative (2008)’). 4 Steven Ratner, ‘Introduction to the Symposium on Soft and Hard Law on Business and Human

Rights’ (2020) 114 AJIL Unbound 163, 163. 5 Throughout this article the term “business entity” is used in a neutral sense. The term refers to all types of entities which might engage in any type of business activity. 6 Margaret Cusenza and Vivienne Brand, ‘“A Tiger

Without Teeth”? the Forthcoming Review of the

Modern Slavery Act 2018 (Cth) and the Place of “Traditional” Penalties’ (2021) 38 Company &

Securities Law Journal 152, 153 (‘A Tiger Without

Teeth?’). 7 Ruggie, Report of the Special Representative (2008),

A/HRC/8/5 (n 3) 4 [8]. 8 Ibid 4-5 [9]. 9 Human Rights Council, Mandate of the Special

Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, 8th session, 28th mtg, A/HRC/

RES/8/7 (18 June 2008). 10 Ruggie, Report of the Special Representative (2011),

A/HRC/17/31 (n 1). 11 Human Rights Council, Human rights and transnational corporations and other business enterprises,

A/HRC/RES/17/4 (n 1). 12 The report of the Working Group on the issue of human rights and transnational corporations and other business enterprises, 73rd sess, Agenda Item 74(b), UN Doc

A/73/163 (16 July 2018) 3 [2]. 13 SB 657, Steinberg. Human trafficking. 14 See, eg, Modern Slavery Bill Evidence Review,

Establishing Britain as a World Leader in the Fight

Against Modern Slavery (16 December 2013) 32-5;

United Kingdom, Parliamentary Debates, House of Commons, 4 November 2014, vol 587, col 687 (Karen Bradley). 15 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending

Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L 330/1 (‘Non-

Financial Reporting Directive’). 16 See also Guidelines on non-financial reporting (methodology for reporting non-financial information) [2017] OJ C 215/1. 17 Non-Financial Reporting Directive (n 15) art 1(1). 18 “Sustainable finance package”, European

Commission (Communication, 21 April 2021) <https://ec.europa.eu/info/publications/210421sustainable-finance-communication_en>. 19 Modern Slavery Act 2015 (Transparency in Supply

Chains) Regulations 2015 (UK). 20 Modern Slavery Act 2015 (UK), s 54(1)-(2). 21 Ibid s 54(4)(a). See also, ‘Statutory Guidance:

Transparency in supply chains: a practical guide’,

UK Government (Statutory Guidance, 20 April 2020) <https://www.gov.uk/government/ publications/transparency-in-supply-chains-apractical-guide/transparency-in-supply-chains-apractical-guide>. 22 Modern Slavery Act 2015 (UK), s 54(5). 23 Ibid s 54(4)(b). 24 Ibid s 54(11). 25 Loi 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre. 26 Sandra Cossart, Jérôme Chaplier and Tiphaine

Beau De Lomenie, ‘The French Law on Duty of Care: A Historic Step Towards Making

Globalization Work for All’ (2017) 2(2) Business and Human Rights Journal 317, 317 (‘The French

Law on Duty of Care’). 27 Anna Triponel and John Sherman, ‘Legislating human rights due diligence: opportunities and potential pitfalls to the French duty of vigilance law’, International Bar Association (Web Page, 17 May 2017) <https://www.ibanet.org/Article/Detail. aspx?ArticleUid=E9DD87DE-CFE2-4A5D9CCC-8240EDB67DE3>; Cossart, Chaplier and

De Lomenie, ‘The French Law on Duty of Care’ (n 26) 321. 28 “periodic penalty payments” are fines payable on a daily or per-event basis until the business entity complies with the obligation, see, Stéphane

Brabant and Elsa Savourey, ‘France’s Corporate

Duty of Vigilance Law: A Closer Look at the Penalties Faced by Companies’ (2017) 50 (December) International Review of Compliance and

Business Ethics 1, 1. 29 Sarah A. Altschuller and Amy K. Lehr, ‘The

French Duty of Vigilance Law: What You Need to Know’, Global Business and Human Rights (Web Page, 3 August 2017) <https://www. globalbusinessandhumanrights.com/2017/08/03/ the-french-duty-of-vigilance-law-what-you-needto-know/>. 30 Modern Slavery Act 2018 (NSW), s 24(1)-(2). 31 Ibid s 24(4)-(5). 32 Crimes (Sentencing Procedure) Act 1999 (NSW), s 17 (“a reference in any Act or statutory rule to a number of penalty units (whether fractional or whole) is taken to be a reference to an amount of money equal to the amount obtained by multiplying $110 by that number of penalty units”). 33 Modern Slavery Act 2018 (NSW), s 24(2), (6). 34 Ibid s 24(7). 35 Modern Slavery Commencement Proclamation 2018 (Cth). 36 Modern Slavery Act 2018 (Cth), ss 4-5, 12-13. 37 Ibid s 16. 38 Ibid s 16A. 39 Wet Zorgplicht Kinderarbeid. 40 Daniel Sharma and Franz D. Kaps, ‘Human

Rights Due Diligence Legislation in Europe - Implications for Supply Chains to India and

South Asia’, DLA Piper (Publication, 26 March 2021) <https://www.dlapiper.com/en/us/ insights/publications/2021/03/human-rightsdue-diligence-legislation-in-europe/>; Julianne

Hughes-Jennett and Steven Minke, ‘Dutch

Child Labour Due Diligence Law’ Hogan Lovells (Blog, 8 July 2019) <https://www.hlregulation. com/2019/07/08/dutch-child-labour-duediligence-law/>. 41 Ibid. 42 Joseph Wilde-Ramsing, Manon Wolfkamp and

David Ollivier de Leth, ‘The Next Step for

Corporate Accountability in the Netherlands:

The New Bill for Responsible and Sustainable

International Business Conduct’, NOVA

Knowledge Centre for Business, Human Rights and the

Environment (Web Page, 18 March 2021) <https:// novabhre.novalaw.unl.pt/new-bill-for-responsiblesustainable-international-business-conductnetherlands/>. 43 Cusenza and Brand, ‘A Tiger Without Teeth?’ (n 6) 153. 44 Human Rights Council, Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights, 26th sess, 37th mtg, UN Doc A/HRC/

RES/26/9 (26 June 2014). 45 Human Rights Council, Report on the sixth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, 46th sess, Agenda item 3,

UN Doc A/HRC/46/73 (14 January 2021) 6 [27]. 46 Ruggie, Report of the Special Representative (2011), A/

HRC/17/31 (n 1) 5 [13]-[16]. 47 Ibid 5 [13].