Due Diligence

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Risk Management

Companies must recognise that they are subject to increased expectations in terms of effective identification and management of social issues. A failure to do so – and the resulting inequality – is increasingly seen as representing a systemic risk to the resilience of business operations and value chains. Expectations are reinforced by the wave of new due diligence regulations and reporting standards focussed on addressing both the ‘E’ and ‘S’ in ESG (see, for example, our earlier blog posts on the EU’s Corporate Sustainability Reporting Directive here, as well as on the UK Financial Conduct Authority’s Greenwashing rules here).

CFOs have a critical role in communicating how companies are addressing wider social issues linked to their business operations and ensuring companies’ compliance with related regulations and reporting standards. To help CFOs execute this role effectively, the World Business Council for Sustainable Development (the “WBCSD“) and Shift have released a primer for CFOs for advancing the ‘S’ in ESG (the “Report“). The Report aims to provide a starting point for CFOs working to address the demands and challenges associated with the ‘S’ in ESG, covering both an overview of the what, the who and the how of corporate social performance and key recommendations for improving the measurement of that performance.…

Continue Reading Business and Human Rights – a “primer” for CFOs for advancing the ‘S’ in ESG

Governance

On 28 February 2023, the Judicial Court of Paris (the “Court”) issued an interim order (the “Order”) in the context of a judicial dispute concerning compliance with the French Law n°2017-399 of 27 March on the Duty of Vigilance (the “French Vigilance Law”). This decision is the result of a lengthy judicial process that started back in 2019 when the defendant was summoned by several NGOs before the Court for an alleged lack of compliance with its obligation of vigilance.…

Continue Reading Business and Human Rights: first French case-law on the Duty of Vigilance – judges adopt a cautious approach to avoid judicial interference in corporate management

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On 24 January 2023, each of the European Parliament’s trade committee and economic affairs committee reached agreed positions on the financial aspects of the draft Corporate Sustainability Due Diligence Directive (the “Draft Directive”). The agreed positions mark a departure from the European Commission’s and the Council of the European Union’s previous positions on the…

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By far the largest focus in recent years in terms of ‘responsible investment’ has been on the ‘Environment’ limb of ESG. The UN Principles of Responsible Investment (“PRI“) – an international organisation working to encourage the integration of ESG factors into investment decision making – is now seeking to change this with the launch of its ‘Advance‘ initiative, which is a “collaborative stewardship initiative where institutional investors work together to take action on human rights and social issues”. This forms part of a renewed effort to reinvigorate the ‘Social’ and ‘Governance’ limbs to ESG and bring social initiatives to the forefront of ‘responsible investing’.…

Continue Reading Business and human rights: investors commit to action on human rights and social issues via the world’s largest human rights stewardship initiative

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On 6 December 2022, the Council of the European Union (the “Council“) and the European Parliament (the “EP“) reached a provisional agreement on a proposal to minimise the risk of deforestation and forest degradation with products that are imported into, or exported from, the EU (the “Agreed Position“). The…

Governance

On 30 November 2022, the Council of the European Union (the “Council”) adopted its negotiating position on the European Commission’s proposal for a corporate sustainability and due diligence directive (the “Draft Directive”). As discussed in our previous blog posts (which you can read here and here), the proposed Draft Directive set out an EU standard for human rights and environmental due diligence (“HREDD”) and required EU member states to introduce legislation making in-scope companies responsible for violations of HREDD standards across their entire value chain. This meant that companies would have to conduct HREDD on their suppliers and clients, and could be held liable for how their products and services are used and disposed of. Although the fundamental principles of the proposed Directive remain intact, the Council’s suggested amendments to the Draft Directive do include some important changes.…

Continue Reading Human Rights and the Environment – EU Council responds to the draft Corporate Sustainability Due Diligence Directive

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On 21 November 2022, the World Benchmarking Alliance – a non-profit organisation that develops benchmarks to hold companies to account for their part in achieving the United Nations Sustainable Development Goals – published its 2022 Corporate Human Rights Benchmark Insights Report (the “2022 Report“).

Compared to previous iterations (which we have discussed in a previous blog post here), the 2022 Report devotes more attention to companies’ efforts to ensure that human rights are respected within their operations and supply chains, rather than simply focussing on the human rights-related commitments that companies have made. The 2022 Report also focusses on companies’ stakeholder engagement, their business models, strategies and risks, and whether they prohibit forms of forced labour.

In applying this revised methodology, the 2022 Report concludes that companies are better recognising their human rights-related responsibilities and have improved their human rights-related risk management strategies. However, the 2022 Report also highlights that the pace of this improvement has been very slow.…

Continue Reading Business and Human Rights: Corporate Human Rights Benchmark 2022 shows that corporate respect for human rights has gained momentum

Japan - Tokyo

The requirement for companies to conduct human rights diligence (“HRDD“) is increasingly being implemented by legislators across the globe.  For example, the EU is expected to adopt its draft corporate sustainability and due diligence directive in 2023. Importantly, the Directive will apply to Japanese companies and their subsidiaries if they meet certain criteria (for further information on the applicability of the directive to Japanese companies, read our earlier blog post here). Japanese companies are, therefore, being required to strengthen their HRDD processes as a result of the legislation of foreign jurisdictions (including the EU).

On 13 September 2022, the Japanese Government published its Guidelines on Respecting Human Rights in Responsible Supply Chains (the “Guidelines“), which recommend that all enterprises engaging in business activities in Japan respect human rights in their supply chains and carry out HRDD.…

Continue Reading Business and Human Rights: Japan publish Guidelines on Respect for Human Rights in Responsible Supply Chains

European Union - Germany - Berlin

Companies have long been awaiting some more clarity on their reporting obligations vis à vis the German Supply Chain Due Diligence Act (SCDDA). The BAFA has now shed some light on what is expected of the reporting entities by publishing 38 detailed questions (in addition to some general information on the reporting entity) covering the whole spectrum of due diligence obligations under the SCDDA. …

Continue Reading Business and Human Rights: Supply Chain Due Diligence – Questionnaire for reporting published by German authority

United Kingdom - London

Investors across the globe are increasingly putting pressure on legislators to mandate human rights and environmental due diligence (“HREDD“). The UK Government has not been immune from such pressure.

As highlighted in our earlier blog post, in early September 2022, a group of 47 companies, investors, business associations and initiatives operating in…