Responsible business conduct: from to hard law with teeth

‍Our key takeaway: Soft law is just hard law in the making. We know what the soft law standards on responsible business conduct are, but we are still in the process of turning those into hard law. This will look different, depending on each jurisdiction. Being ahead of the legislative curve entails implementing the soft law standards, and looking specifically at inter-connections between human rights due diligence, climate and the environment.  

Clifford Chance and Global Business Initiative (GBI) published: ‘Business and Human Rights: Navigating a Changing Legal Landscape’:

• Rise in legislation on human rights, the environment and climate: Clifford Chance and GBI find that “[l]egislation governing business impacts on human rights is increasing, with mandatory human rights reporting, due diligence obligations and other regulatory and legislative devices continuing to emerge across the globe. These requirements form part of broader efforts to drive responsible business conduct, sustainable corporate governance, and to include business in efforts to tackle climate change through the energy transition.” When it comes to the energy transition, the briefing notes that “many governments now regard the deepening climate crisis as an urgent global challenge. As governments recast their strategies to reach the objectives set out in the Paris Agreement, there is more widespread recognition of the need to respond to the risks to people which arise on the path towards climate neutrality, and in ensuring a transition to net zero that is ‘just’ for all states, communities and vulnerable people. Business has a role in facilitating a just transition, including by carrying out human rights due diligence through supply chains.” The inter-connection between environment and human rights is only going to increase: “There is increasing recognition by policymakers and legislatures of the value of adopting a holistic approach to driving responsible and sustainable business conduct that integrates – at least to some extent – a focus on human rights, the environment and also good governance.”
• Soft law becoming law, although not always in the same way: The briefing highlights that “[l]egislative requirements on corporates to implement responsible business practices are grounded in existing soft law standards such as the UN Guiding Principles on Business and Human Rights (the UNGP) and the OECD Guidelines for Multinational Enterprises (the OECD Guidelines) which have been endorsed by governments, stakeholders and businesses.” At the same time, “[c]ountries are taking different approaches as to whether, how far and in what manner [soft law] standards are incorporated into law. While some states transpose concepts and principles from the standards directly, other states simply incorporate standards into legislation ‘by reference’. Others seek to reflect the standards within newly defined duties, acknowledging their foundations within such standards without transposing them directly into new laws.” Specifically, “[t]he scope of human rights-related legal requirements differs across jurisdictions, meaning that some businesses may need to comply with a multiplicity of requirements. In practice, many businesses are likely to be impacted both directly and indirectly, including those in the value chains of organisations directly subject to the legal measures.”
• Get ahead of the curve before it’s too late: The briefing underscores that “[b]usinesses already familiar with implementing the principle of respect for human rights will have a good basis from which to tackle compliance with new legal requirements. As new laws are embedded into practice and their interpretation is tested, it is possible that soft law standards could serve as a lode star for business responses.” This is particularly important because of the direction of travel. When it comes to litigation, “new corporate due diligence measures provide avenues of redress against business where corporate disclosures, due diligence processes, and/or action on human rights and also environmental issues appear to fall short. The intersection between human rights and environmental concerns is further reflected in a trend toward climate litigation which employs human rights as a basis for corporate legal liability.” Further, “[a]longside human rights due diligence, business should be aware that legislatures and regulators are using other measures (such as sanctions and custom restrictions) to promote responsible business conduct on human rights and environmental issues.” The briefing also provides a helpful map and Annex of all legislation – passed and anticipated.