Human Rights Due Diligence for CSDDD Compliance

In a previous article, we looked at the UN Guiding Principles on Business and Human Rights and how they serve the purpose of the Corporate Sustainability Due Diligence Directive (CSDDD). In this article, we summarise recommendations for setting up a human rights due diligence process based on the OECD Due Diligence Guidance for Responsible Business Conduct.
The OECD’s guidance recommends six essential steps for human rights due diligence:

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1. Embed responsible business conduct into policies and management systems

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At the top, organisations should have an overarching governance system that ensures policies or procedures are in place to detect, mitigate, and remediate human rights risks or violations. The principle of this step is first and foremost prevention, to avoid the likelihood of risks occurring by adopting responsible business practices.
What does this look like? Companies should have written policies that affirm a commitment to human rights. For example, many companies have a zero-tolerance statement or an anti-harassment or no-discrimination policy, or any variety of labour policies related to working and employment conditions. These policies can be extended to partner and supplier agreements, to ensure that the same standard is practised in your value chain.
Assigning accountability for the enforcement of human rights policies ensures that these policies are practised. This may look like integrating human rights-related KPIs into management performance reviews and compensation structures. Training on policy implementation may also be needed as communication along the value chain.

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2. Identify and assess actual and potential adverse impacts associated with the enterprise’s operations, products or services

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A comprehensive business activity mapping exercise is useful for this step to identify human rights-related impacts. This step also involves a prioritisation exercise of the most important matters based on likelihood and severity. During this stage, it is important to consult stakeholders and to remember to revisit the risk identification exercise when there is a significant change in operations, location, or business relations.
The OECD guidance specifically recommends that the assessment should determine if the company is the cause of an impact, contributed to the impact, or is linked to an impact through its business relations. These distinctions are important for the next identifying mitigating actions.

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3. Cease, prevent and mitigate adverse impacts

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The cease, prevent and mitigate approach recommends stopping activities that cause or contribute to adverse impacts, and then devising policies or plans that prevent and mitigate future impacts. It may not be practical to cease activities immediately where an activity generates a significant share of revenue for a company. In cases where a risk is not
immediately critical, timelines may be used to gradually cease activities or to gradually improve conditions. The impact of cessation of activities on stakeholders should also be considered and policies for disengagement with business partners or suppliers in violation of company policies should be made clear in contractual arrangements.

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4. Track implementation and results

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To prevent bias, external consultation can be used to track and monitor performance on human rights issues. It is especially useful in human rights due diligence to have an effective grievance mechanism that is impartial, guarantees anonymity, ensures action, and is accessible to stakeholders. This should be part of a wider periodic stakeholder engagement exercise.

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5. Communicate how impacts are addressed

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Communication internally and with stakeholders should start from the policies and actions that you are committed to, and communicate the outcomes of the policies and actions taken. Any communication should be made accessible to its intended audience, with the option of multiple lines of communication with stakeholders.
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6. Provide for or cooperate in remediation when appropriate

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Where violations have been found to occur as a result of the company’s operations or business relations, remediation measures should be implemented according to policy. Remediation may be in the form of financial or non-financial compensation, apologies, restitution, or rehabilitation. Punitive sanctions can be taken against the violators, and prevention measures implemented in the future. It would be wise to devise a remediation procedure conducted by a neutral third party in case of any disputes.

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