How human rights and environmental due diligence are intertwined to achieve a more sustainable future

How human rights and environmental due diligence are intertwined to achieve a more sustainable future
  • Even when and when states fail to protect workers, communities, and the environment, businesses have a responsibility to respect human rights.
  • The European Commission's draught standard-setting legislation on sustainable corporate governance has the potential to change the game in terms of corporate accountability.
  • The introduction of mandated human rights and environmental due diligence is a watershed moment for businesses to show their commitment to good corporate governance and a long-term future.

As the COVID-19 pandemic enters its third year, and with the possibility of war looming over Europe, preserving people and the environment is no longer a nice-to-have, but a must. A increasing consensus is that business has a responsibility to respect human rights, even when and when states fail to uphold their obligations to protect workers, communities, and the environment.

The European Commission is due to release a draught of standard-setting legislation on sustainable corporate governance next week, with the goal of ensuring that human rights and the environment are protected throughout the value chains of EU-based businesses. Despite numerous delays, this might be a watershed moment for corporate accountability if the EU lives up to the lofty goals it set for itself two years ago. "It's time to make sure that ethical business conduct and sustainable supply chains become the norm," EU Justice Commissioner Didier Reynders said in April 2020.

Integrating inclusion into daily life

Investors are putting increased pressure on firms and their boards to identify and address vulnerabilities in their value chains, and this includes the need to connect more directly with communities impacted by corporate activity. Here's where business can make a big difference by putting inclusiveness into reality. Proactive behaviours must be promoted from the top of an organisation. My firm, Roche, has recognised the value of fostering an atmosphere in which all employees are actively engaged, treated fairly and respectfully, have equal access to opportunities and resources, and are free to be themselves while contributing fully to the company's success. This is only achievable with the company's and business partners' engagement, and the same technique may be used to respect communities along the value chain.

A wide range of businesses, investors, and business initiatives have already recognised that effective obligatory human rights and environmental due diligence is a way for businesses to raise the bar and secure long-term stability and profitability.

Over the last decade, businesses have been directed by a voluntary framework specified by the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises to guide their due diligence activities. Due diligence, as a risk mitigation method, establishes a framework for firms to "know and show," then act on, their risks. However, only 37 percent of firms presently do environmental and human rights due diligence, according to a 2020 study by the British Institute of International and Comparative Law. Business activity continues to put people and nature at danger, and abuses persist where awareness is limited. The threats to vulnerable labour and populations will only increase as our natural world deteriorates.

To improve business, we must first comprehend how business actions affect (and are influenced by) all forms of capital: natural, social, human, and created. Company boards are important to this change and must be held accountable for due diligence and its implications. Management systems are the cornerstone of company performance. Corporate governance must keep up with investor and stakeholder demands.

In my decades as a board director in charge of corporate compliance, I've learned that corporate responsibility should never be reduced to a box-ticking exercise, as it is all too often today. Incorporating due diligence into firm culture and practise not only promotes respect for human rights and the environment, but it also provides a business opportunity, resulting in a virtuous loop of economic stability and inclusion. Successful business stewardship can and should coexist with responsible management of our workforces, impacted communities, and the environment.

Raising the bar when it comes to dealing with human rights and environmental issues

Due diligence is an important stage in determining and responding to a company's impacts. Due diligence ensures that policy, practise, and investment are all focused on the same goal. Measuring and investing in all capitals is the way to long-term company success – and it provides us a real chance to meet the European Green Deal and the United Nations Sustainable Development Goals. Impact management can and will open up new commercial prospects for corporate agility, and it will provide fresh meaning to the business as a force for good attitude. Sustainability must be integrated into risk management processes and existing corporate governance procedures by corporations and their boards of directors.

Several European countries, including France, Germany, and Norway, have already begun to establish rigorous human rights and environmental due diligence criteria. In addition, the Netherlands and Belgium are laying out their preparations. It makes sense to coordinate and integrate these efforts through the EU, so raising Europe to the forefront of the world in enforcing such policies. As a result, European businesses would dramatically raise the bar for addressing global human rights and environmental issues, while also levelling the playing field between regions and among stakeholders. If we are to scale up these initiatives, international cohesion will be required.

It is past time for the EU to act — and act decisively. The EU will set the tone for firms and their boards of directors in impending legislation. The introduction of mandated human rights and environmental due diligence is a watershed moment for business executives who want to demonstrate their commitment to both good corporate governance and a sustainable future.