By Judit Kuschnitzki
Public pressure is mounting on businesses to protect human rights along their supply chains. Governments around the world began translating the UN Guiding Principles on Business and Human Rights (UNGPs) into law. These developments impact human rights due diligence in African supply chains.
Human rights due diligence (HRDD) is central to UN guidelines and new national legislation. It considers the horizontal integration of human rights across a business. HRDD ensures human rights stay embedded in company policies and day-to-day management.
Demands for HRDD affect Africa’s growing consumer market and export-oriented companies. More business people are asked for social sustainability and human rights compliance in African countries.
According to the Corporate Human Rights Benchmark (CHRB), these two industries have a high risk of human rights violations. Other high-risk sectors include apparel, ICT, and automotive manufacturing.
Human rights compliance is becoming a prerequisite for commercial success. To get ahead of the curve, companies are advised to adopt innovative HRDD.
At the national level, governments and organisations are responding to growing demands for regulatory change. The African Union created the Africa Mining Vision in 2009. It provides a policy framework that protects local communities from harm by the extractive industry. African governments have also adopted National Action Plans (NAPs) to reaffirm their commitment to UNGPs.
Internationally, the adoption of mandatory HRDD is gaining momentum too. Especially in Europe, countries are ratifying new legislation that requires the conduct of HRDD along supply chains. On March 3, the German federal cabinet passed an official government draft for a mandatory due diligence law. Likewise, the EU announced to adopt new supply chain laws this year, requiring mandatory corporate HRDD. If the law is implemented, EU buyers must trace their supply chains down to the level of small farms.
In the cocoa industry, for example, the EU has already promised funding and other support to help stakeholders in Ghana and Ivory Coast adapt to these changes. As two of the world’s largest cocoa suppliers, none of these two countries can afford to lose the EU as a buyer. Around 67 per cent of Ivorian cocoa exports go to the EU.
Shifting investor and consumer preferences
Investors as well have begun to factor social risks into their investment decisions. In March 2020, a group of 176 international investors sent a letter to 95 companies urging them to conduct HRDD. The targeted companies had failed to score any points on the HRDD indicators in the 2019 CHRB assessment.
Similarly, more customers include social considerations in their purchasing decisions. Research shows that human rights compliant companies benefit from a better reputation among both customers and investors.
Why to invest in human rights due diligence
A study conducted by the EU Commission in October 2020 found a positive correlation between the implementation of environmental and social policies and companies’ economic performance (with a focus on profitability).
Human rights due diligence involves implementation costs, which can be significant. Yet, these costs are offset by savings gained through reduced conflicts and improved knowledge of the value chain. The latter facilitates the anticipation and management of regulatory and business continuity risks.
There is also evidence that responsible businesses have a more secure supply of goods and services. This is due to less labour unrest, staff turnover, hiring and training costs.
Due diligence can enhance companies’ understanding of markets and sources of supply. This facilitates the effective management of health and other crises. A 2021 study by the World Benchmarking Alliance and CHRB showed that HRDD has led to better responses to the COVID crisis.
How to approach human rights due diligence
Due diligence helps businesses identify, prevent, mitigate, and account for potential human rights abuses in their supply chains.
Companies that want to conduct HRDD can turn to UNGPs and the OECD Guidelines for Multinational Enterprises. Both documents provide global HRDD standards that explain how human rights due diligence can be approached.
The UNGPs expect companies to assess all potential human rights risks and impacts. Yet, given the scale of many supply chains, companies could begin their due diligence by focusing on key supply chains. They could also prioritise high-risk supply chains, analysing factors such as country risk.
In high-risk supply chains, HRDD is best complemented by a human rights impact assessment. This can help identify needed remedies. Due to the complexity of supply chains, remedy may require collaboration across stakeholders.
Best practice suggests that a pro-active and innovative approach is most suited to ensure human rights compliance. In the past, companies relied on social audits, expecting supply chain partners to fix shortcomings on their own. Often, this approach resulted in a gap between corporate commitments and processes, and actual results. Businesses are advised to instead develop innovative HRDD strategies. Ideally, these involve local stakeholders and emphasize local ownership and capacity building.