Trends in Human Rights Due Diligence: Technology Paves the Way Forward

May 4, 2022

Trends in Human Rights Due Diligence: Technology Paves the Way Forward

 

Since the unanimous endorsement of the United Nations Guiding Principles on Business and Human Rights (UNGPs) in 2011,the past decade has brought about a growing wave of awareness and policy changes in support of human rights due diligence (HRDD). According to the framework laid out in the UNGPs, HRDD includes four key components: assessing actual and potential human rights impacts; integrating and acting on the findings; tracking responses; and communicating about how impacts are addressed. The list of international, regional, and country-level measures to enforce corporate transparency and accountability with respect to HRDD has been steadily increasing year-on-year ever since the adoption of the UNGPs, and this impetus is very likely to continue, with many jurisdictions contemplating new legal instruments.

 

For example, on December,2021, the Netherlands became the latest country to announce its intention to introduce mandatory human rights and environmental due diligence laws at the national level, joining other countries across Europe and North America – e.g. France, Germany, and Canada – in aligning their legislation to reflect the UNGP standards for responsible business. Although subject to recent delays, the European Commission has similarly put forward a landmark legislative directive on mandatory human rights due diligence that would come into force by the end of this year or early 2023. Policymakers in other jurisdictions like the United States are also increasingly utilizing other measures, including sanctions and customs restrictions, to promote good business conduct and prohibit companies from importing products linked to alleged human rights abuses.

 

However, despite the increased attention and high-level visibility around the issue, there is a major gap between large companies’ public statements regarding human rights due diligence, and the strategies they design and implement to achieve genuine impact. According to a2020 report published by the European Union, while the vast majority of companies surveyed expressed their commitments to respecting human rights, only 36% actually publicly disclosed the processes they utilize to prevent human rights risks and violations throughout their supply chains. The same report indicated that only a small proportion of businesses (16%) cover their entire value chain, and many only undertake due diligence in one specific area such as occupational health and safety, non-discrimination, or gender equality.

 

Increasing emphasis is being placed on conducting HRRD across the entire value chain, which includes all activities, operations, and business relationship with entities that supply or receive products, inputs, or services at any stage, not just those in a direct supply chain. Broader impacts on communities surrounding production facilities are often times neglected as a hidden risk, alongside the operations of downstream suppliers and business partners outside of a company’s own supply chain. Workers around the world face systematic threats to fully exercising their human rights, such as precarious working conditions, indebtedness from recruitment fees, and widespread sexual harassment and discrimination - theCOVID-19 pandemic has only exacerbated these threats and in many cases eroded existing protection mechanism as companies slashed budgets in compliance and governments diverted funds to other areas. While some risks may be easily identifiable and remediated if they are caused directly by something within the scope of a company’s activities, it is equally important within a comprehensive approach to HRDD to consider the negative impacts with more indirect linkages –such as through subsidiaries or subcontractors - that may be contributing to the overall risk environment or likelihood of harms occurring.

 

Companies not only face increasing reporting requirements that enforce transparency around their HRDD programs and efforts, but also rising expectations and demands from consumers, investors, and civil society alike, who are bolstering widespread support for businesses to play a more proactive role in safeguarding the rights of workers within their operations. Businesses who are able to effectively build their capacity in HRDD and communicate their collaborative efforts can not only better address increasing scrutiny from these range of stakeholders, but also be ahead of the curve by being responsive and adaptable towards future reporting requirements and emerging risks. Moreover, shifting beyond a compliance driven approach will allow for the types of holistic engagement that prevents harms from occurring in the first place.

 

Practices for HRDD within small and medium enterprises are less established, and while they may undertake some due diligence within existing regulated areas, they oftentimes fail to address risks outside of those areas. Large multi-national corporations have in many ways been setting the pace in adopting new solutions and utilizing their commercial leverage with suppliers to change practices, however SMEs often face significant budgetary and human resources constraints that limit their ability to undertake in-person social audits and conduct thorough supply chain risk assessments and continuous monitoring. This may lead to siloed approaches and due diligence that doesn’t extend beyond the first tier to lower tiers where risks may be more severe and difficult to capture. Additionally, social audits– the mainstream practice to monitor labor conditions over the past few decades– have also faced widespread criticism for being limited in scope, for failing to meaningful engage worker voices, and for being ineffective at detecting and remediating human rights abuses in global supply chains.

 

Although there are many obstacles in adopting scalable solutions given the complexity across value chains –particularly all the way upstream to raw material extraction or cultivation -innovative technologies are equipping companies with the capability to collect and analyze granular data, conduct ongoing monitoring, and prioritize action where the risks of human rights violations are most prominent. Digital technologies are opening up game changing possibilities and breaking down barriers for improved decision-making processes through better data verification, solution customizability, and insights garnered from big-data and artificial intelligence. There is a tremendous appetite for user-friendly, low-cost technology tools that deliver value and support efforts at every stage of HRDD processes, from supply chain mapping all the way through to automated reporting. By collecting and aggregating human rights risks indicators alongside data on business process like purchasing volume, supplier location, and workforce demographics, companies can more effectively dedicate resources in a targeted fashion. Technology solutions can assist workers, suppliers, and companies for a wide range of tasks such as accessing grievance mechanisms, self-assessments on human rights practices, and the mapping and visualization of human rights risks.

 

Technology also offers substantial cost reduction potential, capturing real-time data at only a fraction of the comparative operational cost of traditional in-person audits and with much greater scalability. ICTs are becoming increasing utilized to onboard suppliers and deliver training modules in any number of compliance areas. Through multilingual worker voice surveys, hotlines, and grievance mechanisms on mobile phones, tech may be able to get closer to on the ground reality of workers, facilitating the deep engagement necessary to achieve supply chain visibility. The market for technology providers creating products to support companies to achieve these aims is highly dynamic and expanding by the day, although technology’s true potential for tipping the balance in favor of scalable HRDD has yet to be realized.

 

One such solution – diginexLUMEN is leading the way towards democratizing supply chain risk assessment and monitoring and powering a new era of supply chain risk assessment by helping companies to collect standardized and comparable information about working conditions in complex supply chains at a low cost. The necessary tools for HRDD are no longer limited to just large multinationals with sizable budgets, but now are accessible to companies of all sizes. DiginexLUMEN was designed by a dynamic team of technology experts and subject matter specialists with extensive knowledge on due diligence and labor standards. The platform was developed in collaboration with the industry and is built for purpose to achieve true scale and impact through its affordability and value. Its development process incorporated inputs from leading brands, suppliers, and assets managers, and was iteratively tested in real-life business contexts. Its suite of features spans the entire remit of HRDD and includes supply chain mapping features, pre-populated recommendation based on a risk scoring algorithm, and automated reporting templates to enable easier presentation of data.

 

Recent trends have highlighted the paradigm shift that is occurring within the realm of business and human rights, with more and more legislative frameworks mandating HRDD reporting and risk mitigation. In order to ensure compliance with such laws, companies will need to increasingly invest in streamlining their due diligence process and upgrading their capacities to achieve full supply chain visibility, to engage workers across numerous contexts, and to have a data-driven approach to monitoring program implementation. Technology will play a crucial role in accelerating progress in every dimension of the UNGPs framework on HRDD - helping companies to assess human rights risks, acting on their findings and tracking responses, and transparently communicating their impact with investors, regulatory authorities, and consumers. Using innovative, affordable technology platforms – like diginexLUMEN - may help small and medium sized enterprises realize efficient due diligence reporting processes at scale, with greater agility, and face lower relative costs overall when compared to large companies. Early adopters of such an innovation could position themselves at the forefront of a new era of technology enhanced HRDD and achieve desirable impacts at a fraction of the cost.

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