Event Note: Freshfields hosted Business and Human Rights Thought-Leaders Roundtable on 'Mandatory Supply Chain Due Diligence across Europe'

This year marks the 'International Year for the Elimination of Child Labour'.  In recognition of this, Freshfields Bruckhaus Deringer hosted an online Thought-Leaders Roundtable for clients with key representatives from PGGM Investments, Japan Tobacco International and Save the Children to discuss opportunities and challenges for international corporations deriving from the most recent legislative developments on supply chain due diligence legislation across Europe.

The event was kicked off with our speakers Boris Kasolowsky, Dimitri Lecat, Ali Kirby-Harris and Marco Vogels giving a short overview of the recent move towards mandatory supply chain due diligence legislation, to varying degrees, in Germany, France, the UK, the Netherlands and on the EU level.

The subsequent Roundtable, moderated by Ali Kirby-Harris, discussed examples of managing the new due diligence and sustainable finance duties for companies in practice. Our international panellists, Mr. Gerard Fehrenbach, Senior Advisor Responsible Investment at PGGM Investments, Mrs. Elaine McKay, International Affairs Director, Japan Tobacco International and Mrs. Franziska Lauer, Head of Corporate Partnerships, Save the Children Deutschland e.V. discussed practical efforts that corporations are making in light of developing business and human rights legislation. 

Gerard Fehrenbach explained how PGGM implemented a sustainable investment process based on three pillars: NO investment, CHANGE and YES. He underlined that for NO, a screening of those investments which are to be excluded is conducted twice a year. The process is guided by detecting (very) severe violators of the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECDs Guidelines for Multinational Corporations. PGGM adjusts its benchmark based on the findings. The CHANGE looks at investments they can improve through their stewardship activities. The YES is the ultimate goal and aimed at seeking for impact investments that contribute to selected SDGs. He further stressed the need of investors to obtain standardised and comparable ESG information by companies around the globe, referring to sustainability reporting standards. Clearly, disclosure obligations are “not a penicillin for everything” unless properly unified. Otherwise, investors will have to continue “comparing apples with pears”.

Elaine McKay pointed out that supply chain due diligence is a complex challenge in corporations involving many different kinds of suppliers, which in each case identify unique human rights issues. By way of example, in their agricultural supply chain, a partnership with the ILO, for example, had been very helpful in enabling JTI to implement tailored processes in the fight against child labour, well before the UNGPs were published. She also highlighted the complexity of identifying human rights risks and prioritising them. Therefore, Elaine McKay highlighted the need to 'be on the ground and speak the language of the people in your supply and value chains' in order to see maximum benefit.

In light of these fruitful discussions the issue of going beyond compliance arose. 

Franziska Lauer pointed out that existing legislation often takes the UNGP as a reference point but does not fully implement them. She emphasized that the UNGP – as soft law – are the real framework to look at when aiming at protecting human rights. While a risk-based approach from the perspective of the corporation might comply with individual new legal due diligence requirements, it may worsen the real situation for rights holders. For example, in the case of child labour, ending child labour in one particular plant could simply shift the child into the informal sector rather than ending the problems for that child.

Therefore, the panellists underscored the importance of implementing a process of remediation alongside other mitigation steps, which, for example, might bring a child into education.

One of the key takeaways is that understanding root causes, taking into account rights holders' perspectives and implementing appropriate remediation processes are key for progress in the realms of business and human rights.

At present, the UNGPs as of 2011 still remain the most holistic framework on human rights supply chain due diligence, albeit as ‘soft law’ requirements. Nevertheless, these guidelines can assist corporations in striving to protect rights and to be prepared for forthcoming legal duties imposed on them.

We will keep you updated here on the forthcoming legal developments.