12 minute read

In today's world, uncertainty seems to be the new normal. Political turmoil, armed conflict, extreme poverty, and natural disasters all contribute to instability in the post Covid-19 recovery attempts with detrimental effects on human rights.

Global supply networks are disrupted by this instability, which exacerbates existing weaknesses such as corruption and inequality.

Modern slavery is one of today's global supply chains' most important human rights challenges. A vast, diverse issue that impacts millions of people worldwide, notably in sectors like manufacturing, construction, and agriculture.

The rise of modern slavery in global supply chains seriously threatens human rights as it violates the principles of equality, freedom, and dignity.

Fifty million people were living in modern slavery in 2021, according to the Global Estimates of Modern Slavery published by the International Labor Organisation (ILO). Of these people, 28 million were in forced labour.

Governments, corporations, civil society organizations, and other stakeholders must collaborate to promote ethical and sustainable supply chain practices to address this issue effectively.

This includes measures such as mandatory due diligence, transparency, accountability, and increased awareness-raising and capacity-building for all actors involved.

For years there have been widespread calls from global NGOs, European Union's decision-makers, civil society, and even companies to mandate corporate action to address the problem and to impose legal consequences.

The growth of international supply chains has had negative consequences, including human and labour rights violations, environmental damage, and corruption. Multinationals have gained considerable power, and weak regulation and enforcement in developing countries have resulted in wide disparities.

Companies have been encouraged to take responsibility for their supply chains on a voluntary basis, but evidence shows that this approach is not enough.

The UN Guiding Principles, adopted unanimously by the UN Human Rights Council in 2011, outline the corporate responsibility to respect human rights and require companies to undertake due diligence to identify, prevent, mitigate, and account for any human rights harm they may cause, contribute to, or be linked to.

Although not legally binding, governments and the world’s largest companies have widely accepted the UN Guiding Principles.

In the absence of an international law to address human rights impacts, several European and non-European countries have adopted or started to consider legislation that embeds elements of HRDD into law.

In 2017, France adopted the Corporate Duty of Vigilance Law, requiring large companies to conduct due diligence on human rights and the environment and to publish an annual vigilance plan. The law was created to ensure that large companies take the necessary steps to identify and prevent human rights and environmental violations in their supply chains.

The German Supply Chain Due Diligence Act, which came into force beginning of 2023, makes it mandatory for larger companies in Germany to conduct supply chain risk analyses better to understand risks and violations in global supply chains.

The Netherlands, Norway, Austria, but also the UK with the Modern Slavery Act,

Canada with the Forced Labor Bill, and the US with the Uyghur Forced Labor Prevention Act have indicated a commitment to adopting corporate accountability legislation within their national business and human rights plans.

The Uyghur Act came into force to prove that big companies' supply chains that import their goods into the US are not tainted with forced labour in the Xinjiang Uyghur Autonomous Region of China.

However, the patchwork of these regulatory frameworks requiring companies to undertake human rights due diligence seems to have failed to generate improvements in corporate human rights practices.

The new legislation from the EU for a Directive on Corporate Sustainability Due Diligence (CSDDD) is to create a level playing field, provide clarity, hopefully, establish effective enforcement and sanction mechanisms, and improve access to redress for all concerned.

The EU's proposal is based on the existing OECD Due Diligence Guidance for Responsible Business Conduct and the UN's Guiding Principles on Business and Human Rights framework.

A critical component of the EU's corporate governance initiative is the regulation of Human Rights and Environmental Due Diligence (HRDD). This proposal is a step towards ensuring that EU companies and non-EU companies operating within the EU respect human rights and environmental standards. Failure to comply with the regulation can result in fines, legal action, and reputational damage.

The EU Corporate Supply Chain Due Diligence Directive encourages sustainable and responsible conduct among corporations and embodies human rights and environmental issues into their operations and management.

Large EU corporations and non-European businesses with significant operations in Europe will be required to evaluate their existing and potential human rights and environmental impacts across their operations and supply chains and to take steps to prevent, alleviate, and rectify any identified negative effects.

Companies subject to the EU proposal on corporate sustainability due diligence are expected to publish the due diligence strategy annually. Companies not subject to the proposal must disclose an annual statement.

Companies that fail to conduct effective due diligence or implement preventative or remediation measures face administrative penalties and civil liability.

The Directive will apply to EU companies with over 500 employees and over 150 million EUR turnover worldwide.

The EU Directive exempts small and medium-sized enterprises (including micro companies), which constitute 99% of all businesses in the EU, from the obligations stipulated in the legislation. This contrasts with the UN Guiding Principles on Business and Human Rights (UNGPs), which specify that all enterprises are responsible for respecting human rights regardless of their size, sector, operational context, ownership, or structure.

However, The UNGPs recognise that the methods through which companies fulfil this obligation may vary depending on these factors and the severity of any negative human rights impacts caused by the enterprise.

Supply chains can be complex and far-reaching, often spanning multiple countries and involving many stakeholders. This can make it difficult to ensure that all parties involved comply with human rights standards, leading to significant risks for companies, from environmental damage and labour violations to corruption and human trafficking.

These risks can harm people and the environment, damage a company's reputation, undermine consumer confidence, and lead to legal and financial consequences.

Human rights due diligence is essential to identify, mitigate and manage these risks, ensuring that a company's activities are socially responsible, sustainable and compliant with laws and regulations.

Protecting human rights in global supply chains is closely linked to the protection of forests, sustainable raw materials extraction, and the preservation of landscapes—crucial elements for the sustainable development of local communities.

Many of the world's forests are located in developing countries, where rural communities rely on them for their livelihoods, food security, and cultural identity. These communities have lived in and around forests for generations and have developed unique knowledge and practices for managing them sustainably.

We cannot focus on forests without considering the people who live next to them. The rights of local communities must be taken into account when planning and implementing policies related to forest conservation and management. This includes recognizing indigenous peoples' rights to their lands and resources, which are often not recognised by governments or companies.

To address these issues, it is necessary to adopt a holistic approach to forest conservation that considers all stakeholders' rights and needs.

Although the Corporate Sustainability Due Diligence Directive and EU Deforestation Regulation (EUDR) are seen as a positive move by the EU to tackle deforestation, there are concerns among some experts that the EU's attempt to regulate the importation of goods associated with deforestation may not lead to a significant reduction in deforestation rates.

That is because the full traceability requirement from the plot of land level could lead traders to reorganise their supply chains, with traceable and deforestation-free products being sent to Europe and non-compliant products being sold to countries with lower import criteria.

This gap will eventually lead to the exclusion of small-scale farmers, as it is complicated and costly to register them and prove that they are not engaged in deforestation.

One solution to mitigate the negative impact of the regulation is the landscape approach. Landscape approaches bring together different stakeholders within and outside a region to work towards shared goals and improve sustainability outcomes.

This holistic process can help reduce the risks associated with smallholder supply chains and direct more resources to areas with high deforestation risk. It can also promote sustainable land use practices, such as agroforestry and conservation agriculture, and foster better stakeholder governance and cooperation.

By creating a safe and stable network of support, we can ensure the fair participation of smallholder farmers in the evolving market.

While the EU's regulation is a step in the right direction, the landscape approach offers a more holistic and collaborative approach to tackling deforestation.

By bringing together different stakeholders, we can work towards a common vision of sustainable landscape management, improve smallholder livelihoods and prevent deforestation in high-risk areas.

Learn more about Earthworm Foundation's landscape approach.