Human Rights and Environmental Due Diligence (HREDD)

In 2022, numbers show that only 16% of companies worldwide address their human rights and environmental impacts over the supply chain. Human rights and environmental due diligence (HREDD) requirements have been getting more attention lately, and rightly so. Thus, on February 23, 2022, the European Commission adopted a proposal.

What do Human Rights and Environmental Due Diligence Mean?

HREDD is a process meant for companies to “efficiently identify, prevent, mitigate and account for the negative impacts of their activities or those of their subsidiaries, subcontractors, and suppliers,” as defined by the European Coalition for Corporate Justice (ECCJ). In other words, the proposal aims to make the companies accountant for their chain supply.

Supply Chains are Complex Patterns

It is no secret that chain supplies have truly long and complex patterns. Let’s take the phone, tablet, or computer you are reading this blog on as an example. It is made of several parts that come from different places. Companies may find it complicated to demonstrate due diligence in such global trade models. Some even de-responsible themselves by arguing that they do not influence their supply chain. Nevertheless, socio-environmental regulations apply to many businesses. Conflict minerals, human trafficking, and other environmental regulations are some examples.

The Example of a Supply Chain in Electronics and its Socio-Environmental Impacts

Human rights and environmental challenges affect supply chains throughout the product lifecycle. Electronics are no exception. Here is the typical supply chain of a device and its impacts on society and the environment:

Life-Cycle Stages	Environmental Impacts	Social Concerns	Regulations
Mining for raw materials	Air pollution Harm to wildlife and habitat Can permanently scar natural landscapes	Linked to armed conflict Poor to no human rights Child labor Violence	CMRT 3TGs (gold, tin, tungsten, and tantalum conflict mineral regulations)
Manufacturing of components	Pollutant emissions Toxic waste disposal and water contamination	Safety issues (e.g., poisoning hazards) Labor rights issues Child labor Violence	Child Labor Due Diligence Law; EU REACH; RoHS; Battery legislations; and Toxics in packaging regulations.
Assembly of the parts	Greenhouse-gas emissions Impact on air, water, and land	Ethical issues Child labor Human rights issues Violence	Environmental, Social, and Governance (ESG) policies Supply Chain Due Diligence Act of Germany

What are HREDD Obligations to Companies and their Managers?

The EU HREDD rules include several specifications for businesses.

They have a due diligence duty to identify, end, prevent, mitigate, and account for all mines, manufacturers, and factories that harm their supply chain. Indeed, they must act on any part of their chain that does not meet human and environmental rights and find a way to work in total respect of such prerogatives.
Certain companies must set a planned strategy to ensure that their business meets the Paris Agreement on global warming.
Company managers ought to oversee the implementation of due diligence within their business.

What are the Benefits of Environmental Due Diligence?

Since there is no possible way of controlling what happens within the supply chain, there must be a way to implement control from the outside. HREDD policy implements such control. In 2020, the European Commission organized a public consultation in which citizens were asked their opinion on the matter. As stated by ECCJ (2022): “respondents agreed that companies must be held liable for harmful practices in their home countries and abroad ad face strong penalties if they break the rules.” Doing such is the first step in minimizing human rights and environmental violations worldwide

Benefits of Showing Human Rights and Environmental Due Diligence

For companies:

Improved risk management. For example, robust human rights and environmental due diligence reduces the risks of:

loosing markets,

damaging the corporate image,
increasing insurance costs, and
undergoing lawsuits,
paying penalties.

Helped companies keep good track of any shift in the chain;

Upgraded awareness of negative impacts;
Harmonized legal framework across the EU.

For consumers:

Transparent and sustainable supply chain, towards more eco-friendly and responsible purchases;

Protection of human and labor rights;
Healthier environment;
Greater trust in companies.

For developing countries:

Enhanced protection of human and environmental rights;
Increased awareness about sustainability issues;
Improved living conditions for people;
Better access to justice for victims.

Unquestionably, the HREDD initiative is not all perfect, but it is a step toward a sustainable supply chain with basic respect for human rights and our environment.

What if Companies do not Respect their Obligations?

Filling to meet the HREDD requirements generates sanctions on both administrative and civil levels. Justice for victims is the main point of these procedures.

Voluntary Guidelines towards Human Rights and Environmental Due Diligence

Guidelines on how businesses should act are voluntary but useful to demonstrate due diligence.

Here are the main ones:

The United Nations published the Guiding Principles on Businesses and Human Rights (UNGPs) in 2011. It is based on three pillars: protection, respect, and remedies. It is a step-by-step actionable operation addressed to governments and companies. The guideline is made for them to prevent human rights abuses. Again, it is a voluntary standard. No one will be held accountable for getting into the grey zones of this guideline nor not respecting it.

Published in 2011, OCED’s Guidelines for Multinational Enterprises are the second main guidelines. They are similar to the former, but they adapt to multinational enterprises. As stated by traditional international law, these multinational corporations have rights, but they have no obligation.

Environmental, Social, and Governance (ESG) criteria are used to make sure the investments made by companies are made responsibly. In other words, ESG helps any investor by ensuring the investment is not going towards unethical practices.

Despite being voluntary, the guidelines above are helpful when addressing socio-environmental concerns.

To Summarize Environmental Due Diligence

There are legal injustices around the world regarding human rights every day. Passing laws help protect the victims, and implement due diligence. Indeed, it would prevent harm in workplaces within and outside Europe. Moreover, it would make the authorities and their companies responsible for improving their supply chains, making it a duty to protect human rights. It is a law project that allows the protection of people and the planet. Finally, Germany also published a similar Act in June 2021: the Supply Chain Due Diligence Act.

Do you have more questions about Human Rights and Environmental Due diligence? Contact Enviropass!