The Strategic Importance of Human Rights Due Diligence (HRDD)
Respecting human rights across supply chains has become a strategic and legal necessity for businesses worldwide. With increasing scrutiny from investors, consumers, regulators, and civil society, companies are expected to demonstrate accountability for the social and ethical impacts of their operations.
Human Rights Due Diligence (HRDD) provides a structured approach to identifying, preventing, mitigating, and addressing both actual and potential human rights risks within operations and value chains. Beyond regulatory compliance, effective HRDD strengthens brand integrity, enhances stakeholder trust, and supports the long-term sustainability of the business.
A Changing Regulatory Landscape
Recent legislative and policy developments highlight the global shift toward mandatory corporate responsibility for human rights:
The EU’s CSDDD and the U.S. National Action Plan on Responsible Business Conduct highlight a global push for stronger corporate accountability. Both require companies to address human rights and environmental risks, aligning with international standards like the UNGPs and OECD Guidelines.
Understanding Human Rights Due Diligence (HRDD)
Human Rights Due Diligence (HRDD) refers to the process by which companies proactively manage the risk of infringing on human rights through their own activities or those directly linked to their business operations, products, or services via supply chains and other relationships.
The aim of HRDD is to identify, prevent, mitigate, and account for how a company addresses adverse human rights impacts. This approach is grounded in internationally recognized frameworks, such as the UN Guiding Principles on Business and Human Rights (UNGPs) and forms the backbone of emerging global regulations.
Core Components of HRDD
Human Rights Due Diligence (HRDD) involves identifying and assessing human rights risks, integrating findings into company processes, monitoring effectiveness, and transparently reporting on actions taken. This includes addressing issues like labor rights, discrimination, and workplace safety through ongoing, data-driven assessments, embedded governance practices, stakeholder engagement, and public disclosure to ensure accountability and impact..
Global Regulatory Developments in Human Rights Due Diligence (HRDD)
The global regulatory landscape around human rights due diligence is rapidly evolving. Governments and international bodies are increasingly holding companies accountable for their human rights impacts, especially within supply chains. Below is an overview of key legislative developments across major jurisdictions:
European Union: Corporate Sustainability Due Diligence Directive (CSDDD)
Overview: Enacted in July 2024, the CSDDD is a cornerstone of the EU’s sustainability strategy. It mandates that large companies conduct HRDD throughout their operations and value chains, including direct and indirect suppliers.
Scope: Applies to EU-based companies with over 1,000 employees and €450 million in turnover, as well as non-EU companies with similar thresholds operating within the EU.
Implementation Timeline: Phased implementation begins in 2029, giving businesses time to align processes with the directive’s requirements.
Key Focus Areas: Human rights, labor rights, environmental harm, and effective grievance mechanisms.
United States: National Action Plan on Responsible Business Conduct
Overview: The U.S. National Action Plan emphasizes HRDD as a best practice for federal contractors and multinational corporations.
Implications: While not a binding regulation, federal agencies are increasingly embedding HRDD expectations into procurement policies and public-private partnerships.
Focus: Human trafficking prevention, forced labor, and worker protection—particularly in global supply chains.
Germany: Supply Chain Due Diligence Act
Effective Since: January 2023
Scope: Applies to companies with more than 3,000 employees (expanding to 1,000 employees from 2024).
Requirements: Companies must assess, mitigate, and report on human rights and environmental risks in their direct and indirect supply chains.
Enforcement: German authorities can impose fines and exclude violators from public contracts.
France: Duty of Vigilance Law
Effective Since: 2017
Scope: Targets companies headquartered in France with over 5,000 employees domestically or 10,000 globally.
Key Requirement: Must publish and implement a vigilance plan addressing risks related to human rights, health and safety, and the environment across their operations and supply chains.
Norway: Transparency Act
Effective Since: July 2022
Applicability: Applies to large enterprises offering goods and services in Norway.
Key Provision: Requires companies to conduct HRDD and provide public disclosures on how they manage human rights risks.
Switzerland: Corporate Responsibility Law (Via Due Diligence Amendments)
Effective Since: January 2022
Scope: Requires large companies to report on human rights and environmental standards, with additional due diligence obligations for businesses sourcing from high-risk sectors (e.g., conflict minerals, child labor risks).
United Kingdom: Modern Slavery Act (2015)
Requirement: Mandates companies with over £36 million in turnover to publish annual Modern Slavery Statements, disclosing efforts to prevent forced labor in supply chains.
Proposed Updates: Future revisions aim to strengthen due diligence requirements and introduce penalties for non-compliance.
Implementing Human Rights Due Diligence (HRDD) in Your Supply Chain
Step 1: Policy Commitment
Objective: Establish a clear human rights policy that is approved at the highest level of management, showcasing your commitment to human rights across all operations and supply chains.
Action: Ensure the policy reflects your company’s dedication to preventing human rights violations and outlines your approach to due diligence. It should be aligned with international standards and regulations.
Tools & Frameworks:
UN Guiding Principles: Provides a global standard for preventing and addressing human rights abuses in business operations.
OECD Guidelines: Offers practical recommendations for businesses to integrate human rights considerations into their supply chains.
Step 2: Risk Identification
Objective: Identify and assess potential human rights risks within your supply chain, including risks related to forced labor, child labor, discrimination, and unsafe working conditions.
Action: Map your entire supply chain, from raw material sourcing to end customers, and assess risks using both internal and external data. Engage stakeholders such as employees, suppliers, and local communities to identify hidden or indirect risks.
Tools & Frameworks:
OECD Guidelines: Provides a framework for identifying and assessing human rights risks across various supply chain stages.
Step 3: Preventive Measures
Objective: Develop and implement effective measures to prevent or mitigate identified risks in your supply chain.
Action: Revise procurement policies, incorporate human rights clauses in supplier contracts, and offer training and capacity-building to suppliers. Consider establishing a code of conduct for suppliers to ensure they meet human rights standards.
Tools & Frameworks:
UN Guiding Principles: Offers practical steps for addressing human rights impacts, ensuring business operations align with international expectations.
Step 4: Monitoring and Evaluation
Objective: Regularly monitor and evaluate the effectiveness of your preventive measures to ensure they’re working and adjust as necessary.
Action: Implement regular audits, site visits, and engagement with stakeholders to assess the success of human rights initiatives. Establish a feedback loop that allows for continuous improvement.
Tools & Frameworks:
OECD Guidelines: Provides guidance on how to assess the effectiveness of due diligence processes and improve them over time.
Step 5: Grievance Mechanisms
Objective: Set up effective grievance mechanisms that allow stakeholders to raise concerns about human rights issues in the supply chain.
Action: Create accessible, confidential, and culturally appropriate channels for stakeholders to report complaints. Ensure the grievance mechanism is independent and protects whistleblowers from retaliation.
Tools & Frameworks:
UN Guiding Principles: Emphasizes the importance of effective grievance mechanisms for addressing human rights abuses within a business context.
Step 6: Transparent Reporting
Objective: Disclose your HRDD processes and outcomes transparently to stakeholders, demonstrating your company’s commitment to human rights.
Action: Publish regular HRDD reports that detail the risks identified, actions taken, and the results achieved. Ensure your reports are clear, accessible, and follow established international reporting standards.
Tools & Frameworks:
UN Guiding Principles: Provides guidance on how to report on human rights due diligence efforts, ensuring businesses are transparent and accountable.
OECD Guidelines: Recommends how businesses should report on the steps they’ve taken to manage human rights risks.
Why These Steps Matter
By following this HRDD framework, businesses can:
Minimize Legal and Regulatory Risks: Complying with human rights due diligence regulations reduces the risk of penalties and lawsuits.
Enhance Corporate Reputation: Taking a proactive approach to human rights demonstrates corporate responsibility, building trust with customers, investors, and stakeholders.
Create Positive Social Impact: Ensuring the protection of human rights in the supply chain contributes to broader social goals, such as eradicating child labor and improving labor conditions worldwide.
Challenges and Best Practices in Implementing HRDD
Implementing Human Rights Due Diligence (HRDD) in supply chains is a complex, ongoing process, and businesses often face several challenges in ensuring that human rights are upheld across their operations. However, by understanding these challenges and adopting best practices, companies can better navigate the difficulties and improve their HRDD efforts.
Common Challenges
Complex Supply Chains
Challenge: Supply chains are often multi-tiered, spanning different regions, industries, and companies, making it difficult to trace and monitor human rights risks at every level. Companies may face challenges in identifying where violations occur in the extended network of suppliers, subcontractors, and third-party providers.
Impact: This lack of visibility increases the risk of overlooking critical human rights issues, such as labor exploitation or unsafe working conditions, in remote areas or lower tiers of the supply chain.
Resource Constraints
Challenge: Implementing comprehensive HRDD requires significant time, effort, and financial resources. For small and medium-sized enterprises (SMEs), there may be limited capacity to dedicate to HRDD efforts, making it difficult to effectively identify, address, and monitor human rights risks.
Impact: Without sufficient resources, SMEs might struggle to meet regulatory requirements or face difficulty in maintaining robust HRDD processes, which could expose them to legal and reputational risks.
Best Practices
Stakeholder Engagement
Best Practice: Actively collaborate with suppliers, non-governmental organizations (NGOs), industry groups, and other relevant stakeholders to strengthen HRDD efforts. Engaging with a broad range of partners can provide valuable insights into risks, as well as enhance the effectiveness of mitigation strategies. This collaborative approach can also help build a shared commitment to human rights across the supply chain.
Action: Organize regular dialogue sessions with key suppliers to discuss human rights risks and concerns. Work with NGOs and civil society groups that specialize in human rights to gain further expertise and improve transparency.
Capacity Building
Best Practice: Invest in training and resources for the teams responsible for HRDD, as well as for suppliers, to ensure everyone understands the importance of human rights and is equipped to implement HRDD processes. This could include training on risk assessment, mitigation strategies, and how to identify and address potential human rights violations.
Action: Create tailored training programs that provide employees and suppliers with the necessary tools and knowledge to spot risks early and take corrective actions. For SMEs, this could involve working with external consultants or industry associations that offer resources at a lower cost.
Continuous Improvement
Best Practice: HRDD is not a one-time process but an ongoing commitment to continuously improve. Regularly updating HRDD processes in response to evolving risks, changing regulations, and feedback from stakeholders is crucial. This adaptability ensures that companies remain responsive to new challenges and can adjust their strategies to stay ahead of emerging risks.
Action: Set up periodic reviews of your HRDD framework, incorporating feedback from stakeholders and assessing the effectiveness of current practices. Stay informed about new legislative developments, such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), and adapt your processes accordingly.
Conclusion
Implementing Human Rights Due Diligence (HRDD) is no longer optional—it’s a critical component of responsible business conduct. As regulations tighten and stakeholder expectations rise, companies must integrate HRDD into their operations to manage risks effectively and build ethical supply chains. Beyond regulatory compliance, HRDD fosters transparency, strengthens relationships with investors, and enhances market access.
By embedding HRDD into supply chain management, businesses can not only ensure they are compliant with emerging global regulations but also build resilient, ethical, and sustainable operations that meet the demands of both regulators and consumers.
At EcoActive, we provide comprehensive ESG reporting solutions to help companies implement robust HRDD frameworks. Our expertise in sustainability reporting ensures that your human rights due diligence processes are fully integrated into your ESG strategies, enabling transparent reporting, risk mitigation, and alignment with global standards. With EcoActive’s support, you can navigate the complexities of HRDD with confidence, ensuring that your operations remain compliant, ethical, and competitive in a rapidly evolving market.
By adopting HRDD practices, businesses position themselves as leaders in corporate responsibility, building trust with stakeholders and securing long-term success in an increasingly ESG-conscious world.
Key Sources
European Commission – CSDDD Overview
OECD Due Diligence Guidance
UN Guiding Principles on Business & Human Rights
U.S. Department of Labor – Comply Chain
Human Rights Watch – EU Supply Chain Law (2024)
DLA Piper – Legal Insight on HRDD (2024)
Ready to elevate your ESG strategy? Connect with EcoActive for expert guidance on CSRD compliance, ESG reporting, and sustainability integration.
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