In the context of the Sustainable Corporate Governance framework, the European Commission is expected to present a draft legislative proposal on mandatory human rights and environmental supply chain due diligence by the first half of 2021. This legal instrument would represent an important step to advance social and environmental supply chain sustainability across global value chains beyond its testing bed in minerals.
Through a series of blogs, we will follow the evolution of the debate on the mandatory law and explore which complementary measures and actions are needed to guarantee positive social and environmental outcomes along supply chains as a result of due diligence efforts. Inclusion of supply chain actors affected by due diligence processes and protection of vulnerable groups will represent the supporting theme and key angle we invite our stakeholders to look at due diligence from. This article kicks off the series by looking at the state of play of the proposed European legislation, reflecting on the UN Guiding Principles’ concept of the smart mix of measures and drawing attention to the purpose of human rights due diligence processes and the expected benefits to the most vulnerable in supply chains.
State of Play on due diligence law – the European context
Since the European Commission’s 2011-2014 strategy Corporate Social Responsibility, the policy debate and strategic direction on sustainable economy has evolved from Corporate Social Responsibility as the responsibility of enterprises to account for their impact on society to specific legislative instruments complementing the many voluntary standards and guidance in the field. The minerals sector has been overtly targeted with the EU Regulation on Conflict Minerals soon coming into application. Since 2017, companies in the EU have gone through a preparation period, characterised also by specific support promoted by the European Commission, such as the due diligence ready portal. More themes and initiatives are summarised in a 2019 overview, which includes EU policies and discussions around a number of corporate sustainability related topics, from sustainable finance, to non-financial reporting and tax transparency.
Last April, the European Commission committed to work on mandatory due diligence for companies . This commitment follows the publication of a comprehensive study on due diligence requirements through supply chains. Besides presenting key requirements to identify, mitigate and prevent a broad range of human rights abuses, including those linked to environmental impacts, the study also looks at existing national proposals or existing laws, which are already making efforts to integrate the UN Guiding Principles on Business and Human rights (UNGPs) into legislations. Moreover, the European Parliament has recently presented two briefings that consider options for specific elements for the future EU legislation. The first looks at the scope of application and the types of human rights violations which should be included; for example not only looking at the International Bill of Human Rights and the ILO Declaration on Fundamental Principles and Rights, but also considering explicit reference to international conventions detailing the rights of specific groups such as children, people with disabilities, indigenous peoples, and so on. The second briefing presents practical options for monitoring, enforcement and access to justice. In addition to this work sustained by the European Institutions, NGOs and civil society have undertaken significant advocacy efforts and 26 companies and associations have issued a public letter supporting EU legislation for human rights and environmental due diligence.
Smart mix of measures likely to address some challenges if coupled with inclusive implementation
There is still significant progress to be made in terms of improving the protection, respect and remedy of human rights within global value chains in spite of the approach of the 10th Anniversary of the UN Guiding Principles on Business and Human Rights and notwithstanding the pursuit of mandatory due diligence by some initiatives in European countries. The Corporate Human Rights Benchmark, which includes specific analysis on the extractive sector, reaffirms through its 2020 results that human rights due diligence remains a key weakness with many companies failing to implement the UNGPs, especially when it comes to turn commitments into positive outcomes on the ground.
In terms of the State duty to promote human rights, calling on the first pillar of the UNGPs, the principles mention the need for a “smart mix of measures”, meaning the application of international and national, as well as mandatory and voluntary instruments. Therefore, mandatory national and regional (e.g. European) legislation could support advancements in the fulfilment of human rights within enterprises’ operations and supply chains. It might be worth noting, that negotiations are also taking place with respect to a UN Binding Treaty on Business and Human Rights; a second draft was discussed at the end of October 2020.
Example of smart mix of measures which directly or indirectly affects mineral supply chains (the below table is representative and not exhaustive)
International voluntary measures
| International mandatory measures
|
National or regional voluntary measures
| National or regional mandatory measures
|
Regardless of this momentum behind the introduction of more mandatory measures, these should not be regarded as the panacea to address all current gaps; while they will certainly help filling some of the gaps of voluntary measures, they won’t fix existing shortcomings alone. Any measure, whether voluntary or mandatory, is as effective as its implementation, which depends upon corporate processes and supply chain leverage. And the effectiveness of implementation is determined by where companies sit on the spectrum of due diligence as a compliance necessity to due diligence as an opportunity for value creation. Due diligence is not just about the creation of policies and procedures to ensure normative requirements are met, but about making efforts to understand the impacts that are taking place in their operations and supply chains as the basis for authentic action, change and thus value protection. This includes taking proactive actions to avoid the exclusion of vulnerable supply chain partners who may not have the capacity to comply and/or may be operating in a conflict-affected or high-risk economy, and thus whom supply chain due diligence efforts are intended to protect.
Human rights due diligence – who is it for?
While the field of voluntary standards, due diligence requirements and solutions expands, companies and stakeholders might lose sight on what the expected outcomes of human rights due diligence are as they focus on complying with voluntary or legal requirements. To bring the context shared so far closer to Levin Sources work, we can provide an example of how due diligence has been applied in the minerals sector, including with respect to sourcing from artisanal and small-scale mining producers. In 2019, IPIS and Ulula assessed the impact of due diligence programmes in eastern DRC. By analysing social, economic and human rights dynamics the study highlights that while there is a correlation between due diligence programs and better mining outcomes, this does not necessarily translate into better human rights and development outcomes. Besides shedding light on the limitations of due diligence, these outcomes remind us of the importance of truly focusing on the desired positive impacts when implementing human rights due diligence. We can challenge due diligence implementation to be more inclusive rather than exclusive by continuously asking the following questions:
- How are due diligence processes affecting supply chain actors in fragile contexts? Are they empowering and helping or weakening and harming them? For example, many artisanal miners based operate in challenging socio-economic contexts where complying with due diligence requirements is not facilitated by the broader environment and where poverty levels are high and livelihood options are limited. What does it mean for operators such as these to participate in responsible supply chains, to do due diligence and to have due diligence done upon you (including the demands that arise as part of corrective action planning)? Are the outcomes of this due diligence fair for marginalised producers and those striving to be responsible in challenging contexts?
- Am I adequately considering the perspective and capacities of my suppliers?
- Am I adequately taking into account the perspective and capacities of vulnerable groups, such as indigenous people, women and youth? How could the way I do due diligence and the consequences of this do more to empower vulnerable groups?
These are just some initial questions we would like to leave readers with, hoping to explore more angles and listening to diverse voices through the next articles.
Finally, an example showing efforts to include ASM producers, comes from the recent call to the industry led by the Alliance for Responsible Mining (ARM), encouraging companies to have responsible sourcing strategies which include artisanal and small scale mining.
A final note – consider taking part in the EU consultation
The European Commission has recently opened a public consultation aiming at collecting stakeholders on possible sustainable corporate governance initiative. We invite our stakeholders working on responsible minerals supply chains, ASM, responsible mining and even supply chain actors themselves to consider contributing to this consultation which is one of the instruments available to ensure that a broader variety of perspective reach European legislators.
*****
Our work on Due Diligence
Levin Sources supports companies across the metals and minerals value chain to develop and implement robust due diligence systems. Examples of our work include gap assessments of due diligence system for tin miners, gold refiners, diamond exporters, or jewellers, against industry standards, recommendations and roadmaps for implementation, review of KYC documentation, value chain analysis and country risk assessment and on-the-ground assessments of artisanal mining organisations. Implementation of due diligence on the ground requires a strong commitment from buyers but also all supply chain actors and stakeholders, and Levin Sources facilitates this through its global network of associates and partners.
