Protecting human rights and the environment: essential ESG items on the board agenda when it comes to building sustainable supply chains

Supply chain sustainability is critical to organisations doing business responsibly, solving societal challenges and protecting the planet. The legal landscape is evolving fast. This means that organisations of all sizes, across all industries will be (or are already) required to identify human rights and environmental risks. Those organisations cannot afford to wait for binding corporate obligations to act.

In 2011, the Guiding Principles on Business and Human Rights by the United Nations Human Rights council provided for the first time a framework outlining the responsibilities of businesses to prevent and address the impacts of human rights abuse through human rights due diligence.

In February 2022, the European Commission published its draft directive on Corporate Sustainability Due Diligence, which sets out mandatory human rights and environmental due diligence obligations for corporates, with a civil liability regime to enforce compliance with the obligations. The directive introduces a “directors’ duty of care” provision. It requires directors to consider human rights and the environment in their decision-making. The implementation into EU countries’ legal systems is expected in 2027.

Proactive management of human rights risks across businesses’ supply chains has shifted from a “should do” to a “must do”, at a time when operational and geopolitical factors present myriad and fast-changing challenges. From handling growing legal and reputational risks to enhancing functional resilience and meeting commercial imperatives, helping to maintain robust effective supply chain human rights strategies and ensure effective implementation is a business-critical challenge and key opportunity for boards today.

Cherie Blair CBE, QC, Founder and Chair of Omnia Strategy

The ESG board agenda

Failure to promote respect for human rights in the supply chain is contrary to the UN SDGs, international labour conventions and labour laws in many countries, including the Modern Slavery Act in the UK. It also goes against the objectives, values and ESG strategy of virtually all organisations, to which the board is ultimately accountable.

Effective human rights due diligence and the protection of human rights across the supply chain is good for business: intelligence on supply chain; identification and mitigation of potential risks and adverse impacts; reduced reputational risk; positive impacts on local communities, etc.

As regulators, courts, investors, partners, employees, and customers step up efforts to hold companies and their directors accountable for human rights impacts once considered remote and beyond their control, directors are having to oversee new processes and relationships to identify, prevent and mitigate social and environmental risks and enable remediation of harms. Our focus must be on practical solutions to these complex challenges, and on informed and clear-sighted corporate leadership and supervision to drive transformational change.

Adam Smith-Anthony, Head of the Business & Human Rights practice at Omnia Strategy

Written by Elise Perraud, NEDonBoard COO

Want to learn more?

Listen to the keynote speech of Cherie Blair OBE QC and the panel discussion including Adam Smith-Anthony, Jane Frost OBE and Jacky Griffiths held on 26 April 2022: link to the replay (available to NEDonBoard members).

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