New supply chain laws in Germany and beyond are set to expand corporate human rights due diligence responsibilities beyond child and forced labor to cover traditional labor and employment rights. The extended scope of required supply chain due diligence creates significant new pressures on global HR professionals.
Existing forced and child labor focused legislation is ineffective. For the past decade, supply chain legislation focused on forced and child labor, including the California Transparency in Supply Chain Act and the recent Fighting Against Forced Labour and Child Labour in Supply Chains Act in Canada. Critics argue supply chain transparency laws lead to “superficial reporting, focused on process rather than outcomes” and “fail to root out forced labor and exploitation from prevailing business models.”
Legislators generally agree the lack of accountability and enforcement measures result in little progress in meaningfully addressing human and labor rights violations. However, a proposed EU directive on corporate sustainability due diligence will involve evaluation of working environments within the entire value chain.
Due diligence to cover some traditional labor and employment rights: New and contemplated supply chain due diligence measures differ significantly from past measures by requiring due diligence checks over what may be considered traditional labor and employment law rights. The German law, for example, identifies the following elements as “human rights” and thus requires the requisite coverage in the company’s due diligence analysis, reporting, and remediation:
- Workplace safety;
- Working conditions;
- Freedom of association;
- Employment discrimination; and
- Wage discrimination.
Beyond tier one suppliers: The new German law requires organizations to monitor and act on violations within their own operations, as well as ensure their direct suppliers and address risks, regardless of whether the activity was performed in Germany or abroad. Further, if an organization becomes aware of a possible violation of human rights by one of its indirect suppliers, an immediate risk analysis of the possible violations must be conducted.
More responsibility for global multinationals: Both changes will have a critical impact on global supply chain management, especially for companies with a heavily diversified supplier pool. The ability to receive and record accurate data and required metrics from the myriad of internal and third-party suppliers will make compliance a major challenge.
North American legislation adds another element to consider: To add an additional layer of complexity, in North America, new legislation targets human rights in the supply chain. For example, the United States’ Uyghur Forced Labor Prevention Act – though only focused on forced labor – introduced a rebuttable presumption that goods from the Xinjiang region in China are the product of forced labor and are therefore banned. Further, the U.S. recently pressured Vietnam to stop importing products from Xinjiang, thus demonstrating a secondary-country impact of such measures.
Outlook: As governments begin demanding more accountability from companies through human rights and labor legislation, companies will increasingly turn to their HR leaders for help. HR Policy Global will facilitate a panel discussion on July 12th on this topic.