A new wind of change is blowing through human rights and environmental legislation in the business world, and this is also true in Luxembourg. Positive changes that are important to understand and anticipate in order to ensure the social protection and rights of all those involved in the value chain of organisations. Today, the commitment is to transparency, reporting and the exchange of good practices.
A topical issue
The treatment of Uyghurs in China, the conditions of diamond mining in Zimbabwe or the modern slavery of migrant workers in England have, and will continue to shock. These terrible events have brought to the forefront of the media the failure to apply human rights principles in industry.
Over the past decade, the issue has become increasingly important on the political stage. Since 2011, when the UN Guiding Principles on Business and Human Rights were unanimously adopted, numerous legislative initiatives have been launched in various countries. This text is key. It lays the foundation for human rights standards, practices and shared responsibility. It affirms that the state and business have a role and a responsibility in this area. It represents a paradigm shift. After England, Australia, and Norway, among others, other countries are interested in the subject and are ready to implement new legislation to improve human rights, particularly in the corporate world.
However, the growing interest in the rights of all human beings is challenged by the current context, by the formal demands and subpoenas of large corporations, by an increasingly globalised economy. Indeed, as Jean-Louis Zeien, Co-Coordinator of the Duty of Vigilance Initiative in Luxembourg, states: "The more globalised an economy is, the more it is subject to the risk that certain economic sectors may be implicated in human rights violations in their value chain.”
Faced with this challenge, other laws, both recent and forthcoming, are trying to go further with regard to labour. Indeed, the implementation of legal obligations of vigilance is "on the agenda". The French Duty of Vigilance Act (2017), the Dutch Child Labour Due Diligence Act (2019), the Swiss Legislative Counterproposal to the Responsible Business Initiative (2020), the S-216 Act, enacting the Modern Slavery Act and amending the Customs Tariff in Canada (2020), the German Due Diligence Act for Supply Chains (2021) are examples of human rights initiatives being implemented. These initiatives are accompanied by reporting and transparency obligations, which, if not respected, lead to legal sanctions.
Announced in April 2020 and effective by 2026, European legislation drafted by the European Parliament and the European Commission should also be introduced on human rights and environmental compliance for companies. This directive should have a broader scope than the current one, covering the entire supply chain, and would perhaps anticipate monitoring by independent authorities. The text would also show a willingness to include any company doing business in the EU, not just European companies.
Thus, this growing legal pressure obliges companies to identify the human rights risks of their activities, to map them by taking into account the company's stakeholders, to understand them, to measure their impacts, to manage them, to evaluate them, to identify avenues for improvement, and to share their approaches.
Today, it is important to understand what these obligations imply and what must therefore be taken into consideration by companies in order to respect these human rights: health, safety, protection, salary, working conditions, medical coverage, etc. It is essential to emphasise that these initiatives do not hinder either the productivity or the competitiveness of the company, but that they are, on the contrary, an added value. These commitments are part of a growing trend: they respond to a growing concern among citizens about the ethical nature of their consumption.
A growing movement in Luxembourg
The Grand Duchy, a catalyst for initiatives in many areas such as sustainable development, and an important global player in the investment fund industry, is determined to take its responsibilities and put human rights at the centre of its concerns. The trend towards regulation is growing and companies are taking responsibility.
The affirmation of the Luxembourg State's commitment to human rights and due diligence is demonstrated by the country's position on the United Nations Human Rights Council since last October. This recent position implies continuing its declarations, being consistent with its objectives in order to constantly increase its attractiveness, and to move beyond Corporate Social Responsibility in the strict sense. These objectives are also part of the national action plan for 2019-2021. The sixth and final commitment is to establish a support platform for civil society and human rights defenders. In concrete terms, the state has committed to four measures. The first one is the establishment of a procedure for the reception of human rights defenders for rest periods of six to twelve months, in particular via the ProtectDefenders.eu platform. Secondly, the State promised to support the activities of the Special Rapporteur of the Human Rights Council on the situation of human rights defenders, and other activities and mandates supporting civil society in the UN system and other multilateral bodies. It is also committed to cooperating in the capacity building of human rights networks and organisations in developing countries, notably through Luxembourg's development cooperation, as well as by paying particular attention to the gender dimension and the protection of women's and girls' rights. Its last objective is to assist and consult with the national civil society platform for the support of human rights defenders, and to inform and raise public awareness on the issue.
But what about a national law? Currently, 17 civil society organisations have already come together to promote and adopt such legislation: "the initiative for a duty of vigilance in Luxembourg". Jean-Louis Zeiein says: "Introducing a duty of care law in Luxembourg is precisely about putting respect for human rights at the centre of economic activities. In this way, respect for human rights will become part of the DNA of companies. This approach calls for the introduction of legislation establishing such a duty for companies domiciled in Luxembourg. The proposal aims to integrate respect for human rights, labour standards and international environmental provisions and agreements throughout the value chain of companies. The importance of considering the entire value chain is all the more important as the majority of products consumed in Luxembourg are imported. It is important for companies to be aware of the impacts that they generate on other territories, sometimes far away. Thus, such legislation would oblige companies to identify actual and potential human rights and environmental risks and take measures to remedy them. Finally, they would have to publicly disclose their assessment and the measures taken. Major companies such as Compass and the Pall Center have already joined the initiative.
How to prepare?
Companies are increasingly being asked to be accountable and to communicate on the measures they are putting in place in favour of human rights. This movement is intensifying, especially since, according to a recent study by the Ministry of Foreign Affairs, 92% of the population and 47 companies in Luxembourg would be in favour of the introduction of a binding law on the duty of care for companies in the Grand Duchy. The study also points out that there is no evidence that the adoption of such a law would lead to a migration of financial services providers to another country. On the contrary, the case of France shows a record level of direct investment from abroad after its implementation.
To be prepared, companies need to take responsibility and anticipate future changes. How can they do this? Through awareness raising, training and by being inspirational. Nowadays, it is more important to highlight the transformation processes than the results. It is also key to translate these challenges into concrete, operational terms that can be understood by all employees. These decisions bring multiple co-benefits to the organisation that can be highlighted, i.e. strengthening deliberate risk management, offering a better perception of the company both internally and externally, attracting and retaining more talent, increasing productivity, etc.
To put this into action, the Blue Print produced by CSR Europe sets out a concrete action plan. The document clarifies the concept of human rights integration by breaking it down into six elements that can easily be applied to a business environment: cross-functional leadership, shared responsibility, incentives, operational guidance and training, two-way communication, monitoring, analysis and integration. A definition of each of the six elements is provided, followed by an overview of current business practices in this area and examples of specific measures and initiatives implemented by companies. The six elements are then applied to the Human Resources, Procurement and Risk functions, outlining how each business line can contribute to the overall process of mainstreaming human rights throughout the company.
As an example of good practice, in Belgium, the Beyond Chocolate partnership for sustainable chocolate was signed between the chocolate sector, the retail sector, civil society, social impact investors and universities. All signatories commit to cooperate on a range of challenges related to sustainable chocolate, such as combating deforestation, child labour and ensuring a decent living for local cocoa producers. In concrete terms, all Belgian chocolate produced or marketed in Belgium will have to meet a relevant certification standard or be produced on the basis of the company's own sustainability programmes by the end of 2025. By the same date, the partners will also have to fully comply with the agreements between the public authorities and the private actors made in the framework of the Cocoa & Forests Initiative. The main challenge here is to stop deforestation in the two largest cocoa producing countries, Ghana and Côte d'Ivoire. The deforestation resulting from the production of cocoa for the Belgian chocolate industry must stop by 2030 at the latest. By then, all cocoa farmers should at least receive an income that allows them to live decently.
The upcoming changes in human rights are therefore real opportunities for companies. The main challenge will not be to simply tick boxes to comply with the laws, but to integrate virtuous practices into the very DNA of companies, and thus create a virtuous circle.
Finance also concerned
The words of Charles Muller, President of Finance and Human Rights asbl
"When it comes to business and human rights, it is common to refer to supply chains (the one-euro T-shirt made under dubious conditions in Bangladesh), which could lead companies in the financial sector to feel unconcerned. But this is not the case. The regulatory frameworks refer to a duty of care on all activities, which implies lending, investing or simply maintaining contractual relations (e.g. a bank account). And the main voluntary initiatives, starting with the "Principles for Responsible Investment", abound in this sense.
While waiting for a legislative framework for all companies, the European Union's "Sustainable Finance" action plan contains, alongside the predominant environmental subject, a whole range of measures focused on the "S" of ESG, which includes human rights.
As demonstrated by a recent study for LuxembourgforFinance carried out by the association Finance and Human Rights with the University of Geneva, more and more major banks and investment fund managers are adopting a human rights policy, convinced that this is not just a "nice to have" but an increasingly pressing expectation on the part of clients, shareholders, employees and society at large. Finance and Human Rights asbl aims to be a catalyst for these efforts.
Finance also concerned
The words of Charles Muller, President of Finance and Human Rights asbl
"When it comes to business and human rights, it is common to refer to supply chains (the one-euro T-shirt made under dubious conditions in Bangladesh), which could lead companies in the financial sector to feel unconcerned. But this is not the case. The regulatory frameworks refer to a duty of care on all activities, which implies lending, investing or simply maintaining contractual relations (e.g. a bank account). And the main voluntary initiatives, starting with the "Principles for Responsible Investment", abound in this sense.
While waiting for a legislative framework for all companies, the European Union's "Sustainable Finance" action plan contains, alongside the predominant environmental subject, a whole range of measures focused on the "S" of ESG, which includes human rights.
As demonstrated by a recent study for LuxembourgforFinance carried out by the association Finance and Human Rights with the University of Geneva, more and more major banks and investment fund managers are adopting a human rights policy, convinced that this is not just a "nice to have" but an increasingly pressing expectation on the part of clients, shareholders, employees and society at large. Finance and Human Rights asbl aims to be a catalyst for these efforts.
To be read also in the dossier "Human Rights: A Call for Businesses to be More Vigilant"
