Demystifying Human Rights Due Diligence - Watch & Jewelry Initiative 2030 :Watch & Jewelry Initiative 2030

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4. Demystifying Human Rights Due Diligence

Human rights due diligence (HRDD) is a risk management tool for organisations that helps businesses identify, prevent, mitigate, and act upon human rights impacts.

The UNGPs define human rights due diligence through a process of six core steps:

Commit to respect human rights and embed the commitment in your business.
Identify your human rights risks – actual and potential.
Take action to prevent and address the risks you identify.
Enable remedy for those affected if you are directly involved in a negative impact.
Track your progress by assessing the effectiveness of measures in order to assess whether they are working; Monitor the human rights performance.
Communicate what you are doing, how impacts are being addressed and show stakeholders that there are adequate policies and processes in place. Be prepared to disclose human rights performance publicly, particularly to stakeholders where the risks of harm are severe.

KEY CONCEPTS

Human rights due diligence should focus on both actual impacts occurring in the present and potential impacts that could occur in the future.

HRDD is concerned with impacts on people, not business risks to the company.

Assessing outward impacts on people (as required by emerging regulations) thus requires a different approach to enterprise risk assessment methodologies that focus on risks to a business. This is particularly relevant for conducting human rights impact assessments in a company, where the severity of impact is measured from the perspective of the individual rightsholders who may be harmed or otherwise negatively affected by the impact.

A key component of human rights due diligence is meaningful engagement with stakeholders, particularly rights-holders such as employees, community members, human rights defenders, supply chain workers, and consumers.

HRDD is an integral part of sustainable and responsible business – an essential component of the corporate responsibility to respect human rights. It should be embedded in formal corporate governance processes and endorsed at the highest level of the organisation and have Board and senior leadership oversight.

STEP 1 Commit to respect human rights and embed the commitment in your business

Respecting human rights starts with a clear commitment from a company’s top management. Oversight, accountability, and coordination around human rights is also critical. This may entail assigning and defining roles and responsibilities within sustainability committees. Internal reporting and discussion on human rights should also occur on regular intervals and not exclusively ad-hoc or in the event of a crisis. Human rights policy commitments should be accompanied by internal KPIs to evaluate and demonstrate implementation and effectiveness over time.

Publicly commit to respect all human rights and set out expectations for business partners, suppliers, and distributors.
Embed this commitment in relevant internal and external systems so that it gets translated into practice and into the organisational culture of your business, reaching all employees.
Establish a grievance mechanism, providing a formalized and effective means for any individual or group to raise concerns about a corporation’s impact on their human rights. The mechanism must be easily accessible, internally and externally.

STEP 2 Identify your human rights risks: assessing actual or potential adverse impacts

Assess, identify and prioritize human rights impacts relevant to your business and its value chain, as well as groups of rightsholders that could potentially be affected, either:

Directly, as a result of your own activities (for example risk of discriminating against certain people in recruitment process), or
Indirectly, as a result of negligence by a business partner (for example risk linked to manufacturing of products or their use throughout the value chain)

The findings are used to inform response strategies and the development of actions to prevent, mitigate, and remedy adverse human rights impacts and position companies to fulfil their responsibility to respect human rights.

STEP 3 Take action to avoid and address the risks you identify

Take action to prevent and address the risks identified by assessing current management practices and identifying gaps.

The UNGPs state that appropriate action to address human rights will vary according to whether the company causes or contributes to an adverse impact, or whether it is involved solely because the impact is directly linked to its operations, products, or services by a business relationship.

If your company’s activities directly caused or contributed to the human rights risk, you should be able to take concrete action to address it. If the risk of a negative human rights impact arises from a customer, supplier, or other business partner, exercising leverage is key.

STEP 4 Enable remedy for those affected

One critical component of implementing due diligence in line with the UNGPs is the provision of effective remedy to redress human rights impact a company may have caused or contributed to, or might be directly linked to.

Whether provided by the state or non-state company mechanisms, a remedy process should restore the rightsholder to the status they held preceding the harm and should be agreed upon and discussed with affected rightsholders.

The five internationally recognized elements of remedy include:

Restitution
Compensation
Rehabilitation
Satisfaction
Guarantee of non-repetition

STEP 5 Track progress

To ensure effective management of your responses to potential and actual negative human rights impacts, it is important to be able to efficiently track and record action, whether and how a potential negative impact was prevented, or a situation was mitigated or remedied for concerned individuals.

Measurement is a key step in any management process and forms the basis of continuous improvement. Tracking and monitoring will help your organisation monitor their human rights risks profile, comply with existing laws, operate effectively, and report externally. This may require using both quantitative and qualitative performance indicators to measure such actions.

STEP 6 Report & Communicate

Communicate relevant information on your due diligence policies, processes, and activities to identify and address actual and potential adverse impacts – including your findings from these activities – with all relevant internal and external stakeholders.

The emerging concepts of “double materiality” (the notion that companies should report on matters that influence enterprise value and matters that affect wider society) and “dynamic materiality” (the notion that the relative materiality of an issue may change over time) make it likely that the connectivity between enterprise risk assessment and human rights assessment will grow over time.

Assessment: Assessing actual or potential adverse human rights impacts with which the company may be involved.
Action: Taking appropriate action to avoid, prevent, mitigate, and / or remedy actual or potential adverse human rights impacts identified in assessments.
Tracking: Tracking the effectiveness of the company’s response to human right impacts, including via qualitative and / or quantitative indicators and feedback from stakeholders.
Communications: Communicating externally in a form and frequency such that the company’s approach can be effectively evaluated.

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