Predicting the impact of Human Rights Due Diligence on Materiality Assessments

Will the incoming EU Human Rights Due Diligence on Human Rights Directive transform reporting expectations?

By Bethanie Thompson, Senior Sustainability Consultant, UK

Legislation on ESG issues has historically focused on the environment. There are established norms, and for a long time companies have faced hefty fines for incidents involving pollution or irresponsible waste and water management. The EU Taxonomy promotes a transition to a circular economy, and much of the global discussion on the climate transition centres on decarbonisation and reducing GHG emissions. Unsurprisingly, these issues regularly feature as standalone topics on materiality assessments. As a result of potential lawsuits or fines, they are often included in enterprise risk management frameworks, internal stakeholders are aware of them, there is existing governance for each issue, and data on them is often readily available.

By contrast, ‘human rights’ often appears as a single issue, alongside topics such as local community engagement, health and safety, talent management, and diversity. While these other topics are undeniably social and relate to people, they aren’t exactly core labour and human rights issues. Freedom of association and union membership, child labour in supply chains, modern slavery in shipping, freedom of movement for migrant workers in manufacturing and construction are all individual issues worthy of scrutiny that are currently often lumped under the one banner issue of human rights. If the EU Human Rights Due Diligence or Human Rights Directive has the same impact on expectations and requirements as environmental norms and legislation, then companies should anticipate changing expectations on the depth and detail they provide across all material human rights topics.

Now, more than ever, organisations should assess if their supply chains, monitoring, materiality assessments, and reporting plans are fit for purpose. They need to be prepared to take action consistently and proactively, as the incoming requirements expected from legislation such as the

EU Human Rights Due Diligence Legislation will increase the scope to beyond direct operations. Acknowledging the complexity of mapping value chains, organisations should be planning now in order to effectively prioritise and mitigate their human rights impact, as they need to be prepared for constant and more stringent accountability.

Now, more than ever, organisations should assess if their supply chains, monitoring, materiality assessments, and reporting plans are fit for purpose. They need to be prepared to take action consistently and proactively, as the incoming requirements expected from legislation such as the EU Human Rights Due Diligence Legislation will increase the scope to beyond direct operations. Acknowledging the complexity of mapping value chains, organisations should be planning now in order to effectively prioritise and mitigate their human rights impact, as they need to be prepared for constant and more stringent accountability.