Business & Human Rights in 2023

Primarily governed by soft law principles until recently, including the UN Guiding Principles and OECD guidelines, BHR law has seen an explosion of legislation throughout 2022 and 2023. This trend is set to have a huge impact on BHR lawyer’s practices and the organisations whose records will be regulated and scrutinised. 

Existing legislation, such as the US’s Uyghur Forced Labour Prevention Act, often focuses on supply chains, making due diligence mandatory in order to prevent human rights abuses occurring in the downstream operations of companies. The UFLPA was signed into law in December 2021 and aims to prevent goods alleged to be manufactured using forced labour in Xinjiang from being imported into the US. 

Increasingly there are similar pieces of BHR legislation across the EU, with potential effects further afield. The Norwegian transparency act came into effect in July 2022 and requires companies to conduct human rights due diligence regarding their supply chains. This has had a significant effect already, notably on the energy industry, with clients “pushing down the obligation to look at due diligence” to multiple tiers of their supply chains.

Similar effects are likely to be felt from other pieces of legislation, including the German Supply Chain Act and proposed EU Corporate Sustainability Due Diligence Directive. The EU legislation will be the most comprehensive to date and establishes a duty for companies, their subsidiaries and supply chains to conduct corporate due diligence, identifying and mitigating potential adverse human rights or climate impacts. Lawyers predict this legislation “will have global implications”, having a ripple effect as commitments are passed through international supply chains, impacting parties beyond just the EU organisations directly obliged to comply.

The combination of human rights and climate obligations entailed by the legislation is also significant, reflecting a trend towards work on issues at the intersection of BHR and climate change.

The overall effect is to drive work for BHR lawyers and create an uptick in interest from the C-suite as multinational companies realise the need to “meaningfully engage with human rights due diligence” and seek support in adjusting to new requirements.

One of the other major trends highlighted by lawyers was the increased use of alternative dispute resolution mechanisms, utilising mediation instead of traditional means of dispute resolution including arbitration. This development is potentially advantageous, offering parties a more flexible approach and faster resolutions, solving issues for those affected in the near or medium-term future rather than waiting a longer period for monetary settlements which may be provided by mainstream dispute resolution mechanisms.

It will be interesting to see how these themes continue to develop as legislation is brought into force and the increased prevalence of alternative dispute mechanisms comes to fruition.