EU issues corporate due diligence guidelines for forced labor | Hogan Lovells

On July 12, 2021, the European Commission and the European External Action Service released due diligence guidance for EU businesses to address the risk of forced labor in their operations and supply chains. ‘Procurement, which provides practical advice on implementing corporate forced labor due diligence. The publication of the guide responds to a specific commitment included in the Communication on Trade Policy Review published in February 2021.

The Guide (available in full here) reflects the growing trend – both internationally and within individual jurisdictions – towards mandatory human rights due diligence (see in particular our blog post on German Supply Chain Law) and the growing business, public and political expectations of companies in all sectors to assess and mitigate human rights risks in their operations and chains supply.

Although the Guide is non-binding, relatively brief and expressly states that it does not reflect any official political position, it is particularly interesting in light of the Commission’s intention to introduce legislation to create a new mandatory obligation for companies to respect human rights. and environmental due diligence (see our blog post).

Due diligence framework

The Guide is largely based on existing international standards and in particular the fundamental ILO Conventions, the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multi-national companies. It recommends that due diligence be implemented in accordance with the six-step framework established by the OECD Due Diligence Guidance for Responsible Business Conduct:

  • Embed responsible business conduct into policies and management systems.

  • Identify and assess the actual and potential negative impacts associated with the company’s operations, products or services.

  • Stop, prevent and mitigate negative impacts.

  • Monitor implementation and results.

  • Communicate how impacts are handled.

Most of these steps are not covered in detail in the Guide, but recommendations are provided on how policies and management systems should be adapted to the risks of forced labor, with particular emphasis on the need to ” a “zero tolerance policy”, by raising awareness with staff and suppliers, and protecting whistleblowers.

Risk assessment

The Guide lists a number of ‘red flags’ to consider when assessing supply chains based on:

  • National risk factors (such as countries with state-sponsored programs, laws prohibiting peaceful strikes, or prison labor policies).

  • Risk factors related to migration and informality (such as employment of migrant workers, provision of housing for workers and lack of written employment contracts).

  • Risk factors related to the presence of debt risk (such as credit agreements for workers, lack of access to identity and residence documents, and excessive working hours).

Additional guidance is provided on considerations to be taken into account in a thorough risk assessment of suppliers and high risk sectors, including on improving training and site inspections.

Action to combat and remedy forced labor

The Guide sets out a series of considerations that businesses should take into account after identifying the risks or impacts of modern slavery. These revolve around the following themes:

  • Action to deal with the risks of forced labor (mainly helping suppliers and companies to agree on corrective action plans, including “where appropriate financial support”).

  • Address the risks of state sponsored forced labor (focusing primarily on direct and indirect communication to governments).

  • Responsible disengagement from business relationships (relatively detailed advice is given on how and under which companies can opt out).

  • Remediation (companies are advised to ‘seek to put the affected person (s) back to the situation they would have been in had the negative impact not occurred (to the extent possible) and to allow for proportionate remediation the magnitude and magnitude of the negative impact ”but little additional practical advice is provided).

The Guide also discusses how due diligence can be made gender sensitive taking into account the different risks in the supply chain for men and women, and how discrimination against ethnic or religious minorities can also be taken into account. account.

Next steps

The Guide includes some new aspects, including disengagement from trade relations and gender, but it is largely based on existing standards and in particular the OECD Due Diligence Guide. The advice provided on remediation is relatively brief and underdeveloped, but clearly sets high expectations for companies.

Any future EU human rights due diligence legislation, or guidance issued under such legislation, may reflect similar approaches to those adopted in the Operational Guidelines. Legislation to introduce mandatory environmental and human rights due diligence was due to be introduced in the first half of 2021, but was delayed following a negative assessment by the EU’s review panel. Commission regulations.

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