GLOBAL CONSIDERATIONS

As the fashion industry comes under increasing scrutiny for social and labor rights, both consumers and governments are boosting a growing worldwide movement to legally require companies to undertake human rights due diligence. According to the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, Due Diligence is a risk management process that companies can carry out to identify and respond to current and potential negative impacts related to their operations, as well as throughout their supply chains.

The OECD Due Diligence procedure has emerged as a pivotal reference point in this evolving legal framework, guiding companies on a more ethical path. Briefly, the procedure is based on six points [1]:

  • Embed responsible business conduct into policies and management systems. The first step shall be to develop, implement, and communicate a policy on human rights due diligence and further incorporate policies and expectations in supplier and business relationships.

  • Identify and assess actual and potential adverse impacts associated with the enterprise’s operations, products, or services. A risk assessment shall be done throughout the whole value chain.

  • Cease, prevent, and mitigate adverse impacts. Once identified, companies shall act on the most significant risks and develop and implement a remediation plan to cease, prevent and mitigate them.

  • Track implementation and review of results. A monitoring process to evaluate the effectiveness of due diligence procedures, working in a continuous improvement mode.

  • Communicate how impacts are addressed. Stakeholders shall be informed about human rights due diligence procedures, risks, activities, and findings.

  • Provide or cooperate in remediation when appropriate. Working together with other parties would be crucial to enable remedy and to provide grievance mechanisms.

New global legislation

Upcoming legislation in Europe will be developed from the proposal for an EU Directive on Corporate Sustainability Due Diligence Directive (CS3D)[2], which will initially apply to large companies or companies in high-impact sectors, e.g. textiles, agriculture, extraction of minerals, etc. Even though SMEs – which represents 99% of EU companies –are excluded, it is estimated that around 16,800 companies worldwide will be directly affected [3], as they are exposed to the directive through business relationships with companies directly in the scope.

Besides that, some European countries have already adopted their Due Diligence law [4]: Norway, the UK, Germany, and France. While countries such as Poland, Spain, Italy, and Ireland are currently developing the law. Outside Europe, we can find early developments in California and Canada as well as already-established legislation in Australia and New Zealand. This is a worldwide push for private companies to ensure the human rights of people working for them, and their supply chain.

Sources:

  1. Organisation for Economic Co-operation and Development (OECD), Guidelines for Multinational Enterprises (2018), mneguidelines.oecd.org//OECD-Due-Diligence-Guidance-for-Responsible-Business-Conduct.pdf

  2. European Commission, Corporate Sustainable Due Diligence (2022), https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en

  3. Worldfavor webinar, Human Rights Due Diligence in the Supply Chain (2022), Worldfavor webinar. Human rights due diligence in the supply chain

  4. Worldfavor webinar, Human Rights Due Diligence Process (2022), Worldfavor webinar. Human Rights Due Diligence Process. What is it and how to implement it?