International Regulatory Enforcement (PHIRE)
Our Top 10 + 1 Predicted Business and Human Rights Issues for 2024*
December 21, 2023
By Jon Drimmer, Tara Giunta, Ruth Knox, Renata Parras, and Anita Ramasastry
Business and human rights continued its sprint around the globe in 2023. Between mandatory human rights due diligence laws that were debated and adopted, modern slavery acts proposed, enacted and evaluated, foundational standards reconsidered, and an avalanche of regulatory enforcement and civil actions in a bevy of jurisdictions, corporate responsibilities to respect human rights are expanding and becoming more deeply entrenched. That makes it, of course, easier to identify business and human rights issues and trends to watch in 2024, and harder to limit them to just 10; while as in years past we include a bonus topic, those left on the cutting room floor could create an impressive list on their own. Nonetheless, and even more so than in 2021, 2022, or 2023, in the spirit of Human Rights Day, which in 2023 marks the 75th anniversary of the date the UN General Assembly adopted the Universal Declaration of Human Rights, we will be bold and venturesome. Some of our topics are cyclical, others just emerging, and a few persisting. But here are our top 10 + 1, in no particular order.
- Global Elections
2024 is the biggest election year in history. According to Bloomberg, voters in countries representing 41% of the world’s population and 42% of its gross domestic product go to the polls in 2024, including in the U.S., India, Indonesia, Venezuela, South Africa, Mexico and Pakistan and about 35 countries. On a policy level, elections can bring a variety of human rights changes that can impact businesses positively and negatively. Indeed, we featured anti-ESG efforts in last year’s top 10 list, and even non-election year 2023 saw 37 U.S. states consider 165 anti-ESG bills and a raft of politically motivated lawsuits and regulatory actions, which will increase exponentially amidst an election environment. In many places, elections also have brought human rights violations, whether through denying internet and media access, chilling freedom of expression, arresting opponents, suppressing votes, or post-election violence. Indeed, as a prologue, this year saw violent election-related clashes in Liberia, Sierra Leone, the Philippines, and 28 deaths in Nigeria, along with 30 reported assassinations/ attempted assassinations. In a recent poll in the U.S., about 25% of those surveyed said they believe “American patriots may have to resort to violence to save the country.”
Companies across a wide range of industries can cause, contribute to, or be directly linked to election-related negative human rights impacts, from technology companies impacting privacy rights of political opponents, to media and internet providers affording access to information in the face of censorship, to transportation businesses bringing protestors to flash points, to communications companies allowing engagement between voters and campaigns, to financial services connected to campaign support as an “integral element of the right to freedom of association,” per the OHCHR. Others may impact the dynamics connected to conflicts, or make monetary contributions, directly or through associations, to parties that foment abuses. Even the hospitality industry has faced scrutiny for housing rioters in the U.S. and elsewhere. Still others, and their employees, may be impacted by arrests, intimidation, looting, rioting, and aggression. Given the global electoral landscape, the elections will be a key business and human rights issue throughout 2024.
- CSRD & the Future of Human Rights Reporting
The EU’s Corporate Sustainability Reporting Directive (CSRD), which applies from 2024, covers EU and non-EU companies meeting certain thresholds. Reporting obligations occur in phases, with reports for the first tranche of covered companies due in 2025. The obligations are substantial, with 12 sector-agnostic standards encompassing a uniform set of disclosure areas. Within the four “S” standards, there are 374 reporting data points alone, out of 1,178 in total. Company disclosures are audited, although except for certain general disclosures, only those that present material impacts – identified through a “double materiality” analysis – must be included. Companies have begun to actively prepare for compliance, which will ramp up in 2024.
While there have been public calls for greater uniformity and consistency in sustainability reporting, there are vocal concerns that the CSRD will usurp resources that are being applied to human rights reporting. Leading companies devote meaningful time and effort to preparing descriptions of human rights programs. Seeking to align with leading reporting frameworks, they describe their priorities, track and report on metrics and KPIs, discuss their annual achievements, and present their goals and philosophies. At least for some companies, 2024 will begin an adjustment toward more limited human rights disclosures tied to the prescribed CSRD formula, but only if the double materiality analysis calls for it.
- HREDDD & The Future of Human Rights Due Diligence
Human rights due diligence may face a similar fate. The Corporate Sustainability Due Diligence Directive (CSDDD), mandating human rights and environmental due diligence for a wide range of EU and non-EU based companies, is nearing finalization. It will require covered companies to identify certain human rights and environmental risks and impacts in their operations and supply chains, take steps to mitigate those impacts, monitor effectiveness, and report on their diligence efforts and risks. The CSDDD will expand human rights diligence well beyond the smattering of laws that already require or incentivize it. Even companies that are not directly in scope may find themselves within the value chain of a company that is, and therefore required to implement appropriate procedures and reporting. A failure to conduct adequate due diligence and implement appropriate policies and procedures could land a company and its executives in operational, legal, and reputational hot water.
Embedding human rights due diligence through mandatory and incentivized regulatory approaches is propelling many companies to begin their human rights journeys, which will continue and increase as new laws come online. For others, however, it is reshaping the nature of their human rights due diligence, with resources applied to a UNGPs-driven approach shifting toward rote human rights regulatory compliance. The field is changing. How it evolves in 2024 when the CSDDD is adopted is worth watching.
- The Treaty
Since its 2014 UN Human Rights Council launch, an international treaty focusing on human rights and transnational corporations has been slowly progressing. In October 2023, an intergovernmental working group held their 9th session, using a 2023 updated draft (a 4th revised draft) as the basis for the discussions. The 2023 draft has broad obligations for states regarding the regulation and oversight of transnational companies, including mandatory due diligence, protecting victims, conducting investigations, and providing broad access to remedy. It contemplates some concepts (e.g., mandatory human rights due diligence throughout value chains (upstream and downstream), shifting burdens of proof in litigation, and jurisdiction over disputes based on the nationality of a victim regardless of where the injury occurred) which have in the past ignited voluble business concerns.
Discussions around the draft treaty remain divisive and it seems doubtful to pass in its current form. However, as we remarked 3 years ago when the CSDDD was introduced, an adopted CSDDD may “sway the draft Treaty’s outcome so that the two instruments are in sync.” As the CSDDD progresses toward finalization, we can expect that 2024 will include efforts to bring the draft Treaty into alignment, and seek to create an element of global consistency.
- Globalization of TCFD and TNFD
As the OHCHR has discussed extensively, “Climate change impacts, directly and indirectly, an array of internationally guaranteed human rights.” Similar pronouncements have, for many years, focused on biodiversity, which is closely connected to the Right to a Clean, Healthy and Sustainable Environment, and considered a precondition to the enjoyment of a wide range of human rights. As part of their duties to protect human rights, numerous governments are on the cusp of adopting mandatory disclosures regarding climate, and more recently, nature.
On the climate side, most regulatory proposals to date align with the Task Force on Climate-Related Financial Disclosures (TCFD), requiring companies to make disclosures across four areas - governance, strategy, risk management and metrics and targets. Several jurisdictions, including Brazil, California, Hong Kong, Japan, Singapore, Switzerland, the United Kingdom, and the EU, have made TCFD reporting mandatory for certain entities. The U.S. SEC’s proposed climate rule also follows the TCFD approach. Many others have announced an intention to adopt such laws. Newer to the scene, in September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) released a framework to encourage organizations to integrate nature into decision-making and support a shift in financial flows away from nature-negative outcomes. The TNFD follows the December 2022 Kunming-Montreal Global Biodiversity Framework. Adopted by nearly 200 countries at COP15, it aims to halt and reverse biodiversity loss by 2030 with implementation intended to follow “a human rights-based approach respecting, protecting, promoting and fulfilling human rights.” Governments already have expressed their support for the Framework. While 2024 will bring additional TCFD-related regulation, the TNFD and efforts to protect biodiversity also will pick up steam.
- Net Zero, Carbon Offsets and Human Rights Impacts
Our sixth issue to watch for in 2024 is actually the synergy of two trends: corporate greenwashing and net zero pledges. Over the past few years, there have been hundreds of legal actions around the world based on allegations that companies are making human rights and other sustainability statements that are inaccurate, misleading, or cannot be substantiated. OHCHR has also recognized the “central” role that businesses play in climate change, and advised companies to align with the UNGPs in their strategies, including disclosures around impacts and goals. In that spirit, many companies, voluntarily or through state mandate, have committed to reduce their emissions and become carbon-neutral by certain dates. However, to meet those commitments, companies often rely on carbon offsetting. Critics claim carbon offsets are a form of greenwashing, or a smokescreen for real climate action, since buyers can pay someone else to adopt climate-friendly actions rather than cutting their own emissions. There are also concerns that the lack of regulation around carbon markets has led to low-cost and low-quality offsets of questionable integrity – including allegations that carbon credits are linked to forced relocations, harms to Indigenous Peoples, killing of environmental defenders, the right to water and other human rights abuses. Recent public reports include allegations of companies purchasing carbon credits with links to forced labor in Xinjiang.
We are starting to see a variety of responses. There are public calls for companies to include human rights due diligence as part of carbon credit purchases, and for states to adopt more focused regulations on purchases and disclosures. A new California law, which is part of a broader climate package in the state, goes into effect January 1, 2024 and imposes detailed public disclosure requirements on entities that operate in the state and make claims of net zero and carbon neutrality, and market, buy, or sell carbon offsets in the state. The proposed EU Green Claims Directive, introduced in March 2023, states that phrases such as “net zero,” “carbon neutral,” and “eco-friendly” would be prohibited in advertisements, in social media posts, or on packaging unless they are sufficiently substantiated and verified. The U.S. Federal Trade Commission’s Green Guides address deceptive marketing related to carbon offsets. 2023 witnessed legal actions against airlines, skin care companies, spring water companies, and others premised on alleged false public statements of carbon neutrality where reductions were based on the purchase and retirement of carbon offsets. These issues will increase in 2024, which will see more public reporting linking carbon offsets to human rights violations, additional regulatory action, and more corporate accountability measures.
- Return of the MSAs
In 2012, California adopted the Transparency in Supply Chains Act. It requires covered companies to report on their efforts to combat modern slavery; it does not mandate any particular measures, but that companies simply report on the steps they are taking. The UK followed the concept in 2015, as did Australia in 2019. Since then, governments have continued to propose and adopt human rights transparency measures, but the modern slavery act approach – disclose only what you are doing – has been criticized. Most recently, after an exhaustive review, the Australian Government tabled a report in Parliament on its Modern Slavery Act concluding that the Act’s transparency model is an “elementary weakness.” It recommends amending the Act to become a mandatory due diligence law, requiring companies to implement a system to take effective action to identify and assess risks, track performance in addressing them, and report publicly.
Nonetheless, 2023 saw a revitalization of the modern slavery act. Canada adopted its version. New Zealand announced that it would pursue a similar approach, after previously indicating that it would require due diligence for certain companies. As the CSDDD takes final shape, we can expect continued debate in 2024 over the adequacy of the more limited transparency strategy envisioned by California, the UK, Australia, Canada, and now New Zealand.
- US & Child Labor
Over the past year, a series of exposés have identified a trend across the U.S. – employing children in a manner inconsistent with ILO standards and federal child labor laws. The New York Times, following an 18 month investigation, described the situation in Dickensian terms, with “[t]ens of thousands of children” in all 50 states working “full time, often on overnight shifts and in dangerous jobs.” The U.S. Department of Labor reports that violations of child labor laws have increased 88% from four years ago for a variety of reasons: labor shortages across a variety of industries, especially in lower-paying service-sector jobs, creating a need for unskilled workers; inflationary impacts on households pushing children into the workforce; the hundreds of thousands of unaccompanied minors that have come to or find themselves in the U.S.; and criminal exploitation.
The discussion surrounding child labor in the United States has led to a polarized debate. Several states have responded by making it easier for children to work, including relaxing some standards contrary to federal law. Four states have done the opposite, enacting laws to strengthen child labor protections. The federal government is increasing enforcement efforts and has developed tools to assist businesses in combatting child labor. Positions will further entrench in 2024, as the issue will be front and center in many local, state, and federal electoral campaigns. For global businesses committed to following ILO standards, due diligence in the U.S., including in relation to age verification in operations and supply chains, will almost certainly increase.
- Corporate Accountability
The 2024 watchword for civil litigation and regulatory enforcement actions against companies is simple: more. While in the past, cases largely were brought in the U.S., 2023 brought more civil lawsuits and government actions in more places, under more theories. The U.S. continues to be the global hotspot, with dozens of climate cases filed in 2023 against companies, along with tort and disclosure-based cases under the Alien Tort Statute, the Trafficking Victim Protection Reauthorization Act, consumer marketing laws, federal securities laws, state laws, and other bases. France has now become a litigating hub, with cases being filed under the Duty of Vigilance Law and traditional tort theories against French companies doing business abroad. The UK remains a highly active jurisdiction, with well-reported group actions for transnational torts and domestic stock drops, cases seeking to expand traditional notions of the corporate duty of care, and litigation funders hunting for cases involving environmental harms and climate disclosures. Remedy is being sought for human rights claims in a number of other countries, often relying on theories pursued in U.S. courts. Even the African Court on Human and Peoples’ Rights issued a decision regarding a corporate human rights violation from 2006 associated with Cote D’Ivoire.
The momentum will increase in 2024. We will see more cases by investors and shareholders against companies that face a reduction in value or stock price because of human rights allegations. There will be more cases involving transnational torts in home and host countries. More activity by regulators and consumers regarding allegedly false marketing claims is a near certainty. More suits that name boards of directors, to emphasize the importance of exercising careful oversight, is likely. Just as France has seen a sharp uptick in cases under its Duty of Vigilance Law, we will see the same in Germany under its Supply Chain Due Diligence Act. Expect civil society and plaintiffs’ firms to file actions focusing subjects conspicuously omitted in the CSDDD – e.g., regulation through litigation – to deter corporate activity in spite of that law. When it comes to human rights litigation and government enforcement, expect lots more in 2024.
- Human Rights and the Energy Transition
Last year, the human rights implications associated with critical minerals almost made the list. Throughout 2023, there were reports around the world of human rights issues associated with mining and processing lithium, nickel, cobalt, and other minerals critical for the energy transition, including land grabs, deforestation, water pollution, and carbon emissions from nickel mining in Indonesia, of child and forced labor related to cobalt extraction in the DRC, of water quality and quantity impacts, and harms to indigenous peoples, from lithium mining in South America, and of food insecurity in Tunisia. They included concerns of water pollution from aluminum processing in Brazil, and protests in Bolivia connected to allegations that its mined lithium is linked to forced labor abuses in Xinjiang. Reports also continued to proliferate about labor concerns around electric vehicle manufacturing, as U.S. authorities began targeting batteries, tires, and other car parts under the Uyghur Forced Labor Prevention Act. The disposal of batteries, turbines, and other key components of the energy transition are creating their own human rights and environmental unease.
As the green energy transition continues to progress, these reports, and the underlying human rights concerns, will increase. Major initiatives like the U.S. Inflation Reduction Act, the EU Green Deal, and California’s mandate to only permit the sale of zero-emission vehicles after 2035, is pressuring companies to identify, extract, and process critical minerals in developing jurisdictions around the world. As the energy transition continues apace in 2024, the human rights implications will come further into focus.
In June, the U.S. Supreme Court ruled that race-conscious admissions programs at Harvard and the University of North Carolina violate the U.S. Constitution. The Court concluded that the schools had “commendable goals”, but they were “not sufficiently coherent for purposes of strict scrutiny” and assigning students to racial categories and making admissions decisions based on them was imprecise and overbroad.
While the case does not address private employer hiring policies, it has changed the overall environment in the U.S., and companies can expect more scrutiny of their DEI programs in 2024. Shortly after the decision, 13 state attorneys general sent a letter to 100 of the biggest U.S. companies arguing that the ruling could apply to private entities. Since then, legal challenges to employers’ DEI programs, including internships, fellowships, and incubator programs or policies tying employment decisions to diversity goals, have been increasing. We have seen recent anti-affirmative action lawsuits, such as one involving an Atlanta-based venture capital firm sued by a conservative activist over its grant program for women of color. We expect that trend to continue in 2024, as more companies face reverse discrimination lawsuits, and the issue will feature in U.S. elections since DEI/Anti-DEI issues often break along party lines.
*This article originally appeared on Law.com.