International Regulatory Enforcement (PHIRE)
Top 10 Predicted Business and Human Rights Issues for 2021
December 22, 2020
Nicola Bonucci,& Jonathan C. Drimmer
As 2020 edges toward a close, we can look forward to a 2021 defined by three Rs - recovery, rebuilding, and restoring. With that in mind, selecting just 10 business and human rights issues we predict will be salient through 2021, given the unpredictability of this past year and the number of issues we will confront next year, is a risky proposition. But in honor of Human Rights Day last week, below are 10 business and human rights issues we believe will receive particular attention between January 1 and December 31, 2021.
We have little doubt that the business and human rights agenda of 2021 will continue to be dominated by COVID-19. The pandemic has caused death and suffering on a massive scale. It has led to human health risks in the workplace, abuses within supply chains, mistreatment of workers, discriminatory treatment, and renewed discussions of sick leave as a human right. It has fostered violence from tensions associated with rapid increase of unemployment and a lack of medical care, affecting in particular minorities and vulnerable populations. It has created human health risks for first responders, medical professionals, and countless others. It has led to stories about corruption, fraud, and the emergence of black markets for PPE, serving as a poster child for how the anti-corruption and human rights agendas go hand in hand.
Unfortunately, many parts of the world continue to see substantial COVID-19 spikes and the impacts of COVID will persist throughout 2021.
- Right to Health
As countries are beginning to approve vaccines from major pharmaceutical companies, the same inequalities evident in the communities most adversely impacted by COVID are likely to emerge. Wealthy countries, and the wealthy within developing and developed countries, are likely to receive priority access to vaccines. Others will lag behind.
Access to medicines is a fundamental element of the right to health. The Office of the High Commissioner for Human Rights (OHCHR) has recognized that “access to medicines is intrinsically linked with the principles of equality and non-discrimination, transparency, participation, and accountability.” Even before COVID, the OHCHR concluded that access to medicines of good quality, that are affordable, and available in a timely fashion remains elusive and called on states to develop national health legislation and policies and to strengthen their health systems. The equities around distribution of COVID vaccines will be a focal point of dialogue, and shine a light on the right to health.
- Freedom of Expression v. Misinformation
With increasing frequency, countries – including those where the rule of law is suspect, and freedom is restricted - are adopting laws prohibiting the public dissemination of false information. Elsewhere, media providers are instituting internal regulations to prohibit the publishing of information that is untrue. Indeed, the issue received particular focus throughout the recent U.S. presidential election, and similar misinformation is spreading in other OECD countries and beyond.
The tension between balancing freedom of speech and access to accurate information, between legitimately protecting the public from false information that may factor into critical daily decisions and unjustified government censorship, is reaching a peak. Media outlets are under increased scrutiny from both governments and public opinion. Debates around good practice and the desirability of reasonable and appropriate restrictions will take place throughout 2021.
- Safety v. Surveillance
The tension between physical safety and the right to privacy continues to grow. Governments and companies are seeking to identify COVID-19 risks among populations and workforces to prevent its spread. Governments are using artificial intelligence and facial recognition technologies to thwart crime, fight terrorism and now for public health reasons. Obviously, keeping people safe is a primary, critical government priority.
But increased surveillance activities come with risks. There are significant privacy implications of collecting information about individuals, particularly in relation to health care. There are deep concerns that law enforcement and public security are using surveillance technologies to target minorities, dissidents, and others. As a result, companies have declined to continue sales of technologies to law enforcement and other customers; the U.S. State Department has published guidelines regarding the human rights implications of dual use products; four U.S. agencies jointly published an advisory warning businesses about surveillance activities in relation to the Xinjiang Uighur Autonomous Region in China; and the EU has announced a provisional agreement between the German Presidency and members of the European Parliament on a revised regulation setting out a new regime for the control of “dual-use” goods. The parameters of responsible surveillance activities will continue as a major issue in 2021.
- Xinjiang and China
Starting in 2019, the U.S. government began issuing a series of executive actions targeting what it calls a system of repression against Uighurs and other Muslim minorities in the Xinjiang Autonomous Region of China. In 2020, those efforts sprouted into a new federal law and several pending bills, new federal sanctions against individuals and entities, new federal export controls on certain companies, new federal requirements and limits on government contractors, seizing goods at the border and embargoing imports from certain government-related entities, to name just a few of the activities. In a virtual EU-China summit mid-September, EU leaders have called on Beijing to respect human rights and open its markets, stating they are fundamental requirements of the EU-Chinese relationship.
We see this focus continuing in 2021 in at least several respects. New U.S. laws will be debated and perhaps enacted. Countries outside the U.S. and the EU will be pressured to enact restrictions similar to those in the U.S. Businesses will grapple with the challenges of conducting meaningful due diligence, and workforces will increasingly raise questions about business connections to the region. Some companies will disengage with suppliers and customers, others will actively assess and reconsider their global sourcing and value chains in light of the growing legal, operational and reputational pressures. As such, navigating the increasing difficulties of doing business in XUAR and China more generally will remain a top major business and human rights issue throughout the year.
While issues and challenges associated with climate change will undoubtedly be a mainstay on business and human rights top 10 lists for many years to come, 2020 saw several issues that will fuel activities in 2021. Early in 2020, the Dutch Supreme Court ruled that the government has an affirmative duty under the European Convention on Human Rights to mitigate climate change, under provision 2 (right to life) and provision 8 (right to private and family life), and required the state to reduce emissions by at least 25%. Just a few weeks ago, the Conseil d’Etat, the French highest public court, requested that the government provide information to enable the court to assess whether the government’s refusal to take stricter measures is compatible with the 2030 targets it set. In addition, dozens of climate change lawsuits, especially in the U.S., focus on the connection between climate change and human rights, and a recent advisory opinion and pending cases regarding human rights and climate are before the Inter-American Commission on Human Rights. Further, the EU in its pre-draft of the mandatory corporate accountability legal directive directly connects climate change to human rights, echoing positions from the UN. Each of these developments is helping to cement the link between climate change and human rights, and creating demands and expectations for companies that will exist throughout the year and beyond.
- Mandatory Diligence
The concept of mandatory diligence is a step beyond human rights transparency laws, like the California Supply Chain Transparency Act, or the UK or Australian Modern Slavery acts. Mandatory diligence laws require that companies to do more than just report what they are doing. They must undertake affirmative assessments to identify their risks, institute measures to mitigate any negative impacts, assess the effectiveness of their measures, and publicly report on their approaches.
Given criticisms about the speed with which companies are voluntarily engaging in human rights diligence, a movement is afoot to mandate it. Human rights diligence laws have been adopted in France and the Netherlands (regarding child labor). An EU-wide conflict minerals regulation, requiring due diligence for importers of tin, tungsten, tantalum and gold, goes into effect in January 2021. Switzerland appears poised for a mandatory diligence regime regarding conflict minerals and child labor. Germany, Norway, and Finland have mandatory diligence bills or efforts progressing to enact such laws, and steps are being taken in Austria, Denmark, and elsewhere in the EU. The EU itself is anticipated to introduce a proposed sweeping and transformative directive that would require companies based or doing business in the EU to undertake diligence and report on their efforts regarding human rights, environment (including climate change), and governance issues such as anti-corruption, undue political influence, illegal campaign contributions and tax evasion.
Given the momentum throughout Europe, 2021 promises to be a year filled with engagement, dialogue, and debate around mandatory human rights diligence – topped with a proposed EU directive and additional laws adopted in some of the EU member states.
- Boards of Directors
Over the past few years, expectations and responsibilities for boards of directors in overseeing human rights issues and programs have become cemented. Mandated board oversight has been included in multiple legislative initiatives, such as the UK and Australian Modern Slavery Acts, the draft of Canada’s Modern Slavery Act, the pre-draft of the EU legislative directive on mandatory diligence, the new Swiss diligence regulation, to name just a few. Corporate benchmarking and reporting groups, such as the Corporate Human Rights Benchmark and SHIFT’s Reporting and Assurance Framework Initiative, expressly consider board-level accountability within their scope. The EU has published a study on directors’ duties and sustainable corporate governance. In the U.S., there is a growing line of cases looking more critically at whether boards of directors fulfilled their fiduciary duties in overseeing the company’s legal, regulatory and operational risks.
Over the course of 2021, and in particular surrounding the discussions related to the EU’s anticipated mandatory corporate accountability due diligence legal directive, we expect a heavy focus on the appropriate role of boards of directors in overseeing salient human rights risks.
- Integration of Human Rights into Other International Regulatory and Compliance Areas
While human rights increasingly is being treated as a standalone program at companies, it also has increasingly become integrated into compliance programs addressing other regulatory areas. The UN, leading global business groups, TRACE International and others have identified the close connection and correlation between human rights and anti-corruption. As they make clear, human rights violations can lead to corruption, and corruption can lead to human rights abuses. Likewise, human rights is being integrated into sanctions, export control and AML regimes. Global Magnitsky Acts now exist in multiple countries, including the U.S., Canada and the U.K, and the EU just adopted its own version. These acts are being employed to strictly limit the economic activity of individuals and entities associated with alleged human rights abuses, such as rigged elections in Belarus, forced labor in China, and security abuses in Iraq, Nigeria and Burma. Similarly, over the past year, some 50 companies – and dozens more subsidiaries – have been added to the U.S. Department of Commerce’s Entity List for allegedly enabling human rights abuses in Xinjiang, making it difficult for them to purchase products from U.S. suppliers. Further, in September an Australian bank settled with the Australian financial crime agency for $1.3 billion for lax AML controls that led to some 250 transactions consistent with child exploitation. In October 2020, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued updated guidance to financial institutions on red flags associated with human trafficking, and trafficking is included as a box on suspicious activity reports.
These trends are going to expand in 2021, requiring companies to think about how they are addressing their human rights risks – to stakeholders and the business – on their own and as part of their standing international regulatory and compliance programs.
- Return of the U.S.
We can expect a Biden Administration to focus on human rights more aggressively – in particular, treating human rights as a distinct priority that helps drive policy, not a tool to accompany or further political initiatives. Among the areas we believe will receive particular focus are: treating LGBTQ+ rights as human rights; climate change and human rights; increasing the growing link between trade deals and human rights, including in connection with seizing goods suspected of being created with forced labor; a potential U.S. Modern Slavery Act; increased human rights requirements for government contractors; disclosures of board diversity for public companies; and a greater global engagement with major business and human rights issues debated across the globe. That could include: legislation mandating that businesses conduct global human rights due diligence, as is being considered in the EU; stronger engagement on a potential UN Treaty on Business and Human Rights, or an alternative; increased extraterritorial liability for companies connected to alleged human rights abuses; and how AI and privacy across a spectrum of issues should be regulated. Although these issues will be spread over the next four years, we can expect the rollout to start in the coming year.
Reprinted with permission from the “December 17, 2020” edition of Corporate Counsel© 2020 ALM Media Properties, LLC. All rights reserved.