4-6. The Trend of Mandatory Human Rights Due Diligence in Global Supply Chains

In recent years, the mandatory implementation of Human Rights Due Diligence (HRDD) in global supply chains has been accelerating internationally. Companies are now required to integrate respect for human rights, in addition to Environment, Health, and Safety (EHS), into their management strategies to secure the trust of their stakeholders. While this was once part of Corporate Social Responsibility (CSR) and voluntary initiatives, a major shift is underway as it becomes a legal obligation institutionalized in various countries.

1. International Regulatory Trends

In the European Union (EU), the Corporate Sustainability Due Diligence Directive (CSDDD) was proposed in 2022, which would impose an obligation on large companies within and outside the EU to identify, prevent, and remedy adverse impacts on human rights and the environment. In Germany, the Supply Chain Due Diligence Act (LkSG) has already been in force since 2023, placing specific HRDD obligations on companies with over 3,000 employees. Additionally, individual EU countries have their own regulations, such as France's Law on the Duty of Vigilance and the Netherlands' Child Labour Due Diligence Act.

2. Impact on Japanese Companies

Japanese companies are highly likely to be affected by regulations in Europe and the United States through their exports and supply chains. In particular, when doing business with major European clients, it is increasingly becoming a condition of business to report on the status of HRDD implementation. The Japanese government has also formulated its own Guidelines on Respect for Human Rights in Responsible Supply Chains, etc. to encourage voluntary efforts by companies, but it has been noted that further legislation may be forthcoming.

3. Key Points for Practical Implementation

・ Conduct a Risk Assessment: Evaluate risks such as child labor, forced labor, severe working conditions, and discrimination across the entire supply chain.

・ Formulate and Disclose Policies: Ensure transparency by clearly articulating a human rights policy and disclosing it to stakeholders.

・ Establish a Monitoring System: Include human rights clauses in contracts with suppliers and conduct local audits to regularly verify compliance.

・ Remediation and Grievance Mechanisms: It is crucial to set up a remediation process for when violations are discovered and to establish a system that allows workers to voice their concerns.

4. Intersection with EHS

Human Rights Due Diligence is closely related to occupational health and safety and environmental issues. Harsh working conditions and exposure to hazardous substances are direct human rights violations, making collaboration between the EHS and human rights departments essential.

Summary

The trend of Human Rights Due Diligence becoming a legal obligation in global supply chains is set to expand further. Japanese companies are required to build their systems early and implement transparent and effective initiatives. By doing so, they can avoid regulatory risks and strengthen their credibility in the international market.