Human Rights Due Diligence Project - US Consultation Summary

Human Rights Due Diligence Project – US Consultation

June 25, 2012

The International Corporate Accountability Roundtable (“ICAR”) is hosting consultations with local experts in various jurisdictions to gain valuable inputs into the Human Rights Due Diligence Project. The Human Rights Due Diligence Project will formulate legal and policy recommendations to governments to promote due diligence to prevent, remedy and mitigate adverse human rights impacts.

On June 25, 2012, ICAR hosted a U.S. Consultation to discuss preliminary research for the project’s survey methodology.  Participants included Sarah Altschuller, Associate at Foley Hoag LLP; Marina Colby, Senior Policy and Legislative Advisor at ECPAT-USA; Piper Hendricks, Litigation Consultant at International Rights Advocates; Jonathan Kaufman, Staff Attorney at EarthRights International; Sol Milius; Katie Shay, Legal and Policy Associate at ICAR; and Meg Roggensack, Senior Advisory for Business and Human Rights at Human Rights First.  The U.S. Consultation was led by Amol Mehra, ICAR Coordinator, and the Human Rights Due Diligence Project experts, including Anita Ramasastry and Robert Thompson.  A summary of the discussion follows.

Litigation Risk as an Incentive for Due Diligence

Participants noted that litigation risk, rather than regulation, often serves as an incentive to implement due diligence procedures.

Voluntary Codes Can Facilitate or Hinder Statutory Requirements

The creation of voluntary codes of conduct may also facilitate the development of statutory requirements.  By establishing best practices, voluntary codes make it easier for governments to incorporate due diligence practices into legislation.  However, some participants noted that voluntary codes in some instances have the opposite effect.  Companies in compliance with codes of conduct may resist government regulation by pointing to their ongoing involvement with voluntary multi-stakeholder initiatives.

Impending Regulatory Activity as an Incentive for Due Diligence

Companies may be incentivized to establish due diligence mechanism when faced with government regulations.  For example, section 1502 of the Dodd-Frank Act imposes an SEC disclosure requirement on companies mining tin, tantalum, tungsten and gold in the Democratic Republic of Congo.  Although the corresponding rules have not yet been finalized by the SEC, some companies are already starting to conduct due diligence on supply chains.  The Electronics Industry Citizenship Coalition has developed a list of conflict-free smelters to facilitate certification.

Environmental Due Diligence is Instructive for Human Rights Due Diligence

Although environmental impacts are easier to measure, environmental due diligence activities provide a helpful analog for human rights due diligence.  For example, the U.S. General Services Administration (GSA) has initiated the Sustainable Supply Chain Community of Practice to establish environmental due diligence procedures for government procurement of its biggest expenditures, including furniture, technology, services, building supplies, food and apparel.  Executive Order 13514 encourages agencies to set greenhouse gas standards.  The National Environmental Policy Act of 1969 (NEPA) requires environmental impact assessments by applicants for government permits or loans to rezone.  The Thompson Memo permits DOJ prosecutorial discretion where a company has due diligence programs in place.  The Superfund Statute (CERCLA) incentivizes due diligence by creating joint and several liability for all entities involved in the placement of hazardous waste on contaminated property.  Significantly, CERCLA was an example of a draconian government regulation that spurred creation of a voluntary initiative to develop due diligence procedures.  Participation in this voluntary initiative was later incorporated as a safe harbor provision for the due diligence requirement.

Anti-trafficking Legislation as a Model for Human Rights Due Diligence

Anti-trafficking legislation and related Executive Orders provide helpful examples of mandating due diligence activity.  Executive Order 13126 requires the Department of Labor, Department of State, and Department of Homeland Security to maintain a list of products they have reason to believe have been mined, produced or manufactured by forced or indentured child labor.  Federal contractors are required to certify a good faith effort to determine if forced or indentured child labor was used to produce the items.  The Business Transparency on Trafficking and Slavery Act (H.R. 2759) creates an SEC reporting requirements, but no penalties, regarding services and goods historically tainted by trafficking or forced labor.  The End Trafficking in Government Contracting Act of 2012 (S. 2234) requires government contractors to have a compliance plan to show it is not complicit in slavery or human trafficking, and expands DOJ authority to prosecute human trafficking cases.

USDA Consultative Group to Eliminate the Use of Child Labor and Forced Labor

The 2008 Farm Bill spurred the creation of the USDA Consultative Group to Eliminate the Use of Child Labor and Forced Labor, which makes recommendations to reduce the likelihood that agricultural imports are produced with child or forced labor.  The Consultative Group had participation from NGOs, business, academia, government, and accreditation groups, and created general guidelines applicable across commodities.

Consumer Protection Laws as a Mechanism to Encourage Due Diligence

Participants discussed using consumer protection laws as a hook for corporate liability, particularly related to affirmative statements regarding labor conditions.

Sanctions as Potential Avenue to Mandate Due Diligence

As part of government sanctions on Sudan, corporations are required to provide the Office of Foreign Assets Control (OFAC) with information regarding due diligence of transactions to demonstrate that funds do not support terrorist activities.  Participants noted that sanctions may provide an avenue for human rights due diligence in the future.

Company Reaction to Human Rights Due Diligence

Although the UN Guiding Principles have encouraged government to look at potential adverse impacts, companies are generally reactionary rather than proactive in terms of managing risk.  However, human rights due diligence is increasingly an issue of board oversight responsibility.  When considering human rights impact assessments, companies consider not only litigation and reputational risks, but also operational risks, including the costs of conflict, delayed regulatory approvals and the potential loss of insurance coverage.

Participants were wary of poor certification systems, often the result of patchwork solutions or complicated certification processes.  European agricultural companies are struggling to certify that supply chains do not employ child labor because of difficulties certifying California suppliers.  As a result, participants encouraged development of federal rather than state legislation.

Next Steps

Participants will submit survey responses on July 27th, 2012 to be incorporated in the presentation of initial findings at ICAR’s Second Annual Meeting in Washington, D.C. on September 6-7, 2012.  The Human Rights Due Diligence Project report will be released in December 2012.

For more information regarding the Human Rights Due Diligence Project, contact Amol Mehra, ICAR Coordinator, at