Human Rights Due Diligence: The Key to Sustainable and Ethical Business Practices

December 17, 2024

5 min read

Dr. Isabelle Vladoiu, International Human Rights Law Specialist

In today’s globalized economy, businesses are no longer judged solely by their financial success. Consumers, investors, and regulatory bodies are increasingly holding corporations accountable for their impact on human rights. As a result, Human Rights Due Diligence (HRDD) has become a fundamental component of sustainable and ethical business practices.

At the US Institute of Diplomacy and Human Rights (USIDHR), we emphasize that HRDD is not just a regulatory obligation but a strategic advantage. Businesses that proactively implement HRDD protect themselves from legal, financial, and reputational risks while building stronger, more resilient supply chains.

This article explores the importance of HRDD, outlines the risks of non-compliance, and provides a roadmap for businesses to integrate effective human rights due diligence into their operations.

Why Human Rights Due Diligence Matters

HRDD is the process by which businesses identify, prevent, and mitigate human rights risks associated with their operations, supply chains, and business relationships. According to the United Nations Guiding Principles on Business and Human Rights (UNGPs) [1], companies—regardless of size or industry—have a responsibility to uphold human rights.

Business Benefits of HRDD

Regulatory Compliance – Governments worldwide are introducing stringent due diligence laws. Laws such as the EU Corporate Sustainability Due Diligence Directive (CSDDD) [2] and France’s Duty of Vigilance Law [3] mandate that companies actively monitor their supply chains for human rights violations.
Investor and Consumer Confidence – Ethical businesses attract investors and retain customers. Companies demonstrating HRDD efforts outperform competitors in ESG (Environmental, Social, and Governance) [4] rankings.
Risk Management – Failing to conduct due diligence can result in lawsuits, financial penalties, and irreparable reputational harm. Proactive HRDD minimizes these risks.
Competitive Advantage – Businesses prioritizing human rights earn public trust, improve brand reputation, and foster loyalty among employees and customers.

Risks of Neglecting Human Rights Due Diligence

Ignoring human rights in business operations can lead to severe consequences. Here’s how inadequate HRDD can impact companies:

1. Legal Liability

New regulations are making HRDD a legal requirement, not just a voluntary commitment. Inaction can result in lawsuits, fines, and regulatory sanctions. Notable laws include:

California Transparency in Supply Chains Act (2010) [5]
UK Modern Slavery Act (2015) [6]
Australia Modern Slavery Act (2018) [7]
France Duty of Vigilance Law (2017) [3]
The Netherlands Child Labour Due Diligence Law (2019) [8]
Germany Supply Chain Law (2021) [9]

Additionally, international human rights frameworks such as the Universal Declaration of Human Rights (UDHR) [10], the International Covenant on Civil and Political Rights (ICCPR) [11], and the International Covenant on Economic, Social and Cultural Rights (ICESCR) [12] form the foundation of corporate responsibility regarding human rights. Collectively known as the International Bill of Human Rights, these treaties emphasize that businesses must respect and uphold fundamental human rights in all operations.

The United Nations Development Programme (UNDP) [13] and OECD Guidelines for Multinational Enterprises [14] also provide essential guidance for businesses to implement human rights due diligence in compliance with international standards.

2. The Role of Business Partners and Investors in BHR

Most businesses operate under a set of core values—expressed in mission statements, codes of conduct, and corporate governance—that align with the expectations of respect for human rights. However, public concern over human rights abuses in global supply chains has risen significantly. Institutional investors, consumer protection groups, trade associations, and banks are applying pressure on businesses to demonstrate HRDD compliance, particularly in regions such as Asia and Africa where human rights risks are heightened.

Investors increasingly rely on Corporate Human Rights Benchmark (CHRB) [15] and Dow Jones Sustainability Index (DJSI) [16] to assess companies’ human rights performance. Businesses failing to implement HRDD face exclusion from ESG asset classes, resulting in financial and reputational losses.

Final Thoughts: The Role of USIDHR in Supporting Businesses

At the US Institute of Diplomacy and Human Rights (USIDHR), we assist businesses in integrating Human Rights Due Diligence into their operations. Through specialized training, policy guidance, and risk assessments, we help companies meet compliance requirements while enhancing their reputation and operational resilience. USIDHR offers multiple programs to support businesses in this effort, including the USIDHR ESG Leadership Program and the Human Rights in Business Academy (HRB Academy).

To learn more about how USIDHR can support your organization, visit usidhr.org.