EU guidance for businesses on business due diligence on forced labor | Morgan lewis

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The European Commission and the European External Action Service have issued due diligence guidance for EU businesses to address the risk of forced labor in their operations and supply chains (Advice) July 12 as a guide for European businesses to implement effective human rights due diligence practices.

The fight against forced labor is a priority for the European Union, which considers that “responsible business conduct by European countries” plays a crucial role in ensuring the effective implementation of EU rights policies of man. Please see our previous LawFlash, Upcoming changes for corporate ESG responsibility in the European Union.

The guide aims to provide European businesses with practical advice on how to implement effective human rights due diligence practices to identify and address the risk of forced labor in their supply chains. It encourages companies to assess the potential exposure of their supply chains to activities causing or contributing to human rights abuses or violations, and to implement appropriate due diligence policies to ensure compliance. international due diligence and labor standards on forced labor.

It refers to the Organization for Economic Co-operation and Development (OECD) due diligence framework for reference, outlining a six-step framework for effective due diligence:

  • Integrate responsible business conduct into company policies and management systems
  • Identify and assess actual or potential negative impacts on the operations, supply chains and business relationships of the company
  • Stop, prevent and mitigate negative impacts
  • Monitor implementation and results
  • Communicate how impacts are handled
  • Plan or cooperate in remediation if necessary

The Guide states that trade policies and management systems must be adapted to the risk of forced labor. This includes the following:

  • Establish a “zero tolerance policy” for forced labor, accompanied by other relevant policies on how forced labor can occur in the company’s supply chain, for example, with regard to recruitment practices and retention, contracting out, use of recruiting agencies or state sponsored forced labor.
  • Policies and management systems that clarify that suppliers and staff will not be subject to retaliation for reporting forced labor hazards or cases. The company should not discourage suppliers or staff from reporting forced labor hazards or cases, but rather provide a clear procedure on how reported hazards will be addressed and, if necessary, escalated.
  • Educate key company personnel (such as buyers or purchasing managers) and suppliers on what constitutes forced labor (e.g., its common forms, types of vulnerable workers and supply chains, and the expectations of suppliers, especially those operating in high-risk contexts). Of particular importance will be the company’s internal awareness of how its own activities, such as purchasing practices, may increase the risk of unauthorized subcontracting and other risk factors for forced labor.

The Guide describes some “red flags” which are indicators or risk factors of forced labor, to be taken into account by companies when defining supply and value chains as part of due diligence. These include the following:

  • National risk factors (for example, countries that have not ratified core conventions of the International Labor Organization, state-orchestrated labor programs targeting minorities, legal regimes prohibiting peaceful strikes and countries with prison labor policies and programs, or the inability to conduct comprehensive risk assessments through threats of enforced government / employer presence).
  • Risk factors related to migration and informality (e.g. employment of irregular migrant workers, workers recruited through third parties, including government recruiters, locally hosted workers, presence of informal workers, (absence of written employment contracts, or the presence of children in the workplace).
  • Risks related to the presence of debt risk factors (such as the existence of credit agreements and debt plans for workers, restrictions on the ability of workers to freely dispose of their wages, restriction of workers’ access to their own identity and residence documents, or the incidence of physical or psychological abuse, violence or harassment).

The Guide also presents considerations for companies when performing in-depth risk assessments of specific high-risk suppliers or supply chain segments:

  • Strengthening controls where the risk is greatest; for example, by carrying out in-depth assessments of recruitment agencies used by suppliers, or “choke points”, such as commodity traders, who source raw materials or operate upstream in high-risk areas.
  • Achieve deep stakeholder engagement in areas of increased risk; for example, with trade unions, civil societies or other experts.
  • Improve training of staff and suppliers in high risk areas and establish stronger prequalification processes for suppliers.
  • Guarantee independent and unannounced access to the site and to workers to collect information and carry out workplace assessments.
  • Interview workers in a secure environment, without the presence of their managers, with the help of an interpreter if necessary (for example, in the case of migrant workers or workers belonging to national minorities).

The Guide also includes considerations for remediation:

  • When a company identifies that it has caused or contributed to real negative impacts, it must remedy these impacts by planning or cooperating in their remediation.
  • Seek to put the affected person (s) back into the situation they would have found themselves in had the negative impact not occurred (to the extent possible) and provide redress commensurate with the magnitude and magnitude of the the negative impact.
  • Consult and dialogue with affected rights holders and their representatives to determine the appropriate remedy.
  • Forced labor is a crime. Businesses should have a system in place to report crimes to local authorities. Where they have caused or contributed to forced labor, companies should cooperate with local authorities to help provide appropriate forms of redress.

The Guide provides links to many sources of information for business on this topic, including the International Labor Organization, the OECD and the United Nations Guiding Principles on Business and Human Rights.

It also recommends business networks on decent work in global supply chains that provide businesses with peer-to-peer information and provide opportunities for joint action and making auditing more efficient, such as :

Although the framework established in the Guide is not mandatory, it mentions that the European Commission is currently preparing a legislative proposal on sustainable corporate governance to promote long-term sustainable and responsible corporate behavior. The future proposal will introduce mandatory due diligence on human rights and the environment, including the risks associated with forced labor.

Summary

The Guide for EU Businesses shows the priority the EU gives to combating forced labor. Businesses can use the Guide to review their global environment, society and corporate governance (ESG) initiatives and policies, particularly with regard to human rights and the risk of forced labor.

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