Introduction
In today’s globalized world, the business landscape is characterized by a high degree of interconnectivity. Firms rely on a vast network of suppliers and manufacturers located across the world to produce goods and bring them to market. This dynamic has facilitated organizational productivity, but at what cost? Exploitative working conditions, unsafe environments, child labor, poor wages, discrimination, and environmental degradation, are some of the consequences of such a system.
It is within this context that supply chain laws seeking to impose responsibility on firms for the actions of their suppliers and business partners have gained traction. By design, such legislation aims to promote human rights, ethical business practices, and social and environmental responsibility in general. Supply chain laws provide protection to workers against being subjected to coercive working conditions. In addition, they promote the cause of responsible business behavior in the private sector. At the level of the business itself, supply chain laws offer legal protection while simultaneously promoting accountability. Notably, as globalization continues to define economic activity, such legislation is increasingly regarded as critical in bolstering corporate sustainability.
Meaning of Business and Human Rights in Global Supply Chains
Business and human rights in global supply chains may be defined as the set of obligations imposed on businesses to respect and guarantee the human rights of all individuals involved in a supply chain. By the term global supply chain, it is meant a group of individuals and entities contributing to the manufacturing process of a particular product and delivering it to the final consumer.
Due to the globalization of the economy, businesses are increasingly relying on external organizations when sourcing materials and products, which puts international labor standards at risk. This is explained by the fact that companies are expanding their operations globally, including emerging markets with weak governance mechanisms, which increases the likelihood that businesses will become involved in human rights abuses, including forced labor, child labor, poor working conditions, employment discrimination, paying low wages, long working hours, and environmental damage. In this context, businesses are obliged to ensure that their own operations and those of their suppliers do not contribute to human rights abuses.
It is argued that the global business community should operate on the principle of responsibility beyond profit maximization. This implies that an organization should behave ethically and transparently to ensure respect for human rights in all its operations, including those of its subcontractors and suppliers. As such, the responsibility reaches beyond the direct operations of the company and concerns all stakeholders in the supply chain.
It is noteworthy that in modern society, many jurisdictions have enacted supply chain laws and established mandatory human rights due diligence duties, obliging companies to prevent human rights abuses in their operations and those of their suppliers. These regulations promote good governance and sustainable supply chain management while encouraging responsible business conduct among firms.
To conclude, business and human rights in global supply chains imply the prevention of human rights abuses in the production process of goods and services. This concept obliges organizations to operate in a manner consistent with international labor standards, which ensures the well-being of employees and stakeholders.
Evolution of the Business and Human Rights Framework
The connection between business and human rights has evolved considerably over time. Historically, companies were primarily expected to generate profits and comply with national laws, while the protection of human rights was seen as a governmental duty. Businesses, in turn, faced minimal expectations beyond adhering to legal requirements. With the rise of global trade, companies began relying on intricate, cross-border supply chains. While this expansion brought economic opportunities, it also raised concerns about human rights violations such as hazardous working conditions, forced and child labor, discrimination, and environmental harm. These issues gained widespread international scrutiny, underscoring the need for companies to be more accountable for the social and environmental impacts of their activities.
From the 1990s through the early 2000s, governments, international bodies, and civil society began advocating that businesses should uphold human rights regardless of location. This shift encouraged the creation of voluntary guidelines and corporate social responsibility (CSR) programs aimed at fostering ethical conduct in business operations. A turning point came in 2011 with the adoption of the United Nations Guiding Principles on Business and Human Rights (UNGPs). These principles established a global framework built on three core elements: the state’s obligation to protect human rights, the corporate responsibility to respect them, and the importance of providing effective remedies for victims of abuses. Though not legally enforceable, the UNGPs have become a widely recognized benchmark for responsible business behavior.
In recent years, many nations have gone further by enacting binding regulations that compel companies to assess, prevent, and respond to human rights risks within their operations and supply networks. Laws related to due diligence, public reporting, and sustainability have enhanced corporate accountability and transparency. Today, the business and human rights landscape continues to develop, as governments, companies, and international institutions collaborate to advance ethical, responsible, and sustainable practices worldwide.
Human Rights Challenges in Global Supply Chains
Global supply chains link firms, suppliers, manufacturers, and workers around the world. They enable firms to produce goods and bring them to market but also raise a number of human rights issues. The complex structure of global supply chains involves multiple levels and participants, thereby creating challenges in terms of controlling and monitoring the activities conducted by suppliers and contractors and ensuring that workers’ rights are protected at all stages of production.
The most pressing human rights issues associated with global supply chains are the prevalence of precarious labor, workers’ rights violations, and the persistent use of forced labor and underage workers. In many countries, employees are subject to low wages, excessive working hours, and often work in unsuitable conditions. They are frequently deprived of their right to organize, bargain collectively, and are exposed to discrimination, sexual harassment, and other rights violations.
Forced labor and child labor are severe human rights issues found in global supply chains. Forced labor takes various forms while being frequently present in vulnerable economies. It incorporates debt bondage, forced marriage, domestic servitude, and other types of labor exploitation. In turn, child labor refers to children’s involvement in economic activity that adversely affects their physical, mental, and social development and exposes them to hazards.
Another critical human rights issue associated with global supply chains is the risk of environmental damage. Ecosystems and communities can be negatively impacted through pollution, waste disposal practices, deforestation, and the unsustainable use of natural resources. As a result, the environmental justice causes communities to experience adverse health effects and impacts on their livelihoods and general well-being. Thus, environmental damage is a significant human rights issue shaping communities’ access to natural resources and the environment.
The key factors contributing to human rights issues in global supply chains include complex supplier networks and limited transparency. The former create considerable challenges in monitoring supply chains, which leads to a lack of responsibility and accountability on the part of firms and organizations involved in production and distribution of goods. Additionally, environmental damage is a significant contributor to human rights issues in global supply chains due to the impact it has on society and communities. Human rights issues in global supply chains should be addressed through improved monitoring, ensuring safe working conditions, and holding firms accountable for any workers’ rights violations. Moreover, it is paramount to develop and design appropriate grievance mechanisms and facilitate access to remedies for workers who have experienced rights violations. At the same time, governments, international organizations, businesses, and civil society can play an important role in promoting responsible business practices while engaging firms in open dialogue, encouraging transparency, and raising awareness among consumers about human rights issues in global supply chains.
In conclusion, human rights issues in global supply chains require collective efforts on the part of businesses, governments, workers, and civil society. Through enhanced identification and mitigation of risks as well as the implementation of responsible and transparent policies, firms can promote sustainable supply chains that support economic growth while respecting human rights and the environment.
Mandatory Human Rights Due Diligence (MHRDD)
Mandatory Human Rights Due Diligence (MHRDD) is a legal framework that requires businesses to identify, assess, prevent, mitigate, and make remedies for adverse human rights impacts. It imposes a due diligence duty on undertakings to avoid contributing to and being involved in human rights violations. MHRDD differs from voluntary corporate responsibility mechanisms as it provides a mandatory basis to govern human rights impact by a business enterprise and its stakeholders.
The purpose of MHRDD is to make sure that in the course of business operations, a company respects the fundamental human rights of its stakeholders. The companies must proactively determine areas where their legitimate business functions may cause negative consequences on human rights. In addition, they have to make sure that their governance structures, policies, operations, and contracts do not involve human rights violations.
A wide range of human rights issues may emerge from the operational functions of a business enterprise. They include child labor, forced labor, human trafficking, discrimination, inadequate working conditions, denial of fair compensation, limitations on freedom of association, and adverse effects on the environment in a community. The challenges of business enterprises frequently emerge from their complex supply chains. As a result, businesses must take the responsibility for assessing such impacts and take the necessary corrective actions. One of the key aspects of MHRDD is that it is a continuous process. Businesses need to engage in recurrent human rights due diligence to understand the nature and extent of the risk. In this regard, businesses have to perform consistent monitoring activities, consult stakeholders, track and manage adverse human rights impacts, and respond by providing access to remedies when their business activities violate human rights.
Corporate Civil Liability for Human Rights Violations
Corporate civil liability is a company’s obligation to provide compensation to individuals or groups of persons for damages resulting from the company’s activities, its omissions, or failure to prevent human rights violations. The key difference between criminal and civil liability is that civil liability does not involve punishment as a way of expressing condemnation by the State but rather provides for compensation for the damage incurred, including the restoration of violated rights and the adoption of measures to eliminate the consequences of the violation.
The growth of corporate social responsibility (CSR) and the use of global value chains put forward the question about the civil liability of enterprises for human rights violations. The problem is complicated by the fact that such violations can be caused both directly and indirectly by the activity of enterprises, regardless of where exactly in the value chain a particular violation took place. Enterprises may be held accountable, even if they turned out to be only indirectly responsible for the violation of human rights, but did not take any steps to prevent it. Indirect responsibility may be associated with failures in the management and control of a company’s suppliers and contractors or a conscious disregard for potential risks and threats.
Companies must recognize and accept the consequences of their actions in terms of respecting human rights. Even if a company does not directly violate human rights, but does not take any steps to ensure that these rights are respected within the framework of its operations, it can be held accountable. Companies are obliged to develop and implement human rights due diligence policies within the organization and the supply chain. A human rights impact assessment is necessary to determine the possible effects of a company’s activities on human rights, including identifying risks and opportunities. This allows for the development of targeted measures to prevent and mitigate damage and eliminate the consequences of violations. The introduction of these requirements significantly benefits large business structures, which have a wide range of activities and therefore have a more significant impact on various aspects of human life. At the same time, the obligations imposed on large corporations also involve challenges in protecting and promoting human rights, which are discussed further in this essay.
A number of states have adopted legislative initiatives aimed at strengthening civil liability, including providing compensation to individuals and groups of individuals for human rights violations. The main advantage of this approach is that states are shifting from a purely regulatory and reactive approach to managing human rights to a more strategic and proactive one, focusing on the importance of transparency and risk reduction. In addition, such laws will benefit the affected individuals and groups since the court will consider the actions taken by the enterprise to identify, prevent, and mitigate potential human rights impacts. In proving civil liability, it is essential to establish a direct link between a company’s actions and the violation, which does not always turn out to be obvious when dealing with large business structures.
Transparency, access to information, and the reduction of hurdles for bringing businesses to civil liability are now seen as critical factors in ensuring effective judicial protection of human rights. Overcoming these barriers contributes to the realization of the victims’ right to justice, which is now recognized in many international and regional instruments and national legislation in various jurisdictions. The right to justice implies not only the opportunity for victims to turn to the court for protection but also the ability of the state to hold the offender accountable. Judicial practice shows that the indirect and complex organizational structure of multinational conglomerates is often fraught with difficulties in proving the guilt and responsibility of enterprises for human rights violations.
At the same time, enterprises have expressed concern about the introduction of such laws, since they will be forced to revise and adjust all areas of their current operations. Businesses will have to review their risk management, monitoring, and control policies, which will require additional time and resources. In addition, challenges such as the complexity of establishing a direct link between the company and the violation may lead to prolonged and resource-consuming disputes in the courtroom.
International Legal Framework and Comparative Analysis
The growing recognition of the importance of human rights in the context of globalization has prompted the emergence of international human rights standards aimed at regulating business enterprises’ due diligence in respect of human rights. Although international law previously imposed human rights–related obligations only on States, today, businesses are also under an obligation to identify and address the negative consequences of their activities. Several international frameworks have been developed to ensure that businesses respect human rights throughout their operations and supply chains.
In particular, the United Nations Guiding Principles on Business and Human Rights (UNGPs) were adopted in 2011 and have since gained wide recognition among the international community in the field of human rights. The UNGPs stipulate the protection of human rights by States, the responsibility of business enterprises for respecting human rights, and access to remedy for victims of human rights abuses. Although the UNGPs are not legally binding, they have influenced many national laws and policies and are integrated into the corporate human rights management systems of numerous multinational corporations.
Furthermore, the OECD Guidelines for Multinational Enterprises on Human Rights contribute to the due diligence of business enterprises in respect of human rights, labor, and the environment. In addition, the International Labor Organization (ILO) also promotes the implementation of international labor standards, including the abolition of forced labor, child labor, discrimination, and poor working conditions.
Many States have adopted mandatory human rights due diligence laws to promote and protect human rights. In particular, the European Union Corporate Sustainability Due Diligence Directive (CSDDD) was adopted to obligate enterprises to identify, prevent, and mitigate adverse impacts on human rights and the environment. Furthermore, Germany adopted the Supply Chain Due Diligence Act (2023), which requires large businesses to conduct human rights risk assessments, establish appropriate remedy mechanisms, and report on due diligence. In addition, France’s Duty of Vigilance Law (2017) stipulates that large enterprises shall develop vigilance plans in order to prevent adverse human rights and environmental impacts.
At the same time, the United Kingdom has adopted the Modern Slavery Act, 2015, which requires businesses to publish reports on actions taken to prevent modern slavery in their operations and supply chains. Despite the fact that the UK Act is a significant step in the direction of combating forced labor, it is much weaker than the aforementioned laws since it does not impose any direct obligations on enterprise management. Thus, even though the UK law requires businesses to report on human rights due diligence, the EU, German, and French laws go further and require enterprises to take specific actions in order to prevent human rights violations and ensure sustainability.
Indian Legal Perspective
India does not currently have a specific law that makes Human Rights Due Diligence (HRDD) mandatory for all businesses. However, there are various laws and regulations that directly or indirectly require businesses to respect human rights. The following Indian laws provide for the protection of the rights of workers, consumers, communities, and the environment, among others:
The Constitution of India and various labor laws such as the Occupational Safety, Health and Working Conditions Code, 2020, Code on Wages, 2019, and Code on Social Security, 2020 guide principles of equity and justice and seek to promote the welfare of workers and provide them with rights, privileges, and protections. The Environment (Protection) Act, 1986 promotes responsible business conduct by directing businesses to prevent environmental damage that could impact the well-being of people and their livelihoods.
The Companies Act, 2013 also promotes responsible business conduct by mandating Corporate Social Responsibility (CSR) for companies that meet specific criteria. The National Guidelines on Responsible Business Conduct (RGBC), 2019, issued by the Ministry of Corporate Affairs, promote voluntary adoption of Responsible Business Conduct by enterprises. The guidelines indicate a progressive approach that aligns India with international expectations on corporate responsibility and human rights, including the United Nations Guiding Principles on Business and Human Rights.
Challenges in Implementation
Although mandatory human rights due diligence is gaining increasing ground, there is still a lot to be done in terms of its practical implementation. The first significant problem is the complexity of supply chains. The majority of major companies use many different suppliers, subcontractors, and contractors. The task to track and ensure that all of them comply with human rights is incredibly complex and difficult.
Another major barrier is the issue of legal inconsistencies. Even though numerous states and countries have adopted mandatory human rights due diligence laws, in many others, such regulations are still not established. For multinational corporations, which often operate in more than one country, the need to adhere to diverse and sometimes even contradicting rules presents a major challenge.
Moreover, as long as the operations of a company are opaque, there is a risk that the worst perpetrators will continue to avoid being caught and punished for human rights abuses. Suppliers and contractors of larger firms, especially in high-risk industries, are frequently not held accountable for their actions. Child and forced labor, unsafe working conditions, and discrimination are just some of the many examples of human rights violations that could be present.
Finally, it is essential to acknowledge that implementing human rights due diligence procedures requires substantial resources. A company that wants to prevent human rights abuses needs to organize and perform regular assessments, audits, and monitoring, collect and store evidence, educate and empower workers and so on. Although large multinational corporations are usually capable of meeting this requirement, it can be overwhelming for small businesses and start-ups.
Even though there are some major concerns regarding the implementation of mandatory human rights due diligence, there are several essential advantages on the side of such measures. First of all, having an adequate due diligence policy in place can help organizations prevent human rights violations. Moreover, in situations when abuses do occur, a company can easily identify the responsible parties and quickly address the problem.
Another benefit is that the implementation of the above-mentioned measures creates a strong foundation for a functioning grievance mechanism and accountability for all stakeholders. Furthermore, mandatory human rights due diligence contributes to the enhancement of a firm’s reputation and performance. Lastly, such initiatives demonstrate a company’s commitment to respecting human rights even if they are not an absolute priority for a firm.
Conclusion
The increasing complexity of global supply chains has made it essential for businesses to take greater responsibility for protecting human rights. Mandatory Human Rights Due Diligence and corporate civil liability encourage companies to identify, prevent, and address human rights risks while promoting transparency and accountability. Although challenges such as complex supply chains, legal differences, and implementation costs remain, the growing adoption of due diligence laws reflects a global commitment to responsible business conduct. Strengthening legal frameworks, improving international cooperation, and ensuring effective remedies for victims will help create more sustainable, ethical, and human rights–respecting business practices in the future.
References
United Nations, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework (2011).
Organization for Economic Co-operation and Development (OECD), OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (2023).
International Labor Organization (ILO), Declaration on Fundamental Principles and Rights at Work (1998, as amended).
European Union, Corporate Sustainability Due Diligence Directive (Directive (EU) 2024/1760).
The Companies Act, 2013 (India).
Ministry of Corporate Affairs, Government of India, National Guidelines on Responsible Business Conduct (NGRBC) (2019).
The Constitution of India.
United Kingdom, Modern Slavery Act, 2015.
Frequently Asked Questions (FAQs)
1. What is Mandatory Human Rights Due Diligence (MHRDD)?
MHRDD is a legal requirement that obliges businesses to identify, prevent, mitigate, and address human rights risks arising from their operations and supply chains.
2. Why is human rights due diligence important for businesses?
It helps businesses prevent human rights violations, improve transparency, reduce legal risks, and strengthen stakeholder trust.
3. What is corporate civil liability for human rights violations?
It refers to the legal responsibility of companies to compensate victims who suffer harm because of the company’s actions or failure to prevent human rights abuses.
4. Does India have a mandatory Human Rights Due Diligence law?
No. India does not currently have a comprehensive mandatory HRDD law, but several laws and the National Guidelines on Responsible Business Conduct promote responsible business practices.
5. What are the main challenges in implementing MHRDD?
The major challenges include complex global supply chains, lack of uniform legal standards, limited transparency, high compliance costs, and difficulties in enforcing liability across jurisdictions.
Author: Serena Dsouza
Legal Intern