Human rights due diligence
HRDDAlso called supply chain due diligence, responsible business conduct due diligence
Human rights due diligence is the ongoing process a company uses to identify, prevent, mitigate and account for harm to people linked to its operations, products and business relationships. It covers risks such as forced labour, child labour and unsafe working conditions in its own business, its subsidiaries and its supply chain.
How it works
A firm starts with a policy commitment and a map of where its activities and suppliers could harm people. It then ranks risks by severity and likelihood, looking at country, sector and the nature of the work. High-risk suppliers get questionnaires, audits and contract clauses, and the firm acts on what it finds: corrective action plans, closer monitoring and, as a last resort, ending the relationship.
The UN Guiding Principles set the model in 2011 and the OECD Guidelines for Multinational Enterprises build on it. Law now turns parts of it into duties. The UK requires large firms to publish a modern slavery statement each year, and the EU Corporate Sustainability Due Diligence Directive will require the largest companies to carry out risk-based due diligence across their chains of activities.
The rules
Set the corporate responsibility to respect human rights and define human rights due diligence: assess actual and potential impacts, act on the findings, track responses and communicate how impacts are addressed.
All business enterprises, on a voluntary basisRequires a slavery and human trafficking statement for each financial year, setting out steps taken to keep slavery out of the business and supply chains, approved by the board and linked from the homepage.
Commercial organisations carrying on business in the UK with turnover above the threshold set by regulationsRequires in-scope companies to identify, prevent, mitigate and remedy adverse human rights and environmental impacts in their own operations, subsidiaries and chains of activities. Member States must transpose it by 26 July 2028.
EU companies with more than 5,000 employees and EUR 1.5 billion worldwide turnover, and non-EU companies with EUR 1.5 billion EU turnoverCommon questions
Is human rights due diligence mandatory?
It depends on size and location. The UN Guiding Principles are voluntary, but the UK requires large firms to publish modern slavery statements, and the EU CSDDD will make due diligence a legal duty for the largest companies from 26 July 2029.
Why does it matter to banks and financial firms?
Banks face human rights risk through their own suppliers and through the clients and projects they finance. Forced labour proceeds are also criminal property, so supply chain abuses can become a money laundering and reputational issue.
How is it different from supplier due diligence?
Standard supplier due diligence checks a supplier's financial health, security and compliance. Human rights due diligence focuses on harm to workers and communities, and it reaches beyond direct suppliers into the wider chain.
