US Highlights Human Rights Due Diligence
The country plans to release new guidance focused on technology-related risks, but pundits are saying it should be expanded to all sectors.
The US government’s plans to introduce human rights due diligence (HRDD) guidance to manage technology firms’ exposures to such risks has been welcomed as a good start. However, experts are calling for it to align with similar texts released by other countries, and to cover more sectors.
Last month, the Biden-Harris administration published the second National Action Plan (NAP) on Responsible Business Conduct, which set out the government’s expectations for US-based companies to conduct HRDD across their value chains in instances where their technologies can be tied to potential abuses.
This has been described as a “welcome step” and shows the US government’s commitment to respecting human rights in business environments.
“As an emerging area, especially with regards to AI, the human rights inherent to the tech sector are still not fully understood,” Davide Ceratto, Senior Human Rights Specialist at the UN-convened Principles for Responsible Investment (PRI), told ESG Investor.
The US Department of State will lead the guidance’s development to encourage investors to conduct HRDD when considering investments in technologies prone to exacerbating human rights abuses, the NAP said.
“This awaited best practice investor guidance, when such investments are in a specific region or an industry with potential exposure to human rights impacts, will enable investors to be more informed about the entities and supply chains to which they direct capital,” Ceratto said.
Specifically, the guidance will cover downstream risk factors associated with the misuse of technology, potential safeguards throughout the product lifecycle, how investors can influence business decisions in companies, and best practices in conducting HRDD.
Tying it all together
Richard Gardiner, EU Public Policy Lead at the World Benchmarking Alliance (WBA), suggested that the US’ focus on developing downstream due diligence rules was particularly interesting in the context of pushback against the EU’s Corporate Sustainability Due Diligence Directive (CSDDD).
The US NAP currently suggests it will go beyond asking qualifying companies to publish a human rights policy, obligating investors to have active engagement with them on specific tech-focused human rights risks.
“The [US’] commitment to develop downstream due diligence is a welcome development,” Gardiner added. “This is extremely progressive and could be very impactful to how tech firms raise capital and what is expected of them by stakeholders.”
But with large US companies expected to fall under the CSDDD, alignment with the EU text will be crucial, Gardiner highlighted.
Separately, The WBA has been working with investors under the Digital Collective Impact Coalition, addressing themes such as ethical AI. It has also published a joint call with investors and civil society calling on tech companies to introduce more ethical practices in the space.
According to the WBA’s Digital Inclusion Benchmark, only 44 out of 200 assessed digital companies have publicly available ethical AI principles.
Expansion hopes
Beyond the need for international alignment, many also think that the due diligence guidance should be expanded to other sectors associated with high human rights risks.
“Several sectors in the economy can present [such] risks, especially in the context of the economic transition to a net zero economy,” said Ceratto. “Guidance on how to effectively implement due diligence in sectors such as mining, renewable energy and agri-food will be fundamental for investors to direct capital towards sustainable activities that support the transition while upholding human rights along the value chain.”
In 2020, the US Department of State published guidance on HRDD for businesses involved in the sale of products or services with surveillance capabilities that could be used by foreign governments. Two years later, the PRI launched the Advance initiative, which helps to facilitate investor-to-corporate engagement in the mining and renewables sectors on human and workers’ rights.
Additionally, this year, the Church Commissioners for England, Aviva Investors and Scottish Widows co-launched an initiative to improve the quality of corporate human rights data. The Investor Initiative on Human Rights Data (II-HRD) aims to extend the depth and breadth of relevant data available to investors via proxy advisors’ voting policies and data providers — such as MSCI, Morningstar and Glass Lewis.
Fair transition
The NAP also highlighted the US government’s intention to promote the just transition by ensuring that labour organisations, trade unions, and impacted communities can meaningfully participate in energy transition planning.
Further guidance for businesses on best practices for engagement and tribal consultations with Indigenous and affected communities is due to be published.
“It is important for all stakeholders to be at the table – be it the Native Americans who live on lands where many of the green transition minerals are – to [workers] whose jobs will be phased out, like coal miners — and those in the fossil fuel sector,” said Bryan McGannon, Managing Director of the US Sustainable Investment Forum’s investor network.
In addition, the NAP has tasked the US Department of Labor with funding a US$2 million technical assistance project, due to be implemented by the International Labor Organization to promote worker-driven social compliance and protect labour rights in global value chains.
With the US presidential elections looming, the incumbent government has very limited time to turn the plans outlined in the NAP into action.
“It is unclear how they intend to finish or make any significant progress on such a long check list, as well as what the enforcement will look like,” said Gardiner. “But there is hope that it will lead to stronger interagency collaboration.”
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