A recent report by the Stern Center for Business and Human Rights at New York University highlights the urgent need for businesses to prepare for a transformative regulatory framework regarding human rights. The introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) by the European Union serves as a catalyst for a broader global shift toward higher standards in corporate accountability.
The report advocates for governments worldwide to adopt a “standards-based” framework to ensure companies fulfill their human rights obligations. By implementing stringent “performance standards and metrics,” authorities can hold businesses accountable for their human rights practices.
The EU’s CSDDD, set to take effect on July 26, 2027, mandates that large corporations assess and mitigate risks to environmental and human rights within their supply chains. This legislation marks a significant evolution in regulatory oversight, departing from the previously established UN Guiding Principles on Business and Human Rights (UNGPs), which have been criticized for lacking enforceable rules and a mechanism for evaluating corporate performance.
Under the CSDDD, non-compliance could result in substantial penalties, with fines reaching up to 5% of a company’s global net turnover. This level of enforcement underscores the importance of adhering to the new regulations.
The Stern Center report calls on all governments, including those within the EU, to establish robust human rights standards that can effectively evaluate corporate performance against these requirements. Companies are encouraged to begin gathering data on their business practices and supply chains in preparation for these evolving standards.
Furthermore, the report emphasizes the necessity for organizations to invest in integrating human rights considerations into their hiring practices and training programs for employees throughout the supply chain. By identifying and addressing significant human rights risks, companies can foster transparent engagement with governments and stakeholders regarding these challenges.
As the regulatory landscape shifts, businesses must proactively adapt to ensure compliance and uphold human rights standards, positioning themselves for success in this new era of accountability.
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