[ Comments on Draft Guidelines on Respect for Human Rights in Responsible Supply Chains ] 28 August 2022

[...]

1. Move towards binding rules that would require companies to respect human rights in their operations and supply chains.

More than a decade after the adoption of the United Nations Guiding Principles on Business and Human Rights (“UN Guiding Principles”), the vast majority of business enterprises globally do not conduct any human rights or environmental due diligence. In Japan, research published in January 2022 by the World Benchmarking Alliance and the Business and Human Rights Resource Centre has shown “a clear gap” between Japanese companies’ commitments on paper and tangible actions to protect rights, such as the implementation of human rights due diligence and stakeholder engagement.

We urge you to explicitly include in the Draft Guidelines a time-bound commitment and roadmap, including the creation of a drafting committee, to develop and adopt robust laws to safeguard against corporations causing and contributing to human rights and environmental abuses in global value chains, including laws that require companies in all sectors to conduct human rights and environmental due diligence. Any such laws should have clear enforcement mechanisms, foresee penalties for non-compliance, and create a civil course of action for people affected by human rights abuses linked to a company’s operations or supply chain.

1. At a minimum, ensure the Guidelines are consistent with international human rights standards, including guidelines for gender-responsive human rights due diligence.

The Guidelines should take care not to use language that inadvertently waters down existing international human rights guidelines for companies, including the UN Guiding Principles, Gender Dimensions of the Guiding Principles on Business and Human Rights, and the OECD Due Diligence Guidance for Responsible Business Conduct. There are examples in the Draft Guidelines where the language used suggests that companies’ respect for human rights is optional (see for example, 2.1.3, “business enterprises are requested to provide remedy when they cause or contribute to adverse human rights impacts” or 3.2 “Business enterprises are requested to embed their human rights policy throughout the business enterprise and to practice the human rights policy concretely in their efforts” (emphasis added)). This is out of step both with the responsibility imposed on businesses to respect human rights by the UN Guiding Principles and with the increasing trend, acknowledged in the Draft Guidelines (1.2), to introduce laws to obligate businesses to respect human rights.

1. Create monitoring mechanisms and a complaints mechanism, open to communities, workers, and other stakeholders, to oversee companies’ implementation of the Guidelines.

The Draft Guidelines state (1 (Introduction)) that the Japanese government will, after adopting the Guidelines, “promote activities to disseminate and increase awareness among business enterprises to facilitate business efforts that respect human rights” and “provide information, advice, and support so that business enterprises can proactively respect human rights.”

In addition to these steps, the Japanese government should implement Japanese civil society’s recommendation to establish and adequately budget and staff a National Human Rights Institution. The institution’s role should include monitoring companies’ implementation of the Guidelines, reporting publicly on company compliance, and receiving complaints regarding failures to respect the Guidelines. The National Human Rights Institution should be fully aligned with the United Nations’ Paris Principles relating to the Status of National Institutions. 

The Japanese government should also assess whether, as a complement to a National Human Rights Institution, it should establish an independent, non-judicial complaints mechanism to oversee implementation of the Guidelines. This mechanism would complement the existing National Contact Point established under the OECD system, but would be a separate entity with all the necessary powers to receive and investigate complaints from communities, workers, and other stakeholders about companies’ respect for the Guidelines. The mechanism should be empowered to issue binding regulatory decisions and should have investigatory powers that include compelling corporations to produce documents and other relevant information in their possession. Among other things, the complaints mechanism should fulfill the effectiveness criteria for state or non-state-based grievance mechanisms set out by the UN Guiding Principles.

The Japanese government should consult widely with civil society organizations and affected populations (including unions, community-based organizations and Indigenous people’s organizations) on the appropriate characteristics and functions of any complaints mechanism. The government should also create and maintain a searchable public database of all business enterprises, their human rights and environmental due diligence reports, and any related government reporting, to promote transparency and accountability.

1. Ensure that the Guidelines include all internationally recognized human rights, labor rights, and environmental rights.

Human rights are indivisible and interconnected. Human rights due diligence standards—binding and non-binding—should guide businesses to respect the full range of international human rights, labor rights, and environmental rights, as set out in international human rights and environmental instruments, including the Paris Agreement on climate change, and customary international law, and as interpreted by relevant authoritative treaty bodies, International Labour Organization (ILO) supervisory mechanisms, and UN special procedures.

The Draft Guidelines state that the term “human rights” refers to internationally recognized human rights (2.1.2.1), which they note include those expressed in the International Bill of Human Rights, and the principles concerning fundamental rights set out in the ILO Declaration on Fundamental Principles and Rights at Work. Reference to the International Covenant on Civil and Political Rights (ICCPR) and International Covenant on Economic, Social and Cultural Rights (ICESCR) is made in a footnote (footnote 17), along with a note that in July 2022 the UN General Assembly adopted a resolution on the “human right to a clean, healthy, and sustainable environment.”

The Guidelines should more clearly remind companies of the substantive content of human rights standards, particularly economic, social, and cultural rights. The ICCPR, ICESCR, and the UN General Assembly’s resolution on the right to a clean and healthy environment should be referenced in the main body of the Guidelines. The Guidelines should also include more references to economic, social, and cultural rights in the explanatory text on section 2.1.2.1 and throughout the examples in the document.

1. Ensure that businesses are required to address and mitigate their contribution to climate change, which is a fundamental threat to human rights worldwide.

Climate change is a fundamental threat to present and future generations’ human rights, including the right to health, access to water and food, and the right to an adequate standard of living. Many major companies have already made a voluntary commitment to set climate targets across their operations and value chains aligned with limiting global temperature rise to 1.5 degrees Celsius, the goal established by the Paris Agreement. However, analysis of compliance suggests that without appropriate processes to hold companies accountable to their pledges, they are unlikely to meet them, with irreversible consequences for rights and livelihoods.

In view of the fundamental threat that climate change poses to the enjoyment of human rights, the Guidelines should more explicitly require companies to address their impacts on climate, including by placing an obligation on business enterprises to strive to align their operations with the 1.5 degrees goal.

Businesses should be required to conduct climate change risk assessments, mitigation, and adaptation measures that would require them to:

Measure: Measure their total carbon footprint, which includes their direct and indirect emissions;

Set targets: Publish specific and measurable goals of greenhouse gas emissions reduction, including intermediate targets; and

Steer: Steer its business activities to reduce its direct and indirect greenhouse gas emissions to align with the most ambitious goal of the Paris Agreement to hold the increase in the global average temperature to 1.5 degrees Celsius above pre-industrial levels, in line with the best available science and their duty to prevent harm. The purchase of carbon offsets should not be seen as equivalent to emissions reductions, given the overwhelming evidence pointing to the unreliability of offsets.

In addition to mitigating emissions, business enterprises should also address affected communities’ climate change-related vulnerabilities that their business operations exacerbate.

1. Give actions and omissions by business enterprises equal attention.

Throughout, the framing of the Draft Guidelines focuses more on actions by business enterprises that cause, contribute, or link them with adverse human rights impacts, rather than a company’s omissions as well as actions. This problem appears in a number of places in the Draft Guidelines, including for example where they seek to explain when a business enterprise causes, contributes to, or is linked with adverse human rights impacts (2.1.2.2 with illustrations, 4.2.1). A company can cause, contribute or be linked with actual or potential adverse human rights impacts in its supply chain by its actions or omissions.

For example, the third illustration in section 2.1.2.2 suggests that a brand or retailer does not cause or contribute to adverse human rights impacts but is merely linked with them when an “[e]mbroidery on a retail company’s clothing products being subcontracted by the supplier to child labourers in homes, counter to contractual obligations.” Human Rights Watch research has shown, however, that brands’ purchasing prices and other buying practices can put tremendous business pressures on suppliers, allowing unauthorized subcontracting and other abuses to thrive unchecked. Where brands merely insert contractual obligations in supplier contracts that forbid subcontracting by suppliers, but fail to identify and correct unfair purchasing practices, brands’ omissions play a contributory role in unauthorized subcontracting. Hence, placing this example in the “directly linked” type is misleading. These cases should often be categorized into the “cause” or “contribute” types by the omissions of the brands to change purchasing prices and other buying practices.

Similarly, the Guidelines should include a range of examples of omissions by companies that can delay the detection and resolution of human rights abuses. Human Rights Watch’s research has revealed a number of such omissions, including for example, the failure to trace and disclose supply chains; failure to have fair purchasing prices and other buying practices; and the failure to have strong human rights defenders and anti-retaliation policies. 

In particular, the Guidelines should reiterate the need for robust human rights due diligence before a company begins a business relationship. Our research and advocacy in the context of Japanese investments in Myanmar have revealed a failure to conduct adequate human rights due diligence before commencing business relationships with companies controlled by the Myanmar military.

1. Ensure human rights obligations apply across the full value chain.

Companies can impact human rights through their own operations, their relationships with upstream suppliers, and the way their products or services are used by other companies or governments downstream. This combination of upstream and downstream activities is referred to as a company’s value chain.

The Draft Guidelines (1.3) distinguish between a company’s “upstream” suppliers (“procurement and securing, etc. of raw materials and resources for their products and services, facilities, and software”) and “downstream” users (“sale, consumption, etc. of their products and services.”)

However, the Draft Guidelines do not then make clear enough that businesses have a responsibility to address the human rights impact of their full value chain – both their upstream and downstream activities – where they have caused or contributed to that impact or if it is directly linked to their operations, products or services by their business relationships. The title of the Draft Guidelines, for example, “Guidelines on Respect for Human Rights in Responsible Supply Chains,” suggests a focus only on human rights risks in a company’s supply chain, not its full value chain.

The Guidelines should more clearly explain that a company is required to address upstream and downstream impacts and provide increased guidance and examples on how to address human rights across the full value chain, including companies’ responsibilities to address their contribution to climate change.

1. Make clearer companies’ obligations to map and publicly disclose their complete value chains.

Transparency around a business enterprise’s global value chain is fundamental to accountability for human rights abuses. The Draft Guidelines state (4.1.1) that, for a company to identify and assess potential adverse impacts, “it is necessary to grasp information on suppliers and other entities in order to ensure the traceability of products and services of the enterprise.” The Draft Guidelines also provide advice to companies (Q&A, Question 6) on the steps to take when an entity cannot get information on its supply chain due to limited traceability.

These references, however, do not give adequate prominence to the importance of mapping and publicly disclosing the names, locations, and other information about entities in their global supply chains. Making this a concrete and distinct aspect of the Guidelines would better facilitate companies to identify actual and potential adverse human rights impacts and enable workers, communities, human rights defenders, and nongovernmental organizations (NGOs) bring to a company’s attention any human rights or environmental issues related to companies in its supply chain. The obligation to map and disclose should also apply beyond a company’s suppliers and also include those entities that utilize a company’s products or services (“value chain”), and which can also result in human rights abuses. For example, companies selling surveillance technology should also know the entities using their products. The Ministry of Economy, Trade and Industry should dedicate a new subsection of the Guidelines to the importance of supply/value chain mapping and disclosure and steps that companies should take to achieve it.

1. Make clear companies’ obligations regarding indirect (tier 2 and beyond) suppliers.

The Guidelines should set out more clearly companies’ obligations to address human rights impacts for indirect (tier 2 and beyond) suppliers. The Draft Guidelines (for example, 4.2) state that companies must address adverse impacts directly linked to the business enterprise’s operations, products, or services by their business relationships, but do not clearly define “business relationships” as including companies in its supply chain, even beyond their first tier. UN High Commissioner on Human Rights Guidance on the UN Guiding Principles, in contrast, states that, “Business relationships…include indirect business relationships in its value chain, beyond the first tier, and minority as well as majority shareholding positions in joint ventures.”

The Guidelines would also benefit from increased guidance on companies’ obligations in relation to tier 2 and beyond suppliers. With many companies currently focusing their due diligence only on their tier 1 suppliers, the Guidelines would benefit from a dedicated section (for example, expanding Q&A question 3 to a dedicated section in the main body) to both define companies’ obligations for their tier 2 and beyond suppliers and provide examples and detail of how companies have met those obligations. 

The Guidelines should also ensure that prioritization of human rights impacts does not lead companies to overly focus on direct suppliers. The Guidelines include language (for example, 2.2.4, Q&A, question 3) that suggests that when a company identifies “multiple adverse human rights impacts with high severity,” it may prioritize addressing human rights impacts related to its own business or its direct suppliers before then tackling human rights abuses related to indirect suppliers. This contrasts with the language of the UN Guiding Principles (p. 26, here) that, while acknowledging that it may not always be possible to address human rights abuses simultaneously, asks businesses to prioritize based on only the relative severity of the impacts, without reference to where in the supply chain it occurs. 

The language in the Draft Guidelines, while limited to “multiple adverse human rights impacts with high severity,” risks causing companies to focus primarily on the impacts of their direct suppliers, as many already do. The Guidelines should instead ask businesses to prioritize based only on the severity of the human rights impacts, as well as their capacity to meaningfully address them acting individually or in concert with others, including their direct and indirect suppliers.

1. Strengthen guidance on remediation and disengagement to reflect international standards.

Companies have a responsibility to remediate human rights abuses they cause or contribute to, and to support remediation when they are linked with human rights abuses. Section 4.2.1 (especially subsections 4.2.1.2 and 4.2.1.3) of the Draft Guidelines should be completely revamped and at a minimum aligned with the UN Guiding Principles and OECD MNE Guidelines and other relevant OECD due diligence guidance.

In particular, the Guidelines should state that when a complaint is made about a company’s conduct, either to the company itself or in the media, the company should commission an independent assessment to determine whether they have caused, contributed or are linked with human rights abuses. The scope of such an assessment should include the company’s own actions and omissions. Any such assessment should involve consultation with relevant stakeholders and affected populations (such as unions, community-based organizations and Indigenous peoples’ organizations). A summary of assessments and remedial action recommended should be made public.

Separately, the Guidelines should state that as part of their framework to remediate or support remediation, companies should share the costs of remediation as appropriate and provide sufficient time for the remediation. Companies that merely cite “zero tolerance” for human rights or environmental abuses and cut ties with suppliers without overseeing remediation, can do more harm than good to workers and communities. To this end, the Draft Guidelines should be revised in wide consultations with a variety of stakeholders and affected populations, to identify remediation frameworks that have developed escalation protocols when companies have used their business leverage to drive positive remediation, while warning that the business relationship could be terminated if progress on remediation is not made.

Where an independent assessment determines that there are no ways for a company to remediate or support the remediation of human rights abuses, then companies should take measures to responsibly exit from a business relationship following a reasonable window for remediation and escalation.

The Draft Guidelines should also reformulate language stating that “business enterprises are not responsible for solving systemic issues” (section 4.2.3). Although systemic issues are undoubtedly difficult and sometimes impossible for a business to solve on its own, businesses should still seek to work collectively, in partnership with both governments, companies, and other stakeholders, to work towards resolving them. The Draft Guidelines later state that “businesses are expected to make efforts to address” systemic issues, and should ensure consistency by clarifying that businesses do have a responsibility to contribute to resolving systemic problems.

1. Ensure stakeholder engagement includes communities affected by companies’ activities and provide additional guidance on how to safely and meaningfully engage stakeholders.

There are several instances where the Draft Guidelines call for engagement or dialogue with stakeholders. “Stakeholders” is defined at 2.1.2.3 as referring to “to persons or groups with interests that could be affected by an enterprise’s activities,” such as, “business partners, employees of the business enterprise, group companies, and business partners, labor unions, worker representatives, consumers, as well as NGOs, such as civil society, etc., human rights defenders, nearby residents, investors and shareholders, national governments, local governments and other organizations.”

The definition of stakeholders in the Guidelines would benefit from being expanded to include not only nearby residents impacted by a business’ activities, but any community or group that is affected by the business. Communities can be affected not only by companies’ own operations, but also by entities in a company’s value chain, which might be a significant distance from a company’s own operations.

The Guidelines should also provide clearer guidance on conducting stakeholder engagement, including the need to contact stakeholders in a language and medium they can understand and to protect all stakeholders, particularly workers, communities, human rights defenders, and NGOs from reprisals.

1. Clarify how the guidelines will be applied by businesses owned or controlled by the Japanese state.

The Guidelines should state clearly that they apply to publicly owned or supported businesses enterprises. The UN Guiding Principles state that, “states should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence.”

Human Rights Watch and other human rights groups in 2021 documented the involvement of Japan Bank for International Cooperation (JBIC), a Japanese government-owned financial institution, in Y-Complex, a high-end commercial development project being built on military-owned land in Yangon, Myanmar. Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN), which is partly funded by the Japanese government, is also involved in the project.

The Guidelines should make clear that state-owned or supported businesses, as well as state-backed financial institutions and agencies like JBIC and the Japan International Cooperation Agency (JICA), are required to implement human rights due diligence. The Guidelines should also require the Japanese government to conduct human rights due diligence when procuring goods or services. The UN Guiding Principles require states to promote respect for human rights by business enterprises with which they conduct commercial transactions, including through their procurement activities.