Information Note: The Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill

The Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill sets out some core building blocks for a fit-for-purpose corporate accountability law in the UK.  

It proposes twin duties on regulated persons (businesses, financial institutions and public authorities): first, a general duty to prevent human rights and environmental harms; and second, a duty to conduct human rights and environmental due diligence (HREDD). Human rights is defined by reference to major international human rights law treaties. 

The Bill usefully recognises that human rights and the environment are interlinked and that both should be addressed simultaneously through HREDD. The duty to prevent ensures that HREDD is focussed on achieving positive outcomes for human rights and environment, not merely putting in place procedures without ensuring their effectiveness.  

The Bill imposes the duty to prevent harms, and to conduct HREDD, on commercial organisations (which includes financial institutions) as well as public authorities, recognising that both can cause, contribute or be directly linked to human rights abuses and environmental harms. The Bill applies to commercial organisations of all sizes and across all sectors.  

Failure to prevent 

The duty to prevent aims to create an overarching duty of result on commercial organisations and public authorities, as well as to incentivise early action, avoidance, and effective implementation of non-judicial remedy procedures where harm occurs. Its enforcement is linked particularly to civil liability (see section on access to justice below).  

Human Rights and Environmental Due Diligence  

For commercial organisations and public authorities' due diligence to be reasonable under the Bill, it must involve:  

(a) integrating HREDD into policies and procedures,  

(b) identifying and addressing potential and actual human rights and environmental harms,  

(c) monitoring the effectiveness of the actions taken and their outcomes,  

(d) communicating with affected peoples, public reporting, and  

(e) setting up effective grievance mechanisms.  

The Bill requires ‘informed, meaningful, and safe engagement’ with affected peoples throughout HREDD.  

The Bill also provides criteria for judging the adequacy of HREDD. These include for example consideration of the size and nature of business, the severity of harms it may be linked to, the extent of its influence within the value chain, and the efforts it has made to exercise this influence, and evidence of continued improvement over time.  

Responsible disengagement 

Where commercial organisations or public authorities wish to suspend or terminate a business relationship due to concerns about human rights or environmental harms arising from HREDD, the Bill requires them to follow a process of responsible disengagement. Responsible disengagement has multiple objectives, including to incentivise companies to invest (time and money) in improving their value chains, rather than merely switching suppliers; to avoid harms that may be caused by rapid or poorly-thought-out disengagement; and to support remedy for those who may already have been harmed. 

Access to justice 

The Bill sets out a comprehensive liability regime that also includes civil liability as well as administrative and criminal liability. 

Under the Bill, a commercial organisation may be held liable for failing to prevent human rights or environmental harm in its operations, those of its subsidiaries, or in its value chains. The Bill proposes a strict liability model, which means victims of harm can hold commercial organisations accountable regardless of whether the harm was intended.   

No cause of action would arise where a commercial organisation completely remedies the harm, generating an incentive for businesses to voluntarily address harms linked to their operations and value chains. Commercial organisations would also have a defence against harm where they demonstrate they took all reasonable steps to prevent the harm (including but not limited to their HREDD). The fact that this is a defence places the burden of proof on the commercial organisation, thereby reversing the usual (and difficult) burden on claimants to demonstrate, with limited access to company information, that the steps taken by companies were inadequate.  There are likely nonetheless be other barriers to access to justice, including a requirement to prove that the UK is an appropriate jurisdiction to hear a claim, costs, language and travel requirements, and many others.  

Beyond civil liability, the provisions in the Bill would permit interested and affected parties to make a complaint to the regulatory authority overseeing the legislation, alleging non-compliance with the Bill by a commercial organisation or public authority. The regulator would also have the power to investigate of its own accord. In cases of non-compliance, the Regulator would have a range of enforcement powers, including the issue of a fine of up to 10% of an organisation’s global turnover. The Bill also creates criminal liability for serious criminal behaviour committed by a person associated with a commercial organisation for corporate gain. Directors would commit an offence if the commercial organisation on whose board they sat failed to conduct HREDD, or provided materially false information in an HREDD report. 

Reporting and transparency of information  

Under the Bill, commercial organisations over a certain size (to be specified in regulations) would be required to submit to the regulator, and publish, a report on their HREDD every year. The report would need to assess effectiveness of actions to address HREDD harms, and proposals for improvements over the next year. It would also need to disclose value chains and report on scope 1 and 3 greenhouse gas emissions.  

The same commercial organisations would also be required to respond to written requests from the public for information about their products and services, with some exceptions. 

FPP supports the aims of this corporate accountability law and encourages its adoption. To ensure adequate protection of the rights of indigenous and forest peoples under this law, some areas could be strengthened, including:  

• Expanding the definition of "human rights" to make explicit reference to the full range of international human rights treaties and instruments, including e.g. the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention on the Elimination of All Forms of Discrimination against Women and the UN Declaration on the Rights of Indigenous Peoples. 
• Explicitly including the right to effective participation and the right to free, prior and informed consent within the requirements for due diligence processes.
• Taking more explicit steps to remove barriers to accessing justice and remedy.