Finland

Government covering note on the UN Guiding Principles on Business and Human Rights National Action Plan

Legislative report

“A report on legislation pertaining to national and international business and human rights is to be drafted based on the principles stated in the UN Guiding Principles. The objective is to examine whether legislation corresponds with the aims of the UN principles and determine the necessity of initiatives taken to otherwise improve corporate operating practices, particularly where due diligence, corporate reporting obligations and remedies for victims of human rights violations are concerned. It is also to propose concrete recommendations for change, wherever necessary.”

Due diligence

“With regard to the due diligence, the working group rightly emphasises in its report the need to identify best practices and the concept of more functional international specifications. At the same time, it is vital that the discussions be continued also at the national level. The aim of the round table discussions presented in the report should be to not only increase dialogue, but also to establish as broad a national understanding as possible on what due diligence means and how it can be properly implemented in various sectors and business areas. Stakeholders from different fields are invited to the round table discussions, whose final outcomes are addressed by the Committee on Corporate Social Responsibility.”

Introduction [page 11]

“…companies have the responsibility to respect human rights, regardless of the states’ obligation. Companies should therefore carry out due diligence …”

1 The state obligation to protect human rights

1.2 Activities in international organizations [page 14]

“In international human rights bodies, Finland has emphasised development related to due diligence.”

1.3 Activities in the EU [page 16]

NON-FINANCIAL REPORTING

“On 18 April 2013, the European Commission made a proposal to amend the accounting directive for the disclosure of so-called non-financial information of certain large companies.

The proposal shall be applied to companies of significant public interest with more than 500 employees on average on the account closing date. According to the proposal, such companies should include in their annual report a declaration stating material data related to the environment, social affairs, employees, human rights, and the prevention of corruption and bribery. The declaration should contain a short description of the business model, a description of the policies related to the areas mentioned above as well as the due diligence related to them, the results obtained in the policies, the main risks and risk management that apply as related to the areas mentioned above, and the non-financial performance indicators significant for company business. Instead of a declaration attached to the annual report, companies may also publish separate reports on certain conditions.”

3 Expectations towards companies and support services

3.1 Clarification of due diligence [page 24-26]

“The OECD Guidelines for Multinational Enterprises12 were updated in 2011. In the same connection, the UN Guiding Principles on Business and Human Rights were included in the Guidelines along with due diligence. In the OECD Guidelines, due diligence is seen as an examination process with which companies identify and prevent the actual and potential adverse impacts of their activities in their decision making and risk management. This means that due diligence is not a single action. Instead, it is an ongoing process where the human rights impacts of business activities are assessed with appropriate and sufficient care.

Due diligence also includes the mitigation of adverse impacts and communication on how companies deal with these adverse impacts. Potential effects are dealt with by preventing or mitigating them, whereas actual impacts will be dealt with by remedying them.

By following due diligence, an attempt is made to prevent the adverse impacts which a company will either cause itself, to which it will considerably contribute towards, or which are directly related to the company’s activities, products or services through a business relationship.

The contribution refers to a situation where that contributing impact is substantial. This means activities resulting in indirect adverse impacts caused, promoted or encouraged by another party. This does not cover minor or insignificant contributions. If a company contributes to a detrimental effect on human rights, it should take the necessary measures and use its influence to prevent or alleviate the adverse impact.

In the Guidelines, business relationships cover relations with business partners, supply chain operators and other operators independent of the state and governmental operators that are directly related to the company’s business activities, products or services. If the company has a lot of suppliers, it should identify the areas where the risk of adverse impacts is highest and contribute to the prevention of these risks.”

WHAT IS SUFFICIENT?

“At the consultation events organised by the working group, it was suggested that a new statutory obligation on due diligence should be established for companies when implementing the UN principles on a national level13. Transforming the due diligence described above into a legally binding obligation is difficult to envisage. The problem with statutory due diligence for respecting human rights is the difficulty of defining the obligation included therein. On a national level, respecting human rights is defined in appropriate legislation, and careful actions may be important for assessing company responsibilities. Extending national legislation to international activities is even more challenging. The special questions related to the regulation of international business activities have been described above in Section 1.1.

According to the international guidelines, the sufficiency of following due diligence and the possibilities of making a difference are always weighed on a case-by-case basis. The issues mentioned above (such as the size of the company, branch of activity, operating conditions, ownership and business structure) are taken into consideration. The seriousness of the adverse impacts caused is important as well. Since both the UN principles and the OECD Guidelines emphasise prevention, a retrospective assessment on sufficiency will cause challenges of its own for preparatory actions.

The discussion on the content of due diligence and the ways it is applied also continues in international organisations.

Though there is no binding regulation on due diligence, it is a central concept in managing human rights risks related to international business activities. For these reasons, more discussion and information is required on the types of risks and possibilities related to each branch of activity, on the types of risk management needed, and on the expectations for observing due diligence in various branches of activities.

As a follow-up measure, the working group proposes that

• companies, non-governmental organisations and other key stakeholders are invited to a roundtable discussion by branch of activity. For example, the discussion could begin with the forest industry, the consumer goods trade and the textile industry. With the discussions, an attempt shall be made to create a dialogue amongst various stakeholders and to establish the essential risks for each branch of activity as well as sufficient risk management and due diligence.
• In co-operation with the business sector, the collective industrial organisations and non-governmental organisations, sharing of due diligence best practices is promoted in order for companies to apply them.
  Principal responsible parties: Ministry for Foreign Affairs and Ministry of Employment and the Economy, schedule by the end of 2015.”