1. Introduction [page 3]
“The legal system of the Federal Republic of Germany contains numerous instruments that are focused primarily on the protection of human rights. They are binding on all enterprises. Where the business operations of an enterprise have an international dimension, procedures for identifying any actual or potential adverse impact on the human rights of people affected by its business activity should be developed and implemented.”
III. Federal Government expectations regarding corporate due diligence in respecting human rights
Procedure for the identification of actual and potential adverse impacts on human rights [page 9-10]
“Central to the exercise of due diligence is the establishment of a procedure that serves to identify, to prevent or to mitigate potentially adverse effects of corporate activity on human rights. It is not – or not only – a matter of considering risks to the company’s own business activity but is primarily about risks to the human rights of those who may be affected by corporate activity, such as employees of the enterprise itself or of other companies in the supply chain, local populations and customers.
The consideration of potentially adverse impacts on human rights is a continuous task that accompanies work processes and, in particular, is performed with a sectoral focus. It should take place when new divisions, products or projects are launched as well as in the context of existing business activities. When potential risks are examined, a distinction must be made between the following types of impact:
- those generated directly by the enterprise itself,
- those to which the enterprise contributes, for example through direct contractual relations with suppliers, and
- those connected indirectly with the enterprise through its business relations, its business activity or its products or services even though no direct contractual relationship exists, for example in situations involving numerous intermediary dealers. Granting loans, issuing credit lines and providing other financial services to other banks, insurers or other financial service providers do not in themselves constitute a relationship in the above sense if those transactions cannot be unambiguously attributed to a particular business activity in the real economy.
This systematic approach to identifying key impact factors and risks is nothing new and is already part of established management systems and processes, as may be seen, for instance, in Annex I to Regulation (EC) No 1221/2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS), which deals with the internal environmental review to be conducted by participating organisations.
The size of an enterprise, the sector to which it belongs and the nature of its business activity directly influence the risk that its operations will have an impact on human rights. The required depth and breadth of the risk assessment depends on these factors. An initial risk analysis on the part of an enterprise should be conducted for each division or each product category and possibly for each location too. The starting point may be a simple overview of the company’s main activities and of the value chains and business relations these activities entail. On the basis of this overview and with due regard to the international human rights standards enshrined in instruments such as the Universal Declaration of Human Rights, the International Covenants on Human Rights, the ILO Core Labour Standards and the OECD Guidelines for Multinational Enterprises, potential risk areas can be identified. Contextual circumstances such as the political framework and the presence of vulnerable groups of people (indigenous populations, for instance) should be factored into the analysis. The choice of method and the assessment of risks can be made on the basis of the analysts’ own research, interviews in-house, in subsidiary enterprises and/or with business partners and input from external specialists.
With the aid of this analysis, enterprises should determine whether an in-depth review is needed. This is most likely to be the case if the risk of an adverse impact on the human rights of particular groups is particularly high and fuller information is required before any action can be taken. For this reason, the recognised problem areas should be ranked in order of priority.
The risk of a particularly adverse impact arises, for example, in cases where a large number of people may be affected or the potential impact would have serious, unforeseeable, or irreversible consequences. The in-depth review should at least include local dialogue with actually or potentially affected parties and recourse to both internal and external expertise in the field of human rights.”
1.1 Basic rules of economic policy
Bi- and multilateral economic relations [page 17-18]
“it is important that trade should be shaped in a development-friendly way. This means, for example, that environmental, social and human rights standards should firmly underpin free-trade agreements, which should be accompanied by impact-assessment and monitoring mechanisms.”
The current situation
“The Federal Government supports further development of the range of instruments for human rights impact assessment of trade and investment agreements.”
- “The Federal Government advocates and supports further development of the range of instruments for human rights impact assessments of the EU’s trade and investment agreements. Moreover, comprehensive impact assessments should be conducted before negotiations begin, so as to guarantee that the findings of the assessments can influence the negotiations.”
1.3 State support
Export credits, investment guarantees and other instruments for the promotion of external trade page 24-25
The current situation
“The processing of export credit guarantees, DIA guarantees and untied loan guarantees is undertaken on behalf of the Federal Government by the mandated companies Euler Hermes and PwC. Respect for human rights is already an element in the assessment of applications. Where there is reason to do so, environmental and social aspects as well as human rights considerations are closely examined.
How closely depends on the potential impact of the project. The minimum requirement for the assumption of a guarantee is compliance with the national standards of the target country. Projects with a considerable impact on human rights are subjected to a more thorough examination.”
“The Federal Government will ensure that human rights, which have hitherto been an element of the environmental and social impact assessment, are given more specific consideration and a higher profile in assessment procedures. It will measure the existing assessment procedures against the requirements set out in chapter III above and make adjustments where necessary. One particular priority will be measures for better identification of risks to human rights as part of the assessment process.”