Corporate law & corporate governance

The State’s responsibility to foster a corporate culture respectful of human rights both at home and abroad is a key element of the first pillar of the State duty to protect human rights as articulated in the UN Guiding Principles on Business and Human Rights (UNGPs). Corporate law focuses on the rules for forming and operating corporations. Corporate governance, on the other hand, involves a system of rules and procedures designed to balance the interests of a company’s various stakeholders, including shareholders, customers, employees, and the community. Corporate law and governance, therefore, directly shape what businesses do and how they do it. However, their connection to human rights remains poorly understood. Corporate law and human rights are often viewed as distinct legal and policy spheres populated by different communities of practice, as noted in the 2011 Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises.

Some of the key concepts and characteristics of corporate law, such as legal personality, limited liability, liability within corporate groups, and delegated management, have proven to be obstacles to the legal accountability of transnational companies for human rights-related abuses by their subsidiaries and business partners in practice. On the other hand, several aspects of corporate law and governance, such as rules on company disclosure, non-financial reporting, directors’ duties, and stakeholder engagement, have proven to be important measures to ensure the protection of human rights and the remediation of any harm.

The UNGPs recognise the key role of corporate law and governance in the protection of human rights. According to the Guiding Principle 3, in meeting their duty to protect, States are urged to:

“(a) Enforce laws that are aimed at, or have the effect of, requiring business enterprises to respect human rights, and periodically to assess the adequacy of such laws and address any gaps;

(b) Ensure that other laws and policies governing the creation and ongoing operation of business enterprises, such as corporate law, do not constrain but enable business respect for human rights;

(d) Encourage, and where appropriate require, business enterprises to communicate how they address their human rights impacts.”

The Commentary to the Guiding Principle 3 adds that “[l]aws and policies in this area should provide sufficient guidance to enable enterprises to respect human rights, with due regard to the role of existing governance structures such as corporate boards.”

Corporate governance has become a central component of an increasing body of legislation articulating and regulating business respect for human rights, especially in mandatory human rights and environmental due diligence and reporting legislation. There is a shift towards increased demands from boards of directors and senior management in embedding respect for human rights within corporate culture and considering broader social and environmental impacts beyond shareholder interests. The Organisation for Economic Co-operation and Development (OECD) Guidelines on Multinational Enterprises also calls upon boards to consider the interests of the company’s stakeholders.

Various experts and scholars have studied the relationship between corporate law and governance and respect for human rights. For example, in 2010, former UN Special Representative on Business and Human Rights, Professor John Ruggie, conducted a cross-national study on human rights and corporate law as part of the “Corporate Law” project. The study identified that “several States recognise through their corporate and securities laws that responsible corporate practice should avoid negative social or environmental consequences, including for human rights.” (Report on Human Rights and Corporate Law)

More recent studies have analysed the role of corporate governance frameworks and directors in considering the long-term interests of stakeholders. For instance, in 2020, the European Commission released a study on directors’ duties, identifying that “directors’ duties and company’s interest tend to favour the short-term maximisation of shareholder value” and “current corporate governance frameworks and practices do not sufficiently voice the long-term interests of stakeholders”. The Commission further called for a legislative reform “to ensure that sustainability is further embedded into the corporate governance framework with a view to align better the long-term interests of management, shareholders, stakeholders and society.” Similarly, in 2022, the World Economic Forum’s Global Future Council on Human Rights published an Insight Report and Guidance Note to guide board members and senior executives on how to identify and engage with stakeholders who are affected by a company’s activities, and to understand the potential human rights risks and impacts on these groups.

These studies are part of ongoing discussions in corporate governance on Shareholder Primacy and Stakeholder Theory. A middle-ground between Shareholder Primacy and Stakeholder Theory in corporate governance is the concept of Enlighted Share Value (ESV). ESV is the idea that “corporations should pursue shareholder wealth with a long-run orientation that seeks sustainable growth and profits based on responsible attention to the full range of relevant stakeholder interests”. This can be seen in how the United Kingdom legislature incorporated ESV in the director’s duties provisions of the UK Companies Act 2006 (section 172) to make it possible for directors to take into account the long-term sustainability of the company and not purely short-term profits, by requiring directors to consider certain factors that encompass the interests of different stakeholders, such as employees, suppliers, customers, the community, and the environment.

A number of the emerging mandatory human rights and environmental due diligence laws, alongside mandatory reporting legislation, articulate the responsibility of the board of directors to integrate human rights and sustainability principles into corporate governance and structures (See the Issue page on Mandatory Human Rights Due Diligence for more information). These legislative developments aim to compel senior management to demonstrate a commitment to good corporate governance. They also align with the Guiding Principle 16 of the UNGPs, which calls for the endorsement of human rights commitments at the most senior level of the enterprise. For instance, the German Act on Corporate Due Diligence Obligations in Supply Chain, which entered into force in 2022, mandates senior management to adopt a human rights policy statement and a strategy for the company. This strategy should include a description of the procedures through which companies fulfil their due diligence obligations. Failure to meet due diligence obligations in the law can result in monetary fines or exclusion from the award of public contracts under the German Act. Furthermore, Norway’s Transparency Act (Norway’s due diligence legislation), effective from July 2022, requires that the board approve the company’s human rights due diligence reports. Repeated violations in publishing reports can result in a monetary penalty for the company or individuals in cases of willful or negligent infringement. In addition, the UK Modern Slavery Act 2015 obliges the board of directors to approve a slavery and human trafficking statement, encompassing policies and due diligence processes aimed at addressing modern slavery and human trafficking in supply chains. However, the UK’s Modern Slavery Act has been criticised by the Business & Human Rights Resource Centre for lacking effective mechanisms for sanctions in case of non-compliance and for insufficient public reporting.

With the growing attention to the role of senior management in governing companies’ impact on human rights and the environment, some studies analyse the issue of company directors’ liability who make decisions without adequately considering the human rights and environmental impacts. For example, academic research by R. McCorquodale and S. Neely argues that while no specific legislation in the EU and the UK directly assigns liability to directors “who do not take action in relation to human rights and environmental risks”, emerging trends in case law suggest the possibility directors’ liability in some situations. Their analysis highlights the possibility for shareholders to bring legal claims against the board of directors due to the financial and reputational losses that the company suffer from adverse human rights and environmental impacts linked to the decisions of the board of directors. For example, legal claims were brought against Shell by its shareholders, seeking to hold company directors personally liable for failing to prepare for the energy transition properly and putting the company at financial risk. The analysis of McCorquodale and Neely also highlights that the development of mandatory human rights due diligence laws presents an opportunity to expand directors’ duties to include specific human rights monitoring systems, and failure to manage such risks could put directors in breach of their duties. Understanding and addressing directors’ liability in relation to adverse human rights and environmental impacts is crucial for prompting proactive measures that ensure directors are well-informed and considerate of the broader effects of their decisions on human rights, society, and the environment.

While the relationship between corporate governance and the protection of human rights and the environment has recently been shaped through due diligence legislation, stakeholders have suggested that human rights due diligence process and reports are an important mechanism, but not the only mechanism, to ensure directors, boards, and senior management pay attention to human rights. Other mechanisms to ensure companies address human rights impacts include increasing the extent to which directors and officials consider human rights impacts in a business’s operations, by linking executive pay to Environmental, Social and Governance (ESG) considerations and possibly redefining the purpose of a corporation (Purpose of the Corporation Project). Thomson Reuters reported in 2022 that an increasing number of companies link ESG metrics to executive officers’ compensation packages. For example, 20% of the annual cash incentive compensation for Alocoa’s executive officers is tied to security, environmental and diversity targets.

Businesses are also undertaking measures in response to emerging ESG priorities. As the Office of the United Nations High Commissioner for Human Rights (OHCHR) reported in 2023, financial institutions are increasingly integrating an ESG approach into their investment decisions. This trend is evidenced by the growth in ESG investing, which has risen from US$ 22.8 trillion in global assets in 2016 to an anticipated US$ 53 trillion by 2025. Shareholder pressure, or “ESG Shareholder Activism”, also urges businesses to incorporate ESG considerations in their operations. Shareholder activists often attempt to shape corporate policies by filing proposals that are voted on at annual meetings or by launching public campaigns on issues such as board diversity or climate-related matters. For example, investors are increasingly pressuring Shell by filing climate resolutions and urging the oil major to reduce its greenhouse gas emissions footprint in alignment with the Paris Agreement goals. Shareholders of ExxonMobil successfully petitioned the company in 2017 to appoint a climate change specialist. Similarly, institutional investors are calling on US companies, particularly those in low-wage sectors such as retail, restaurant, hospitality, and gig industries, to pay a living wage to their workers.

Companies can contribute to respect for women’s rights through women’s economic empowerment supported by sound corporate governance. In support of this, over 3,000 global businesses have endorsed the Women’s Empowerment Principles, a joint effort by UN Women and the UN Global Compact, which focuses on corporate actions to encourage women’s empowerment in the workplace. In this scope, the 2019 report from the Working Group on Business and Human Rights develops a gender framework for the UNGPs and proposes gender guidance specific to each of the 31 Guiding Principles. The illustrative actions recommended by the Working Group include ensuring equal representation of women in the workforce at all levels, including on boards.

Sustainable Development Goals (SDGs) 16 (peace, justice and strong institutions) and 17 (partnerships for the goals) have clear links to corporate responsibility and governance, outlining targets on reducing corruption and bribery (16.5), accountable and transparent institutions (16.6), and encouraging States and companies to create meaningful partnerships for enhanced SDG implementation through finance, trade, technology, and multi-stakeholder and public-private partnerships (Goal 17).

Policy coherence is a key enabling factor for SDG achievement, highlighted in SDG 17. There is thus a strong basis to work towards ensuring that legal and policy frameworks enabling achievement of the SDGs – including corporate law – are also in line with States’ human rights commitments. Since the overarching aim of the SDGs is to “realize the human rights of all”, a successful realisation of the 2030 Agenda will require policy coherence to ensure that “states meet their duty to protect human rights from business-related human rights abuses and that businesses meet their corporate responsibility to respect human rights”, as is further explained in the key recommendations to Governments and businesses from the UN Working Group on Business and Human Rights in 2017 (See the Issue page on the 2030 Agenda for Sustainable Development for more information).

16) Peace, Justice and Strong Institutions

17) Partnerships For The Goals

References

The United Nations Guiding Principles on Business and Human Rights
Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, “Human rights and corporate law: trends and observations from a cross-national study conducted by the Special Representative”, UN Doc. A/HRC/17/31/Add.2, 23 May 2011.

Jukka Mähönen, The Pervasive Issue of Liability in Corporate Groups, 13 (5) European Company Law.
OECD, The OECD Guidelines on Multinational Enterprises on Responsible Business Conduct, (2023).
European Commission, Study on directors’ duties and sustainable corporate governance, (2020).
European Commission, Proposal for legislation fostering more sustainable corporate governance in companies: Inception Impact Assessment, (2020).
World Economic Forum Global Future Council on Human Rights, Guidance Note: Board Duties in Ensuring Company Engagement with Affected Stakeholders, (2022).

R. Rhee, A Legal Theory of Shareholder Primacy, (2017).
H.J. Smith, The Shareholders vs. Stakeholders Debate, (2003).
S. Andreadakis, Enlightened Shareholder Value: Is It the New Modus Operandi for Modern Companies? In Corporate Governance: Recent Developments and New Trends (Springer, 2012).

Keay, Having regard for stakeholders in practising enlightened shareholder value, 19 (1) Oxford University Commonwealth Law Journal, (2019)

D. Millon, Enlightened Shareholder Value, Social Responsibility, and the Redefinition of Corporate Purpose Without Law, (2010).
UK Companies Act 2006.
German Act on Corporate Due Diligence Obligations in Supply Chain Norway’s Transparency Act.
UK Modern Slavery Act.
Business & Human Rights Resource Centre & Modern Slavery Registry, Modern Slavery Act: Five Years of Reporting, (2021).

McCorquodale and S. Neely, Directors duties and human rights impacts: a comparative approach, 22 Journal of Corporate Law Studies, (2022)
Carrington, Shell directors personally sued over ‘flawed’ climate strategy, (2023).
UK Proposed Private Member’s Bill: Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill.
IHRB, Human Rights Due Diligence and Corporate Boards: Reflections on European Commission Proposals Relating to Director Duties and Board Oversight, (2022).
Frank Bold, The Purpose of the Corporation Project.
Thomson Reuters, More Executives Could See Their Compensation Tied to ESG Goals if SEC Finalizes Climate Disclosure Rules, (2022).
OHCHR, Investors, ESG and Human Rights, (2023).
H.E. Liekefett, H. J. Gregory, and L. Wood, Shareholder Activism and ESG: What Comes Next, and How to Prepare, (Harvard Law School Forum on Corporate Governance), (2021).
Hogan Lovells, Recent developments in ESG shareholder activism around the world and suggestions for risk mitigation, (2023).
Offshore Energy, 27 shareholders heap more pressure on Shell to take ‘credible’ climate action, (2024).
Interfaith Center on Corporate Responsibility, Investors Call on U.S. Companies to Take Steps Toward the Payment of a Living Wage, (2023).
UN Global Compact, Endorse the Women’s Empowerment Principles.
OHCHR, 10 key recommendations to Governments and businesses from the UN Working Group on Business and Human Rights, (2017).

Additional Resources:

OECD, G20/OECD Principles of Corporate Governance, OECD Publishing, Paris, (2023).
Armour, H. Hansmann, R. KraakmanThe Essential Elements Of Corporate Law: What Is Corporate Law?, Harvard Law School, John M. Olin Center For Law, Economics, And Business Discussion Paper No. 643 7/2009.

Aspen Institute – the Aspen Business and Society Program; Unpacking the Corporate Purpose: A Report on the Beliefs of Executives, Investors and Scholars, May 2014.
L. Anker-Sørensen, J.Mähönen, and B. Sjåfjell (eds.), Special Issue on Liability in Corporate Groups, European Company Law, 13 (5) Kluwer Law International, (2016).
N. Cankar, Transition Economies And Corporate Governance Codes: Can Self-Regulation Of Corporate Governance Really Work? 5 Journal of Corporate Law Studies (2015).
Wesley Cragg, Human Rights, Globalisation and the Modern Shareholder Owned Corporation, in T. Campbell and S. Miller (eds), Human Rights and the Moral Responsibilities of Corporate and Public Sector Organisations, Chapter Six, 2004 Kluwer Academic Publishers pp. 105–127.
D. Wheeler and M. Sillanpää, The stakeholder corporation: A blueprint for maximizing shareholder value. London: Pittman Publishing, (1997).
P. Giráldez and J. Manuel Hurtado, Do independent directors protect shareholder value? 23 Business Ethics: A European Review (2014).
The Equality and Human Rights Commission, Business and human rights: A five-step guide for company boards, (2016)

What National Action Plans say on Corporate law & corporate governance

Belgium (2017 - open)

Action point 4

Promote existing qualitative initiatives on human rights and social responsibility

Promouvoir les initiatives qualitatives existantes relatives aux droits de l’Homme et à la responsabilité sociétale

The Flemish government plans a sustained and sectoral approach to social responsibility as companies operating in the same sector face similar challenges. In consultation with the sectoral organizations, the Flemish authorities will support these organizations and their members in order to sustain their value chains and management of their businesses.

Action point 9

Strengthen collaboration between public services and the various organizations active in the field of human rights and of international entrepreneurship

Renforcer la collaboration entre les services publics et diverses organisations actives dans le domaine des droits de l’Homme et de l’entrepreneuriat international

This section mentions that the regional authorities and a number of Belgian institutions at several levels (such as Ducroire, Finexpo, the Belgian Investment Company, the Belgian Investment Company for Developing Countries, and also organizations such as the Chambers of Commerce among others) that support international entrepreneurship can also obtain information on the ground, through their members, and gain experience in the field of corporate management of human rights issues around the world. An action therefore involves the collection of information from such stakeholders.

Action point 15

Incorporate the principle of “due diligence” into the management of the company, also in the terms of human rights

Intégrer le principe de « diligence raisonnable » au sein des organismes de gestion de l’entreprise, également en matière de droits de l’Homme

This section mentions corporate governance. Concretely, the action will consist of contacting those responsible for the two Belgian corporate governance codes in order to examine the possibility of integrating international developments, in particular with regard to human rights, which will entail the attempt to minimize the administrative burden on public authorities or enterprises, but without impairing the application and implementation of ambitious criteria and controls.

Action point 29

Facilitating the circulation of knowledge in the field of human rights and CSR

Faciliter la circulation des connaissances dans le domaine des droits de l’Homme et de la RSE,

The government of Walloon will seek to encourage university networks of researchers concentrating on the topic of management of corporate socio-economic aspects on the perspective of the respect for human rights and CSR.

Pillar 1: The State Duty to Protect Human Rights

Strand 8: Legislation, Policies and Incentives

Action Point 8.1. (page 60)

The Ministry of Economy will support the legal provision committed in the Agenda for Productivity, Innovation and Growth seeking to create a legal framework for social business enterprises, by encouraging the incorporation of business and human rights criteria.

Strand 9: State Business Enterprises

Action Point 9.2 (page 49)

The National Oil Company (ENAP), with the support of independent experts, will prepare a baseline to identify eventual impacts on human rights and the promotion and respect actions the company is currently performing. This aims to identify gaps and manage the relevant plans for human rights remediation and mitigations. Priority subjects included in the study will be: life, health, environment, water, communities and workers. This initiative is based on the new Sustainability Policy passed by the Board of Directors in December 2016. It is composed of four strands: consideration of stakeholders, environment, integrated management and human rights.

Action Point 9.3 (page 50)

The Ministry of Economy, Development and Tourism will support the incorporation of the Guiding Principles in the business enterprises forming part of the System of Public Business Enterprises (SEP).

To strengthen coordination between the Ministries forming part of the Inter-Ministerial Working Group, amplify the impact of this Action Plan, and make known its progress, the Group will carry out the following actions: …

2. Encourage the adoption of policies, statements or codes of conduct by business enterprises and urge the implementation of mechanisms of due diligence

Pillar 2: The Corporate Responsibility to Respect Human Rights

Strand 2: Promotion of Corporate Due Diligence in the Field of Human Rights

Action Point 2.1 (page 54)

The Ministry of Foreign Affairs, through the General Directorate of International Economic Relations, will:

Promote human rights in the management of public funds to promote exports carried out by ProChile, through the progressive incorporation of analysis mechanisms helping to ensure that business enterprises having access to the tools offered by this entity respect human rights. Likewise, it will establish, if relevant, requirements about sustainability and respect for human rights, as criteria to choose the business enterprises participating in programmes to promote exports and corporate activities, including SMEs and micro SMEs. …

Action Point 2.2 (page 55)

The Ministry of Economy, Development and Tourism will: …

Hold a working group meeting at least once each semester with the Division of Social Economy and Associativity and the Division of Smaller Business Enterprises, with the purpose of identifying the impact of human rights in the management of businesses such as cooperatives and SMEs, and of incorporating the vision of human rights and business enterprises within this type of economic associations. Based on the activities of the working groups, sector guides will be developed to evaluate compliance with human rights issues, with special emphasis on the management of supply chains. …
Agree, with business enterprises represented in the Social Responsibility Council for Sustainable Development, upon the development of memorandums of understanding, guides, handbooks and guidelines containing best practices, so that they can become an integral part of business and human rights standards in the following subject matters: labour practices, impact on communities, corporate practices and supply chain management. …
Coordinate technical meetings with SEP, CORFO, SERNAC and SERCOTEC to agree on the incorporation of targets and indicators of compliance with human rights standards in these services.

Criminal liability of legal persons in the field of human rights [page 11-12]

“Implements Principles 1 and 3a

Modern business is inconceivable without companies and cooperatives. They facilitate the concentration of funds, limit risk, and create opportunities for professional management. They are a means of implementing major business projects. However, like any other such means, companies may be open to abuse. Those who engage in crime can divide up responsibility for decisions and hide behind convoluted management structures. At large corporations, it can often be difficult to find a specific liable person. The Act on the Criminal Liability of Legal Persons [Act No 418/2011 on the criminal liability of and proceedings against legal persons] resolves this by making it possible to infer that a legal person as a whole is liable.

The most serious human rights abuses can be punished as crimes. According to the case-law of the European Court of Human Rights, too, the state duty to efficiently investigate and ultimately punish infringements is central to human rights protection. However, criminal prosecution is the strongest instrument of power the state can wield, and has repercussions for employees, shareholders, creditors, business partners and others who have nothing to do with criminal activity. In this light, legislation needs to be monitored and evaluated.

While the state carries primary responsibility for human rights protection in its territory, in today’s interconnected age the stringent application of the principle of territoriality is impossible. The Czech Republic has decided that – whether unilaterally or on the strength of an international treaty – it will prosecute certain unlawful conduct by Czech nationals irrespective of where this conduct occurs. As such, it is assuming responsibility for the conduct of its nationals (including businesses) abroad, thus making it possible to fill in the regulatory gap to some extent in those cases where such conduct is not punishable under another country’s law.

Current state of play:

The criminal liability of legal persons was introduced into Czech law in 2011 and covered and exhaustive set of criminal acts. In 2016, the concept underlying the definition of the criminal liability of legal persons was revised so that a legal person can now be liable for all crimes other than a narrow group of acts expressly precluded by law.
Czech law allows a Czech citizen or a legal person established in the Czech Republic to be prosecuted even if they committed their crime abroad.
Foreign nationals and legal persons perpetrating a crime to the benefit of a Czech legal person may also be prosecuted.
Under Czech law, the most serious human rights violations [The criminal acts listed in Section 7(1) of Act No 40/2009, the Criminal Code] can be prosecuted regardless of the perpetrator’s nationality or where such violations occurred.
The Czech Republic is party to a number of international treaties on legal assistance and on the prosecution of various types of international criminal activity, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Task:

Evaluate the impacts and practical application of the new text of the Act on the Criminal Liability of Legal Persons. If it transpires that the legislation still has loopholes impeding or preventing the prosecution of serious violations of human rights, propose amendments to the law.
Coordinator: Ministry of Justice
Deadline: 31 December 2018”

Disqualification of a member of a body [page 13-14]

“Implements Principles 1 and 3b

If a company executive orders or, due to negligence or connivance, allows the company he or she manages to encroach on human rights, that executive must be found to be liable. It is always more advisable to prosecute specific culprits rather than a whole company. However, a criminal penalty is not always appropriate. Indeed, criminal prosecution appears to be too strict a response to minor or negligent breaches of the law.

One possible solution is disqualification – banning someone from holding corporate directorships. Professionals recommend disqualification as a lighter form of punishment for a number of acts directly associated with business activity. Disqualification is a punishment that is suitably harsh for the perpetrator without carrying the stigma of criminal prosecution, and does not harm the company as a whole. Furthermore, judicial proceedings in such a case are simpler and more economical.

Although current Czech law does accommodate disqualification, this is restricted to a narrow set of offences and the maximum duration is limited. In this respect, we need to explore whether the present wording of constituent elements is sufficient, i.e. whether it is broad enough for the courts to have sufficient opportunity to apply this instrument, while being definitive enough so that members of company bodies know what acts are prohibited. We should also consider what the maximum duration of disqualification ought to be for the various acts.

Current state of play:

The disqualification of members of governing bodies from holding such office was introduced into Czech law in 2014 by the Business Corporations Act. This makes it possible to punish those who have bankrupted their company or have repeatedly and seriously breached the tenet of due diligence. They may be disqualified for up to 3 years.
Members of governing bodies, influential persons and controlling entities may be disqualified. [Section 76(2) of Act No 90/2012 on companies and cooperatives]

Task:

Assess the use and applicability of this concept and consider whether it needs to be revised. In particular, evaluate the breadth of constituent elements, how sufficient the definiteness and precision of the law is, as well as the maximum disqualification period and variations depending on the seriousness of the act, and consider extending this concept to other persons effectively exercising influence over the running of a company. Also consider revising this concept so that it is not limited to companies, but can also be applied to other types of organisation with a different legal form. In these assessments, focus on the punishability of acts where a member of a governing body enables human rights standards to be breached either wilfully or out of gross negligence. If the concept of disqualification proves to be hard to apply in these situations, consider revisiting the constituent elements so that disqualification is easier to impose in such circumstances.
Coordinator: Ministry of Justice
Deadline: 31 December 2020”

State aid, guarantees and subsidies [page 26]

“Current state of play:

Guidelines on Corporate Governance of State-Owned Enterprises are taken into account in the management of state enterprises and companies in which the state has a shareholding.”

Transparency [page 37-38]

“The Guiding Principles set great store by openness and transparency, which in practice means communication with the public, with employees and with other stakeholders. Businesses should make public the fact that they are mindful of their responsibility, that they are not just assuming this responsibility for show, and that they accept it as part of their business ethics. This ongoing communication could include not only the public, but also investors, business partners and potential employees, for whom the business, by following this path, has become a more attractive partner or place to work. Communication may be one way (e.g. various forms of non-financial reporting) or bidirectional (e.g. public hearings on matters of general interest).

The Government of the Czech Republic recommends that businesses where the activities, products, services or business relationships are associated with risks of serious human rights violations formally provide information on how they are dealing with those risks, even in situations where the law does not require them to do so. The government recommends all companies reporting on human rights to take account of the Reporting Framework for the UN Guiding Principles on Business and Human Rights. Reporting should provide information of relevance without overwhelming the reader. The Government also recommends that large-scale projects with a potential major impact be publicly presented and consulted.”

Appendix 1, GP3b

Status in Denmark (initiatives implemented before the UN ratification of the Guiding Principles) [page 26]

“all new legislation is evaluated in terms of human rights consequences. Large parts of Danish national law support compliance with the UNGPs such as legislation on labour issues, the environment, child labour etc. This type of protective legislative framework of Denmark enables business respect for human rights.”

This implies that Denmark undertakes efforts to ensure that all legislation, including corporate law, is evaluated in terms of human rights consequences.

Appendix 1, GP 4

Status in Denmark (initiatives implemented before the UN ratification of the Guiding Principles) [page 28]

“[The Danish Investment Fund for Developing Countries (IFU)]’s overall objective is to promote sustainable economic growth, economic development and a more equitable distribution of income by co-financing private sector investment in developing countries. IFU’s investments in projects should contribute to job creation, good governance, respect for the environmental, higher social standards and community development.”

2 The state and companies

2.1 The state as an economic operator [page 22-23]

CORPORATE GOVERNANCE

“The Ownership Steering Department in the Prime Minister’s Office has set a CSR reporting requirement for unlisted companies that are either majority-owned by the state or entirely state-owned. This also includes human rights. The obligation requires that companies submit reports in accordance with the best practices in the branch of activity concerned and, at minimum, adopting the standards corresponding to those of their central competitors.

As an owner, the state expects that the administration and management of state-owned companies take human rights into consideration in a responsible and transparent manner, both in their own organisation and in their subcontracting chains.

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

the importance of human rights to the state when serving as a company owner will continue to be emphasised in preparing the next decision in principle on ownership policy.
When the amended OECD Guidelines on Corporate Governance of State-Owned Enterprises enter into force around the end of 2015, the new definitions of policy will be included in the ownership guidance practices of the Finnish state.
Principal responsible party: Prime Minister’s Office, schedule before the end of 2016.”

I – The State’s Obligation to Protect Human Rights

The International Framework

1. The United Nations (UN) [page 13]

… France also chairs the Group of Friends of Paragraph 47 of the Rio+20 Declaration. This group promotes sustainable development reporting to better ensure that economic actors respect social, environmental, good governance and human rights standards. This group successfully advocated for reporting to be reinforced and extended to all SDGs …

2. The International Labour Organization (ILO)

France is second to just one other country in its ratification of ILO conventions. It has ratified 127 conventions, including the eight fundamental conventions and the four governance conventions (considered priority instruments). It regularly publishes reports on the enforcement of these conventions, which are submitted to the organization’s Committee of Experts on the Application of Conventions and Recommendations. The observations and recommendations of this committee are taken into account when revising national regulatory instruments and practices. France is committed to seeing ILO, a source of international labour laws, establish a shared reference standard based on a common interpretation of conventions. It actively supports the universal ratification process for ILO’s eight fundamental conventions. For several years, it has also underlined the need to reinforce the organization’s supervisory system.

France is one of ILO’s more active members and has a permanent seat on the organization’s Governing Body. It adheres to and promotes the Decent Work Agenda, and fully supports the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (the MNE Declaration). The country has signed a four-year partnership agreement with the International Labour Office, which involves implementing CSR initiatives and contributing to
the Better Work Programme.

4. The International Organization for Standardization (ISO) [page 15]

France actively contributed to work completed by ISO which resulted in the adoption of the ISO 26000 standard on social responsibility for businesses and organizations. This standard seeks to promote a common understanding of social responsibility, but cannot be used for certification. The ISO 26000 standard deals with seven core subjects, one of which is human rights …

… In addition, France steered work on the voluntary international standard ISO 20400, which provides guidance on sustainable procurement for organizations in the public and private sectors, through the French standardization organization AFNOR. This standard aims to establish a basic frame of reference to tackle the practices of social and environmental dumping. It was approved in late January, which paved the way for its publication.

Actions Underway [page 16]

France is participating in work carried out by the UN intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, which has been mandated to elaborate an international legally binding instrument, subject to the integration of parameters defined with our European Union partners, in order to ensure that the process respects the unanimity and integrity of the UN Guiding Principles (applicability to all businesses, consultation with businesses and integration of UN Guiding Principles).
Working with the Group of Friends of Paragraph 47 of the Rio+20 Declaration, France supports the reinforcement of reporting requirements in the environmental, social and governance fields, especially with respect to the implementation of the Sustainable Development Goals adopted on 25 September 2015.
France actively contributes to OECD activities in the field of responsible business conduct, particularly its work on due diligence (in the textile and finance sectors) and reinforcing the OECD Guidelines to mark their 40th anniversary (from June 2016 onwards).

Actions to be Implemented

Work to enhance cooperation between the World Trade Organization (WTO) and ILO to better integrate international social standards on responsible production processes and methods (for example, targeting child labour and forced labour), in order to promote a level playing field that takes into account existing frameworks and regulations.

The European Framework

7. The European Union (EU) [page 17]

France has played an important role in ensuring that these issues are high on the European agenda, particularly with respect to the adoption of the European directive on binding non-financial reporting, which France actively supported during negotiations.

It also promoted the inclusion of social, environmental and governance standards in trade and investment agreements. It helped to ensure that the conclusions of the Council of the EU under the Dutch Presidency were adopted, supporting the enforcement of the UN Guiding Principles on Business and Human Rights and their integration into development policy.

France could play a key role in the adoption of a common European framework on due diligence. The French National Assembly launched a parliamentary “green card” initiative to this effect.

Actions Underway

France has made human rights a requirement in non-financial reporting following the transposition of European Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups.
France is promoting the notion of due diligence at the European level to encourage the creation of a common framework based on the legislative framework adopted in France.
France has transposed the European Directive on trade secrets into national law, allowing businesses to protect trade secrets while assuring the necessary transparency of business activities and conduct, and the protection of whistleblowers acting in the public interest.

The National Framework

10. The Reinforcement of Legislation [page 23]

Recent public policies have led France to adopt new legislative measures supporting CSR.

For approximately ten years, French legislation has required all large companies to publish detailed information on their CSR policies. The 2001 Act on New Economic Regulations, otherwise known as the NRE Act, requires listed companies to disclose specific social and environmental information in their management reports. The Act of 12 July 2010, also referred to as the Grenelle II Act, reinforced transparency requirements in two ways:
- Under Article 224 of this act, the annual reports of asset management companies must mention the ways in which their investment policies take into
  account environmental, social and governance criteria.
- Under Article 225 of this act and the decree of 24 April 2012, companies must provide more detailed information, non-listed companies that exceed thresholds (for example, the threshold of 500 employees) must respect transparency obligations, 11 and independent third parties must check the
  information published.
Articles 70-IV and 173-IV of the Act on Energy Transition for Green Growth of 17 August 2015 extended reporting requirements by introducing the concept of the circular economy and asking companies to provide information on how the use of their goods and services affected climate change. An implementing decree was adopted in August 2016 to clarify these obligations.

France also played a key role in developing transparency obligations for companies at the European level. It was the main supporter of the draft directive on non-financial reporting obligations, published on 22 October 2014, which requires large European listed companies to publish reports on their social, environmental, human rights and corruption policies. France encouraged the European Commission to take an ambitious approach when adopting the guidelines discussed in the directive. The directive is currently in the final stages of being transposed into French law. This will reinforce existing non-financial reporting requirements for companies.

In the development field, the Act of 7 July 2014 on France’s strategy for development and international solidarity states that policy in this field must take into account “the social and environmental responsibility of public and private actors”. In addition, “France shall promote this requirement to partner countries and other donors”.
Furthermore, “It shall also encourage businesses with their headquarters in France and with offices abroad to implement the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights”. Also under this act, “Companies shall implement risk management procedures to identify, prevent or mitigate social, health and environmental damage and human rights abuses that may arise as a result of their operations in partner countries”.
The Act of 21 July 2014 defined the scope of the social and solidarity economy (SSE) for the first time. The notion of an SSE enterprise now covers
traditional actors (nonprofit organizations, mutual societies, cooperatives, and foundations) as well as new forms of social enterprise (commercial companies which pursue socially useful goals and decide to adopt SSE principles). Under this definition, the SSE represents 10% of GDP and 2.3 million employees. After the Rana Plaza tragedy, France wished to give consumers the ability to check manufacturing conditions for goods sold in France by distributers, manufacturers and producers. Article 93 of the SSE Act, which discusses transparency obligations with respect to the social conditions of a product’s manufacture, entered into force on 1 August 2014.
Article 13 of the SSE Act seeks to ensure that more public purchases are made from socially responsible businesses (many of which are part of the SSE) and that better use is made of social clauses in procurement contracts. It states that, if a maximum annual procurement amount is exceeded, contracting authorities must adopt schemes promoting socially responsible purchases. This article came into force on 1 February 2015 (Decree of 28 January 2015).
- Article 11 of the SSE Act creates a “socially useful solidarity-based enterprise” accreditation which is awarded to businesses with high social standards so they can attract private financing from socially minded investors, particularly solidarity-based employee savings. This article came into force in the first quarter of 2015 after the Conseil d’Etat (Council of State) issued a decree to this effect.
An act on a duty of vigilance for parent companies and outsourcing companies was promulgated on 27 March 2017. Under this act, companies that employ more than 5,000 employees in France, or more than 10,000 employees in France and abroad, must draft and implement due diligence plans. Plans must set out reasonable measures to identify risks and prevent serious abuse of human rights, fundamental freedoms, health, personal safety and the environment, arising as a result of the operations of the company, of companies under its direct or indirect control, or of subcontractors and suppliers with which it has well-established commercial relationships.

13. The Role of Public Agencies

The Agence Française de Développement (AFD)

… Also pursuant to Article 8, the AFD must incorporate social responsibility into its governance system and operations. It must implement measures to evaluate and control the environmental and social risks of the operations it finances, and to promote the financial transparency of businesses involved in these operations, country by country. Its annual report must mention the ways in which it addresses social responsibility requirements …

15. Economic Sectors and Human Rights

The Extractive Sector [page 34]

… France’s actions in [the extractive sector] focus on multilateral and European initiatives reinforcing the legal and regulatory framework for businesses working in the extractive sector, especially in regions with fragile governance systems …

II – Businesses’ Responsibility to Respect Human Rights

6. Reporting [page 44]

Businesses must monitor the human rights measures they adopt and disclose on theirinitiatives in this field.

Under European Directive 2014/95/EU, human rights will become one of the pillars of CSR. This position will be reflected in French reporting requirements when the directive is transposed into national law. It should be noted that human rights reporting is already a requirement under the regulatory provisions of the Commercial Code. Decree 2012-557 of 24 April 2012 on the social and environmental transparency obligations of businesses places human rights on an equal footing with other issues.

Actions Underway:

France is continuing to implement monitoring indicators and communicate with external stakeholders on business commitments and enforcement under the UN Guiding Principles on Business and Human Rights.

Actions to be Implemented:

Implement provisions to help transpose the European Directive on non-financial reporting into French law.

Objective 25.1.1: Ensure assessment of regulative influence on the market.

Objective indicator: Existence of document assessing influence on market of concrete area before introducing every concrete regulation.

Activities:

Creating working group conducting analysis about the influence of regulations on market.
Defining conditions and criteria of expert participation in working groups.
Conducting expert activities with the side initiating communication regulatory.

Responsible agency: Government of Georgia, The office of the Business Ombudsman of Georgia.

Partnership agency: Business sector; Global compact Georgia; CIDA.

Objective 25.3.1: Analyse existing situation regarding direct and indirect state involvement and define suggestions for creating effective mechanisms with the aim to prevent discrimination.

Objective indicator: Analytical document of existing situation through experts’ involvement.

Activities:

Planning actions of sharing recommendations and implementing them.
Implementing agreed action plan.

Responsible agency: Administration of the Government of Georgia.

No partnership agency.

Objective 25.6.1: Elaborate appropriate amendment package concerning corporate social responsibility, including women strengthening principles.

Objective indicator: Elaborated legislative amendments package.

Activity: Researching mechanism of probable promotion concerning corporate social responsibility, including the principle of strengthening women.

Responsible agency: Ministry of Economy and sustainable development of Georgia in cooperation with parliament.

No partnership agency.

1.1 Basic rules of economic policy

Bi- and multilateral economic relations

Measures [page 18]

“The EU Special Incentive Arrangement for Sustainable Development and Good Governance (‘GSP+’) can be used as a format for promoting the observance and application of human rights standards by governments of developing countries. In the forthcoming review process of 2018, the Federal Government will press for further strengthening of that instrument.”

Development policy

The current situation [page 19]

“the Federal Government has undertaken to implement the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests and has initiated a number of development cooperation projects to assist governments of developing countries in enforcing the land-tenure rights of marginalised groups, in strengthening stakeholders in civil society and in raising awareness among companies, for example those investing in agriculture, and gaining their support for the application of these guidelines with a view to preventing illegal actions such as land-grabbing.”

Enterprises in public ownership [page 26-27]

The current situation

“there is a federal regulatory instrument known as the Public Corporate Governance Code of the Federation (PCGK Bund), comprising recommendations and suggestions for good corporate governance and addressed to enterprises in which the Federal Government holds a majority stake. The federal administration of shareholdings is organised on a decentralised basis and is the task of whichever federal ministry is responsible for the company’s area of activity. Section 1.4 of the Public Corporate Governance Code states that the federal ministry responsible for the shareholding should ensure that enterprises acknowledge and comply with the Code and embody it in their corporate rules. The Code is part of the Principles of Good Corporate Governance and Management of Federal Holdings, which were adopted by the Federal Government and published by the Federal Ministry of Finance in its role as the lead body in this field. They form the foundations for responsible management of federal stakes in enterprises and provide for standardised performance of this task by the various federal ministries. Several federal states and municipalities have separate management codes for their own holdings.”

Measures

“The Federal Government, in cooperation with the Council for Sustainable Development, will expand the training courses of the federal holding management bodies to include sustainability matters and so focus its attention on responsibility for human rights in the enterprises in which it holds a direct majority share. The scope of the training curriculum of the holding management bodies shall be inserted as part of the next revision into the Public Corporate Governance Code of the Federation. At the annual meeting of the bodies managing federal and state holdings, the states shall be urged to follow this federal practice.”

Annex 1 – List of additional and ongoing actions to be carried out across Government

Development Cooperation to [page 21]

“21. Support developing countries to improve their business and investment environment and continue to promote transparent, accountable and effective governance systems, rule of law, and equitable and inclusive economic growth, including transforming economic opportunities and outcomes for women and girls.”

Section 3: Actions

I. Key commitments to ensure policy coherence across Government [page 16]

“Ensure coherence between the National Plan on Corporate social Responsibility and the National Plan on Business and Human Rights, including by promoting cooperation between the Business and Human Rights implementation Working Group and the Corporate Social Responsibility Stakeholder Forum”

Department of Foreign affairs and trade, enterprise and innovation

The Irish NAP also provides information on due diligence (see the section on Due Diligence), and corruption (see the section on Corruption)

IV. Italian ongoing activities and future commitments

Legality Rating

“The legality rating is an indicator of compliance with high standards of legality by companies. It is a tool introduced into Italian law by Decree Law No. 29 of 24 March 2012 in order to promote principles of ethical behavior in the business environment through the assignment of a recognition, measured in “stars”. These are indicative of the respect for legality by companies that have requested it and, more generally, the degree of attention paid to the proper management of their business. The rating is linked by law to advantages in the granting of public loans and facilities for access to bank credit.” (p. 16)

Responsible Conduct and Due Diligence in the framework of the United Nations, OECD and European Union

“Finally, in its Resolution of 10 March 2021, the European Parliament addressed to the Commission recommendations concerning Due Diligence and Corporate Responsibility for a future directive, which would contribute to preventing and mitigating potential or actual negative impacts of business action on human rights, the environment and good governance.” (p. 44)

Chapter 2. Action Plan

2. Areas of the NAP

(3) Measures of the Government Promoting Corporate Responsibility to Respect Human Rights

A. Measures Related to Domestic and Global Supply Chains and Promotion of Human Rights Due Diligence Based on the UNGPs

(Existing framework/Measures taken）

Japan’s Stewardship Code and Corporate Governance Code refer to grasping the status of investee companies and corporate information disclosure to promote sustainability initiatives, including elements of ESG issues. In addition, the Stewardship Code, which was revised again in March 2020 also includes reference to consideration on sustainability when holding dialogue between institutional investors and investee companies. Furthermore, the Guidance for Collaborative Value Creation was published as a guideline for dialogue and disclosure on voluntary and proactive initiatives of companies on non-financial information, including ESG factors.

Objective 1: ensuring State’s duty to protect, defend and respect human rights

A. Legislative measures [page 1]

2. “Reforming legal regulation regarding administrative liability. The aim is to regulate individual administrative liability in the Republic of Lithuania, to separate it from criminal liability, ensuring the main features of the administrative liability: simple fast-track process, preference to non-repressive impact measures, and their adequacy to the committed offence, thus increasing effectiveness of these measures.

The measure is carried out with a view to improving the Draft Code of Administrative Offenses of the Republic of Lithuania, submitted for deliberation to the Seimas of the Republic of Lithuania on 7 June 2012.”

Objective 2: promoting corporate responsibility and respect in the field of business and human rights

A. Implemented and on-going measures for the development of CSR in Lithuania [page 6]

3. “The application of CRS principles to the state-owned enterprises … It was foreseen that state-owned enterprises (hereinafter referred to as the SOE) operating under the principles of good governance may act as examples of socially responsible business. To this end, since 2010, actions were taken to restructure SOEs with a particular focus on corporate transparency and social responsibility.”

Principle 2

Respect for human rights in the business sector is also required by the laws governing corporate liability for damages, ownership relations, consumer protection, the fight against corruption, and privacy protection. (pg. 10)

Principle 3(d) – Non-financial reporting

Slovenia has adopted a new legal regulation aimed at increasing the transparency of certain companies and at improving the adequacy, convergence and comparability of non-financial information, increasing the transparency and consequently the diversity in their administrative, management and supervisory bodies, increasing corporate responsibility and efficiency and thereby the effectiveness of the single market, and at improving corporate management. (pg. 21)

[T]o create a transparent, effective and clear management system which fosters the trust of investors, employees and the general public in the corporate management system, Slovenia has extended the list of companies which are required to include non-financial statements in their annual reports. (pg. 21)

Principle 5 – Oversight

The Slovenian development cooperation is aimed at enhancing human rights in developing countries, whereby good governance and strengthening the rule of law, including respect for human rights and equal opportunities, are classified as horizontal or multi-sectoral fields of activity. (pg. 25)

Principle 10 – Basic Principles

Slovenian representatives participate on the board of directors, Slovenia will continue to cooperate actively in accordance with the EBRD’s fundamental principles relating to respect for human rights. (pg. 33)

Annex – Human Rights Due Diligence in Practice

Human rights are a significant element of corporate social responsibility and as such have to be incorporated into risk management and management reviews. (pg. 46)

C. Current Status

1. Domestic Status [page 3]

Increased discussion of corporate social responsibility as a result of human rights issues such as low wages, child labor, poor working environment and forced migration of indigenous people in the management process of multinational corporations.
Following the adoption of the ‘UN Guiding Principles on Business and Human Rights’ in 2011, various follow-up measures are being pursued to realize the guiding principle internationally.
Description of the expiration dates of the comprehensive policy for sustainable management by amending the 「Industrial Development Act」 on December 2017.
* Article 19 (Comprehensive Policies for Sustainable Management)
(1) The Government shall formulate and implement comprehensive policies every 5 year to encourage corporations to promote activities for sustainable management that takes into account economic profitability, environmental soundness, and social responsibility.
According to ‘Operation Rules for National Contact Point (NCP) for Implementing OECD Guidelines for Multinational Enterprises’ enacted in 2001, NCP was established within the Ministry of Trade, Industry and Energy. But considering the fact that it is insufficient to prevent human rights violations of corporations, NCP amends operational rules and strengthens the diversity and professionalism of its members.

…

2. Implementation of the Second NAP [page 4]

Promotion of social responsibility, including respect for human rights in managerial activities.
– Publication of operating casebook of Creating Shared Value Forum and opening of training course for experts of corporate social responsibility and creating shared values.
– Revision of 「Procurement Business Act」 and addition of an article promoting corporate social responsibility on January 2016.
Improvement of OECD Guidelines for Multinational Enterprises National Contact Point (NCP).
– Held meetings and seminars for overseas Korean companies to promote the implementation of OECD Guidelines.
– Operated NCP website (www.ncp.or.kr) and opened English website.
– Diversified the composition of the members as requested in the OECD Guidelines and professionalized the operational procedures.

D. Tasks for the Third NAP

Institutionalization of Human Rights Management

1. Secure corporate responsibility on human rights [page 4]

Express expectations of corporate responsibility on respecting human rights in a way that can be effectively communicated to corporations in order to fulfill their responsibilities in respect of human rights.
– Express expectations of corporate responsibility on respecting human rights through its official website. (declaration)
(1) All corporations within the territory or jurisdiction of Republic of Korea, regardless of its size or location, should implement the corporate responsibility on respecting human rights defined by UN Guiding Principles.
(2) To the extent possible, corporations should pay attention to prevent human rights violations happening at supply chain such as business partners or supplying companies.
(3) Government should provide necessary support and legal, policy, and institutional arrangements for corporations to fulfill their human rights responsibilities.

2. Establish and implement measures for corporate sustainability management [page 5]

Reflect ‘respecting human rights·prohibition on discrimination’ ‘work-life balance’ on the criteria of factual survey on corporate sustainability management and reward assessment.
Include corresponding strategy about making global standard and norms of corporate sustainability management.

II. Antecedent and Context

Human rights are one of the elements that comprise Corporate Social Responsibility along with others such as social elements; environmental elements; also those relating to the balance of work and family life; good governance; and transparency.

Guiding Principle 2

Measure 4

“The self-regulation codes will also be promoted, taking as an example relevant sector experiences, such as the Global Code of Ethics for Tourism of the World Tourism Organization (WTO) or the Code of Conduct for the protection of children and adolescents against sexual exploitation in the Tourism and Travel Industry, as well as the relevant labor conventions of the ILO.”

Measure 7

“The Government will establish networks among Spanish companies or that the ones that operate in Spain for the promotion of: measures, procedures or internal systems that can effectively contribute to the prevention and/or mitigation of the negative consequences of business activities on human rights; as well as for the dissemination of good practices aimed to avoid these consequences, or to influence their avoidance, reduction or remedy. The establishment of procedures for internal assessment and determination of action will be promoted in a manner that avoids other negative consequences on human rights.”

Measure 8

“The Monitoring Commission will design and submit to the Government the adoption of an incentive system that includes both large companies and Small and Medium Enterprises (SMEs) that carry out policies in the field of human rights. These incentives may be economic, commercial, visibility and image, or other nature, to encourage companies to have policies and reliably certify that they have implemented adequate procedures at a global level according to their size and circumstances, namely:

A public commitment to assume its responsibility to respect human rights in accordance with the provisions of the Principle no. 16;

A process of due diligence aligned with the sectorial guides regarding the OECD (due diligence guidance), and based on the dialogue with stakeholders that allows identification, prevention, mitigation, and accountability of how they address the impact of their own activities and those that are directly related to their business relationships in accordance with the provisions of Principles no. 17 to no. 21;

Some processes that allow to remedy all the negative consequences on human rights that have caused or contributed to provoke according to what is established in Principles no. 22, no.29, no. 30, no. 31.”

Guiding Principle 3

Measure 10

In order to increase transparency, and the confidence of consumers and investors on Spanish companies, the Government will compile the reports that companies write voluntarily, in accordance with the Spanish Strategy for Corporate Social Responsibility, and the Article 39 of the Sustainable Economy Law. It will be encouraged that these take into account the impact of their activities on human rights, including the value chain, introducing a specific chapter for that purpose. Likewise, and in relation to the reports and reports mentioned in the article 35 2 a) of the Sustainable Economy Law, which binds state business corporations, and public business entities attached to the General State Administration, it will be promoted the inclusion of a section on human rights. In addition, the transposition of Directive 2014/95 / EU on disclosure of non-financial information and information about diversity by certain large companies and certain groups will be carried out.

Guiding Principle 28

Measure 1

“The Government will promote the development of practical guides and compile good practices on the establishment of grievance mechanisms managed by companies themselves that respect the criteria identified in Guiding Principle 31.”

Guiding Principle 30

Measure 1

“The Government will support the development of effective mechanisms for access to remedy in the collaborative mechanisms it participates in in accordance with the criteria identified in Guiding Principle 31.”

Measure 2

“The Government will publish the recommendations that are appropriate for the companies to establish or participate in the effective operational level grievance mechanisms available to the individuals affected by their negative consequences.”

The three pillars of the UN Guiding Principles on Business and Human Rights [page 6]

“A clear Swedish profile in this area can contribute to strengthening Sweden as a brand. The Guiding Principles are also fundamental to the corporate governance of state-owned enterprises.”

1 The State duty to protect human rights [page 11]

Criminal law provisions to protect human rights

“Sweden has a number of criminal law provisions for the protection of human rights regardless of the context in which an offence is committed, including in the business context. Through these criminal provisions Sweden also fulfils its international commitments in relevant respects. Examples include: …

Corporate fines entail liability for companies, among others. Although only natural persons can be convicted of a crime, corporate fines may be imposed on a business operator (e.g. a legal entity) for crimes committed in the exercise of business activities. (Chapter 36, Penal Code).”

Annex: Measures taken [page 23-24]

The State as owner

“According to the government state ownership policy, state-owned companies are expected to set a good example, which means that they must seek to comply with international guidelines such as the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises. They must also be transparent and report in accordance with the Global Reporting Initiative (GRI). State-owned companies must also identify areas of CSR that are relevant to their business strategy and the board of directors must set strategic sustainability targets. The ownership policy applies in companies where the State is the majority owner; in other companies, where the State is part-owner, the State seeks to ensure that the ownership policy is followed, in dialogue with other owners.
The Government has held seminars for the chairs of boards and managing directors of all state-owned companies on the Government’s expectations regarding the companies’ application of the UN Guiding Principles on Business and Human Rights. A study was carried out in 2013 on the international guidelines from the UN and the OECD, aimed at facilitating companies’ application of the state ownership policy. …
A business analysis tool that sheds light on relevant areas of CSR, including human rights, has been developed for state-owned companies by the Government Offices corporate management organisation. The analysis increases the owner’s awareness of the companies’ risks and opportunities and how these can be managed. The result of the analysis is integrated in corporate governance and taken into account in the Government’s regular dialogue with the company, in monitoring the company’s development, and in the recruitment and nomination of board members.
Like other state-owned companies, Swedfund International AB (Swedfund) and the Swedish Export Credit Corporation (SEK) are required to comply with the government state ownership policy for CSR, as described above. Moreover, Swedfund and SEK have social mandates specially adopted by the Riksdag. Swedfund is required to ensure that its investments comply with international standards and CSR principles, within clear and sound corporate structures that do not contribute to tax evasion, money laundering or terrorist financing. SEK is required to take account of conditions such as the environment, corruption, human rights and working conditions in its credit assessments.”

Annex: Measures planned [page 27-29]

Regulations and legislation

“The interim report Implementation of the EU’s new accounting directive (Swedish Government Official Reports 2014:22) proposes enhanced transparency regarding payments made by some companies active in the extractive industry and in the logging of natural forests. The provisions will require companies to publish annual reports on payments made to authorities in the countries in which they operate. The aim is to combat corruption.”
The EU has adopted a Directive amending the Accounting Directive on disclosure of non-financial and diversity information. Corporate disclosure of sustainability and diversity policy (Ministry Publications Series 2014:45) proposes that certain companies prepare a sustainability report providing information on, for example, respect for human rights and anti-corruption activities. It is also proposed that the corporate governance reports of certain listed companies disclose the diversity policy that applies to their board.”

The State as owner

“CSR will continue to be an integral part of the Government’s active corporate governance of state-owned companies. The human rights work undertaken by state-owned companies will be examined in relevant cases in the sustainability analysis and followed up in stakeholder dialogues between representatives of the owner and the companies.”

Corporate action

“The Government’s clear expectation is that companies operating in Sweden or abroad comply with the UN Guiding Principles for Business and Human Rights and other relevant guidelines in this area, and review their due diligence and redress mechanisms. Companies operating in markets where human rights challenges are particularly serious should place special emphasis on work in the area.”