Corporate (Ir)Responsibility Made in Germany - Part III: The Referentenentwurf: A Compromise à la Merkel - By Mercedes Hering

Editor’s Note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. In September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.

 

I. What happened so far

It took Ministers Heil (Labour, SPD), Müller (Development, CSU) and Altmaier (Economy, CDU) 18 months to agree on a draft for the Lieferkettengesetz (Supply Chain Law) to be presented soon to the German Bundestag for legislative debates. For an overview of the different proposals put forward by the Ministries and NGOs, and political discussion surrounding them, please check my previous blogs, which you can find here and here. You can also watch the panel discussion on the Lieferkettengesetz that we organized in November 2020 with Cornelia Heydenreich (Germanwatch), Miriam Saage-Maaß (European Centre for Constitutional and Human Rights), and Christopher Patz (European Coalition for Corporate Justice).

On 15 February 2021 the government’s “final” draft was published – the so-called “Referentenentwurf”. This initial agreement was met with relief from all parties involved, as it was preceded by a long-lasting deadlock. At first, Minister for Economic Affairs, Peter Altmaier, blocked Cabinet meetings so that the government position paper (“Eckpunkteplan”) published by Ministers Heil and Müller could not be discussed. Afterwards, Altmaier again blocked a compromise proposal brought forward by Müller and Heil in Cabinet. The matter went up to the “Koalitionsausschuss”, the committee that negotiates if members of the coalition parties cannot reach an agreement. This committee failed to come to an agreement. The issue of civil liability and the scope of application were the most controversial points. Thereafter, the matter reached the “Chefetage”, Angela Merkel. She sat down with the three ministers involved and Olaf Scholz, Vice-Chancellor and Minister for Finance (SPD), and tried to mediate between the different positions. The group met twice before, eventually, an agreement was reached resulting in the Referentenentwurf of 15 February 2021. The agreement did not last for long. Peter Altmaier withdrew (again) his support for the draft just after it had been circulated.

On 28 March 2021, another “final” draft was published. Those two drafts differ in subtle but impactful aspects. This blog post was originally based on the first draft; its text has been amended to integrate the changes introduced in the second draft. The second Referentenentwurf is the one signed off by Cabinet on 3 March 2021. In this blog, I will first summarize the main points of the draft(s), and afterwards review the various critical points raised against it.More...


Corporate (ir)responsability made in Germany – Event report - By Mercedes Hering

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project

On 27 November 2020, the T.M.C Asser Institute hosted an online roundtable discussion on the German Supply Chain Law (Lieferkettengesetz). The full recording of the event can be seen here:

The three panelists, Cornelia Heydenreich from Germanwatch, Miriam Saage-Maaß from the ECCHR and Christopher Patz from the ECCJ reflected on the political framework surrounding the debate, current drafts, and Germany’s role in the European discussion on binding due diligence legislation.

I. The pathway to a Lieferkettengesetz 

As Heydenreich pointed out, civil society’s role in the struggle for a Lieferkettengesetz can barely be overstated. When in 2011, the UNGPs were passed, Germany was in no rush to implement binding due diligence legislation. Instead, the German legislators waited for their European counterparts to come forward with an action plan. It was in 2013 when a new – more left-leaning – government first voiced the idea that a national action plan should be drawn up. In 2015, consultations began. The consultation process was a dialogue, the drafting process itself was not. Even though the monitoring methodology fell short of civil society’s expectations, the result of the monitoring process was shocking nonetheless: Only 13-17% of companies complied with the National Action Plan. 

It became clear that the government needed to implement binding due diligence regulation. It also became clear that the drafting process would have to begin as soon as possible for a law to be passed before the general election in September 2021. 

II. Current drafts

Saage-Maaß turned to the different proposals for a Lieferkettengesetz: The government’s position paper from the Ministry of Development and the Ministry of Labour as well as civil society’s model law. Contrary to what the government currently envisages, Saage-Maaß emphasized the need to include small or medium-sized companies that operate in high-risk areas. 

The role of private international law must not be neglected. The question turns on whether or not the whole of the Lieferkettengesetz will be an overriding mandatory provision, or merely the due diligence obligation itself. 

Civil society organizations are particularly critical of so-called “safe harbor” provisions. These safe harbor provisions allow companies to be exempted from liability if they are part of certain multi-stakeholder initiatives (MSIs). All panelists agree, however, that as of today, no MSI meets the standards set out by the OECD. In its report, the Institute for Multi-Stakeholder Initiative Integrity (MSI Integrity) comes to the same conclusion: “MSIs are not effective tools for holding corporations accountable for abuses, protecting rights holders against human rights violations, or providing survivors and victims with access to remedy.” 

For an overview of other aspects of the legislative proposals, such as the burden of proof, please see the foregoing blog series “Corporate (Ir)responsibility Made in Germany”

III. EU-wide discussion

In April 2020, European Commissioner for Justice, Didier Reynders, announced that the Commission commits to legislation on mandatory due diligence. Patz emphasizes the positive impact Germany’s Council Presidency, beginning July 2020, has had on the endeavor. Germany’s Council Presidency stands out because of its strong affirmative call for a supply chain law and for reforms of directors’ duties. At the beginning of December, the Council published its Conclusion on Human Rights and Decent Work in Global Supply Chains, where it calls on the European Commission to launch an EU Action Plan by 2021 (n. 45) and to table a proposal for an EU legal framework on corporate due diligence (n. 46). According to Patz, this constitutes a strong political signal. This strong call is reinforced by three Committees, the Human Rights CommitteeDevelopment Committee, and the Legal Affairs Committee, that also spoke out in favor of civil liability. 

Another strong political signal was sent by the EU Fundamental Rights Agency, which in its report “Business and Human Rights – Access to Remedy” called for significant changes pertaining to the reversal of the burden of proof, class actions and procedural mechanisms in order to facilitate access to justice for those affected. 

The work of German MEP Anna Cavazzini (Greens) should be highlighted, too. In the European Parliament she pushed for an additional enforcement mechanism in the form of trade restrictions. Products that benefitted from human rights abuses along the supply chain should not have access to the European single market. In order for the trade restrictions to be lifted, remediation ought to be paid. This initiative counters criticism from civil society that points out that due diligence laws often have the effect of targeting whole sectors of one particular economy. Adopting additional trade restrictions allows for a much more targeted approach. 

In her report on an anti-deforestation legal framework, Delara Burkhardt(S&D) also advocated for civil liability. Companies that exercise control over companies should be held liable, even where it was not directly them, but the other company that committed an unlawful act. In order for this liability mechanism to be effective, Burkhardt advocates for a presumption in favor of control. This helps to balance the information deficit litigants suffer because they do not have access to internal corporate documentation. 

IV. Conclusion 

At the beginning of the roundtable discussion, Duval pointed out that Germany’s stance on any binding due diligence regulation will be decisive. Germany’s role in the EU-wide discussion can hardly be overstated. Germany amounts to 30% of all EU exports, and to 20% of all imports. Factoring in France’s loi de vigilance, both countries together could put enough pressure on the European legislators to push for an EU-wide mandatory due diligence regulation. 

Germany is as close as it has ever been to adopting a Lieferkettengesetz. Yet, the process has come to a halt. The government position paper should have been discussed in the Cabinet at the end of last year for the law to be adopted in 2021. All ministers have to agree, afterwards the proposition will go to Parliament. Heydenreich said that the law will have to be adopted in May, or June the latest; Parliamentary session ends in July. 

At least Germany’s involvement in the EU-wide debate looks promising. Germany’s Council Presidency as well as individual German MEPs have had a tremendous impact on the adoption of an EU-wide due diligence regulation.

New Event! Corporate (ir)responsibility made in Germany - 27 November - 3pm (CET)

On 27 November, we will host a digital discussion on Germany’s approach to corporate (ir)responsibility for human rights violations and environmental harms in the supply chains of German businesses. This event aims to analyse the evolution of the business and human rights policy discussion in Germany and its influence on the wider European debates on mandatory human rights due diligence EU legislation. Germany is the EU’s economic powerhouse and a trading giant, hence its position on the (ir)responsibility of corporations for human rights risks and harms throughout their supply chains has major consequences for the EU and beyond.

Background

Currently, Germany is debating the adoption of a supply chain law or Lieferkettengesetz. This would mark the end of a long political and legal struggle, which started in 2016, when the German government adopted its National Action Plan (NAP) 2016-2020. Germany’s NAP, like many others, counted on voluntary commitments from businesses to implement human rights and environmental due diligence throughout their supply chains. Unlike other NAP’s, the German one also included a monitoring process, which tracked the progress businesses made during that four-year period.

The final report, which was published in September, showed that only roughly 13-17% of German businesses implemented the voluntary due diligence measures encouraged in the NAP. On the basis of these rather disappointing results, as required by the coalition agreement between the two governing parties, a draft for a Lieferkettengesetz should have been presented to the Cabinet this autumn. However, the Ministry for Economic Affairs and Energy, backed by business lobby groups, strongly opposes any form of civil liability for human rights violations committed within supply chains and managed until now to delay the process.

Our discussion aims to review these developments and highlight the key drivers behind the (slow) movement towards a Lieferkettengesetz. Weaving political insights with legal know-how, our speakers will provide a comprehensive overview (in English) on Germany’s positioning in the business and human rights discussion and its potential influence on the future trajectory of a European legislation.

Speakers:

Moderator:


To register for this event, please click here. You will receive a link before the start of the event.


For enquiries, contact conferencemanager@asser.nl


Winter academy: Due diligence as a master key to responsible business conduct

On 25-29 January 2021, The Asser Institute’s ‘Doing business right’ project is organising an online winter academy on ‘Doing business right: Due diligence as a master key to responsible business conduct’.

This academy brings together students, academics and professionals from around the world and provides a deep dive into the due diligence process as a strategy to achieve responsible business conduct.

Learn more and register here. 

Corporate (Ir)Responsibility Made in Germany - Part II: The Unfinished Saga of the Lieferkettengesetz - By Mercedes Hering

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.

In Part II of this blog series, I intend to outline the different proposals for a Lieferkettengesetz. First, the Initiative Lieferkettengesetz’s model law, secondly the proposal submitted by the Ministry for Labour and Social Affairs and the Ministry for Economic Cooperation and Development, and lastly, I will present the amendments pushed by the business sector and the Ministry for Economic Affairs and Energy.More...

Corporate (Ir)responsibility made in Germany - Part I: The National (In)Action Plan 2016-2020 - By Mercedes Hering

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.


On the international stage, Germany presents itself as a champion for human rights and the environment. However, as this blog will show, when it comes to holding its own corporations accountable for human rights violations and environmental damage occurring within their global supply chains, it shows quite a different face.

In recent years, German companies were linked to various human rights scandals. The German public debate on corporate accountability kickstarted in earnest in September 2012, when a factory in Karachi, Pakistan, burned down killing almost 300 people. The factory had supplied KiK, Germany’s largest discount textile retailer with cheap garments. Then, over a year and a half ago, a dam broke in Brazil, killing 257 people. The dam had previously been certified to be safe by TÜV Süd Brazil, a subsidiary of TÜV Süd, a German company offering auditing and certification services. There are many more examples of incidents in which German companies were involved in human rights violations occurring within their supply chains, yet eight years after the factory in Pakistan burned down, and nine years after the unanimous endorsement of the UN Guiding Principles on Business and Human Rights by the UN Human Rights Council, there is still no binding German legislation imposing some type of liability onto companies that knowingly, or at least negligently, fail to uphold human and labor rights in their supply chain.

This is despite the fact that Germany, the third-largest importer worldwide, with its economic power and negotiation strength on the international stage, could have a dramatic impact on business practices if it were to embrace a stronger approach to business and human rights.  

In the coming two blogs I am to take a critical look at Germany’s recent policies related to corporate accountability and discuss the current developments (and roadblocks) linked to the potential adoption of a Lieferkettengesetz (Supply Chain Law). In this first post, I focus on the effects of the National Action Plan 2016-2020, building on recently released interim reports. In my second blog, I will then turn to the various proposals and political discussions for mandatory due diligence regulation (Lieferkettengesetz).More...


Doing Business Right Blog | The Rise of Human Rights Due Diligence (Part IV): A Deep Dive into Unilever’s Practices - By Shamistha Selvaratnam

The Rise of Human Rights Due Diligence (Part IV): A Deep Dive into Unilever’s Practices - By Shamistha Selvaratnam

Editor’s note: Shamistha Selvaratnam is a LLM Candidate of the Advanced Masters of European and International Human Rights Law at Leiden University in the Netherlands. Prior to commencing the LLM, she worked as a business and human rights solicitor in Australia where she specialised in promoting business respect for human rights through engagement with policy, law and practice.

 

The consumer goods industry is shaped by businesses’ desire to engage with the best-quality suppliers at the cheapest price in order to sell goods at a high-profit margin in the burgeoning consumer markets. Accordingly, they continue to build their value chains in order to provide goods to consumers. The resulting effect of this is that potential human rights risks and impacts are likely to arise in the supply chains of businesses that operate in the industry. Risks that often arise in this sector include forced labour, non-compliance with minimum wage laws and excessive work hours, land grabbing and discrimination. Accordingly, businesses such as Unilever face the challenge of preventing, mitigating and addressing adverse human rights impacts in their supply chains through conducting human rights due diligence (HRDD). As Paul Polman (former CEO of Unilever) has stated: ‘We cannot choose between [economic] growth and sustainability—we must have both.’

This fourth blog of a series of articles dedicated to HRDD is a case study looking at how HRDD has materialised in practice within Unilever’s operations and supply chains. It will be followed by another case study examining another that has also taken steps to operationalise the concept of HRDD. To wrap up the series, a final piece will reflect on the effectiveness of the turn to HRDD to strengthen respect of human rights by businesses.

 

Company Background[1]

Unilever PLC (Unilever) is a consumer goods company that is co-headquartered in the United Kingdom and the Netherlands. It is considered to be one of the world’s leading consumer goods company, making and selling around 400 brands (including Dove, Lipton and Magnum) in the personal care, foods, home care and refreshment categories in more than 190 countries. Unilever is also the second largest advertiser globally and creates content to market its products using digital channels. It employs more than 155,000 people globally and over two billion people use its products daily.[2]

Unilever has a complex global value chain, with its global manufacturing operations spanning across approximately 76,000 suppliers and 300 factories in 69 countries in order to produce products of almost 19 million tonnes. Its products are distributed through a network of more than 400 warehouses to 26 million retail stores, including large supermarkets to small convenience stores and e-commerce channels.[3] 

Unilever endorsed the UNGPs in 2011 and recognises that it has ‘the responsibility to respect human rights and the ability to contribute to positive human rights impacts.’[4] It states that it follows and supports the OECD Guidelines.[5] Unilever acknowledges that there is ‘both a business and a moral case for ensuring that human rights are upheld across [its] operations and [its] value chain.’ As a result, it seeks to identify human rights risks that it may be involved in through its activities or business relationships through conducting HRDD and integrating the responses into its policies and internal systems, acting on the findings, tracking its actions and communicating with its stakeholders.[6] Unilever was the first company to pilot the Shift and Mazars UN Guiding Principles Reporting Framework, which resulted in its Human Rights Report 2015 – Unilever’s disclosure to the Reporting Framework in 2015 is accessible here.

Unilever’s human rights work is overseen by the CEO and supported by the Leadership Executive, including the Chief Supply Chain Officer, which includes the Chief Supply Chain Officer, Chief Legal Officer, Chief Sustainability Officer and the Global Vice President for Social Impact.[7] Unilever’s Procurement Team leads its supply chain efforts. There is no publically available information on the size and resources of this team, its role or where team members are located.

 

Identification and Assessment of Risks

Unilever’s process for identifying its salient human rights risks started with a workshop facilitated by Shift. Unilever considered the range of potential human rights impacts resulting from its activities, and prioritised those likely to be the most severe were they to occur, based on how grave the impacts to the rights-holder could be, how widespread they are and how difficult it would be to remedy any resulting harm.[8] Unilever drew from previous conversations with external bodies, including the Work Economic Forum Human Rights Global Agenda Council, the Global Social Compliance Programme and the UN Global Compact.[9] It also drew from external data sources such as governments, international agencies and risk organisations that assist it to monitor changes in human rights situations in the countries in which it operates, as well as from understanding of the perspectives of affected stakeholders and verification with expert stakeholders of the salient issues identified.[10]

Following this initial risk assessment, Unilever conducts regular human rights impact assessments (HRIAs), 'which include on-site visits by third-party experts who engage and consult rights-holders and other stakeholders.’[11] For example, in 2016 it commissioned a human rights impact assessment of its own operations and value chain in Myanmar in order to identify impacts on 'local right-holders, including workers, their families and other community members'.[12] This assessment 'uncovered regular patterns of discriminatory practices within some suppliers in [its] extended supply chain'. In addition, during the assessment of the harvesting of palm sugar activity, 'children were found to be working alongside their parents as they prepared palm juice, whilst palm sugar tree climbers were using unsafe homemade ladders to pick the fruit'.[13]

Unilever considers that its suppliers play a critical role in helping it source responsibly and sustainably.[14] Accordingly, Unilever developed a Responsible Sourcing Policy, which sets out Unilever’s expectations with regards to the respect for the human rights, including labour rights, of the workers in its extended supply chain. It is based upon 12 fundamental principles that are derived from internationally recognised standards and include treating all workers equally with respect and dignity, paying workers fair wages and ensuring working hours of all workers are reasonable.

Clauses are included in supplier contracts in an effort to ensure that suppliers respect and comply with a set of Mandatory Requirements related to each of the fundamental principles set out in the Responsible Sourcing Policy.[15] For example, with respect to workers being paid fair wages, suppliers are required to ensure that all workers are provided total compensation packages that include wages, overtime pay, benefits and paid leave which either satisfies or exceeds the legal minimum standards or industry standards, whichever is the highest. Guidelines and tips are provided for the implementation of a comprehensive and robust process so suppliers can meet the Mandatory Requirements and move up the ‘continuous ladder of improvement’ and advance to good practice and then finally achieve and maintain best practice with respect to each of the fundamental principles.

Where there are breaches of the Responsible Sourcing Policy, they must be reported to Unilever who will investigate and discuss its findings with the relevant supplier. If remediation is required, the supplier is required to devise and inform Unilever of their Corrective Action Plans (CAPs) and implementation plans and timeline to resolve the breach.

Unilever’s Procurement Code Committee evaluates and makes recommendations where suppliers are not willing to comply or move up the continuous improvement ladder, and it reviews all key incidents raised. Continual non-conformances with no remediation plans result in an escalation to the Global Procurement Code Committee for a decision on terminating the business relationship.[16] No information is publicly available regarding Unilever’s Global Procurement Code Committee.

 

Engaging with new and existing suppliers[17]

Unilever’s audit approach to evaluating suppliers is depicted below.


Source: Unilever 2015 Human Rights Report, p 18

Unilever uses a risk-based approach to evaluate prospective and existing suppliers. Suppliers are required to complete a self-declaration regarding their compliance to the Mandatory Requirements of Unilever’s Responsible Sourcing Policy. Suppliers are then segmented based on a risk assessment using externally available indices of business and human rights risks from expert sources. Country risk is one element of the risk assessment (see below for the outcome of Unilever’s 2018 country risk assessment).

Source: Unilever’s Supply Chain, p 17.

Suppliers in the highest risk segment are required to undergo an independent third-party audit. Raw material or finished goods suppliers are required to undergo an on-site audit, while service suppliers need to undergo a remote desktop audit.

During the course of an on-site audit, all non-conformances are recorded to indicate where a supplier’s site does not align with the Responsible Sourcing Policy Mandatory Requirements. A supplier must provide a time-bound CAP to address and remediate non-conformances, and the auditor must confirm the remediation has effectively addressed the non-conformance in a follow-up audit within a 90-day period for the supplier to be Responsible Sourcing Policy compliant.

Audit frequency can be every 12, 24, or 36 months, and is determined by the number and type of non-conformances found in the previous audit. CAPs must be implemented to address all non-conformances and re verified in a follow-up audit to confirm and verify that the identified issues have been effectively remediated.[18] As at May 2018, of the 44,290 suppliers risk assessed to date, 11,287 were classified as high risk of which 1,667 were identified with issues in the previous three years of which 1,175 had verified CAPs.[19]

More serious non-conformances are classified as ‘Critical Incidents’, with the most severe of these termed ‘Key Incidents’. The presence of Critical Incidents automatically means that the supplier must have a new audit after 12 months. On top of the requirements for Critical Incidents, the auditor must raise a Key Incident to Unilever within a 24-hour period. Key Incidents are escalated to either Director or Vice President level within Unilever to ensure appropriate attention is given. Within seven days a CAP to remedy the issue must be provided by the supplier.

 

Stakeholder Engagement Channels 

Unilever engages with its stakeholders in conducting risk assessments. Stakeholder consultation, dialogue and action are considered to be a critical part of its risk assessment process and have been said to deliver ‘enormous value’, given the localised and culturally specific nature of the issues faced. Unilever has identified its stakeholders to include its employees, trade unions, customers, NGOs, communities, suppliers, workers, business partners, advisory boards (such as the Unilever Sustainable Living Plan Council), governments, intergovernmental organisations and civil society organisations.[20] Unilever’s Advocacy Team play a lead role in engaging with its external stakeholders, which is supported by its External Affairs Team.[21] Unilever also engages with various organisations including the World Business Council for Sustainable Development, Consumer Goods Forum, United Nations Global Compact and the World Economic Forum.

Unilever also captures and addresses complaints through its grievance mechanisms – it notes that ‘Grievance mechanisms play a critical role in opening channels for dialogue, problem solving, investigation and, when required, providing remedy.’[22] With respect to Unilever’s supply chain, one of the fundamental principles of the Responsible Sourcing Policy requires all workers to have access to fair procedures and remedies. Accordingly, suppliers are required to provide grievance mechanisms to their workers. Unilever monitors the number of complaints received from workers by suppliers each year in order to monitor its salient issues and address root causes so that similar grievances will not be raised in the future.[23] Additionally, Unilever also provides a hotline that anyone can access to report on responsible sourcing issues. It has also developed a grievance procedure for workers in its palm oil supply chain. A summary of the complaints raised under this procedure can be found here.

Identified risks 

Through its risk identification and assessment processes, Unilever has identified eight salient human rights issues within its business, which are depicted in the image below.

Source: Unilever Human Rights Report 2015, p 26.

 

During the course of 2017, Unilever identified the following non-conformances in relation to the salient issues:


Source: Human Rights 2018 Supplier Audit Update, p 10.

 

Integrating and Acting

Unilever recognises that it must take steps to identify and address any actual or potential adverse impacts with which it may be involved whether directly or indirectly through its own activities or its business relationships. It seeks to manage the risks identified in the processes discussed above by ‘integrating the responses … into [its] policies and internal systems, acting on the findings, tracking [its] actions, and communicating with [its] stakeholders about how [it] address impacts.’[24] Remediation is perceived as important as addressing human rights impacts.

With respect to each of the eight salient issues set out above, Unilever has taken specific actions and implemented initiatives to prevent and mitigate those issues from arising in its supply chains. For example, with respect to forced labour Unilever has, inter alia:[25]

  • Developed best practice guidelines on the use of migrant labour focusing on the recruitment process, contractual terms and the payment of wages and benefits. These guidelines are not publicly available.
  • Incorporated human trafficking explicitly into its Human Rights Policy Statement, Code of Business Principles and its Respect, Dignity and Fair Treatment Code Policy, and provided associated training to its employees globally.I
  • Incorporated trafficking guidelines into its Responsible Sourcing Policy and Responsible Business Partner Policy.
  • Published a UK Modern Slavery Statement in 2017, 2018 and 2019.
  • Became a founding member of the Leadership Group for Responsible Recruitment, which promotes responsible recruitment practices by business.
  • Provided training to suppliers in Turkey, Dubai, India, Bangkok and Malaysia on eradicating forced labour and the responsible management of migrant labour.

 

Tracking

Unilever recognises that ‘the ability to track and monitor issues is a vital part of measuring progress in remediation and addressing grievances’.[26] The Unilever Board is responsible for compliance, monitoring and reporting and day-to-day responsibility lies with senior management. Unilever’s Corporate Audit Team and external auditors undertake checks on this process. [27]

With respect to tracking its supply chain, Unilever has an ‘Integrated Social Sustainability Dashboard’ (Dashboard), which sets out the ‘number of non-conformances for each fundamental principle of the RSP’.[28] It uses the information available through the Dashboard to identify salient hotspot issues ‘allowing use to prioritise, build guidance produce webinars, and support regions where the need is greatest’.[29] Unilever’s Procurement Team also monitors supplier compliance levels and identifies when intervention is required. It works with suppliers to ensure effective remediation. Unilever also tracks and verifies that CAPs are implemented within the agreed timelines. When very serious Key Incidents occur, Unilever more directly and actively participates in developing CAPs and following up on their implementation.[30]

 

Communicating

Unilever claims that it engages in dialogue with its employees, workers and external stakeholders who are or could potentially be affected by its actions.[31] It particularly focuses on individuals or groups who ‘may be at greater risk of negative human rights impacts due to their vulnerability or marginalisation’.[32]

Unilever primarily uses its Human Rights Report 2015 and Human Rights Progress Reports to communicate its process of identifying and assessing human rights risks and impacts, including its salient human rights issues and the actions taken to prevent and mitigate those issues, as well as integrating, acting and tracking those issues. Unilever also utilises its annual Modern Slavery Statements to communicate with stakeholders. Aside from these reports and statements, Unilever has not clearly stated what other means it utilises to communicate its human rights impacts, policies and approaches. A review of its website contains a webpage detailing its engagement with stakeholders, but fails to recognise exactly how this engagement is carried out.

With respect to grievances raised through the Palm Oil grievance procedure, Unilever publishes a Grievance Tracker online setting out a summary of each grievance raised, the link to Unilever and the latest actions taken to address the allegations. It also publishes responses in relation to specific claims – see for example here and here.

 

The Gaps Between Theory and Practice

Unilever has acknowledged that the challenges faced by the business community with regard to its responsibility to respect human rights are ‘enormous’, particularly given the scale of their operations and supply chain. It states that ‘the risk of systemic human rights abuses exists across our value chain and the value chains … This is a reality we must confront and work together to resolve.’ As a result it has claimed to go beyond respecting human rights to actively promoting them. This approach has positioned it publicly as a leader and a model from which other businesses can draw inspiration.[33]

What is clear from a review of Unilever’ human rights approach is that it recognises its responsibility to respect human rights and has sought to take steps to fulfil this obligation along its entire value chain. While Unilever’s human rights efforts started to gain some momentum in 2010 when it launched its Sustainable Living Plan and began evaluating suppliers, it accelerated its efforts in 2014 by introducing a Human Rights Policy Statement, formalising its commitment to promoting human rights across its operations and supply chains, as well as through designing a five-year human rights strategy.[34] In 2015, it became the first company to produce a standalone human rights report.

Nonetheless, despite Unilever’s extensive human rights work over the past years, including the strengthening of its HRDD processes in its supply chains, it has drawn and continues to draw criticism in relation to the human rights abuses that still exist within its value chain. Key human rights issues that have been placed in the spotlight in various jurisdictions are discussed below. Information regarding alleged human rights violations committed by Unilever pre-dating the UNGPs has been included in the sub-sections below to the extent that such violations have been found to still be present following Unilever’s actions to increase its efforts to respect human rights in 2014.

Vietnam

In 2013, Oxfam (together with Unilever) published a report in which it assessed the labour standards in Unilever’s operations and supply chain in Vietnam and developed measures to guide Unilever (and other companies) to fulfil their social responsibilities. It found that despite Unilever’s commitment to human rights, its tools and processes for due diligence and remediation via grievance mechanisms needed to be strengthened. It stated that Unilever had ‘not been aware that some of its practices were associated with adverse impacts for workers, including wages that were legal but low, excessive working hours, and high levels of contract labour.‘[35] Recommendations were made by Oxfam to Unilever, including policy changes, strengthening its due diligence processes and better aligning business processes with its policies. Unilever made a range of commitments in response to the recommendations.

A progress report was published in 2016, which found that Unilever’s ‘overall commitment to respecting human and labour rights has been strengthened as a result of effective leadership across the business’. Nonetheless, it identified some ‘critical implementation challenges’ that need to be addressed in order to ‘[translate] the company’s policy commitments into practice and achieve positive outcomes for … workers’. Specific issues that were identified were:

  1. There was an ‘unresolved tension’ between the commercial and labour standards imposed on suppliers. Some suppliers did not see the business case for their own businesses in improving their labour standards.
  2. Despite Unilever’s efforts to ensure fair compensation for workers, there was a lack of evidence to show that worker wages had increased beyond the legal minimum level in Vietnam.

Additionally, Oxfam highlighted that multinational more generally need to address the root causes of adverse human rights impacts in their supply chains in order for ‘good labour standards to become universal operating conditions.’ Oxfam made further recommendations to improve the situation for workers in Vietnam.

India

In the 2011 SOMO & ICN Report, SOMO also reported on Indian tea plantations that supply to Unilever. Issues identified included wages being paid with too little benefits, workers being discriminated against in relation to promotions and benefits, the casualization of labour as well as violations of the freedom of association. In 2016, ICN released a follow up report on the situation in India. It found that there had been some improvements in the ‘payment of minimum wages, setting up procedures for safe handling of chemicals and the provision of basic medical care and educational facilities for all temporary and permanent workers’. However, there are still ‘many serious non-compliances’ relating to ‘unequal benefits for casual workers, overtime wages and working hours, advance payments, chemical handling practices and worker representation.’ Unilever responded by stating that it was in dialogue with its suppliers in relation to the issues raised in the follow up report.

Further, in 2015 a BBC investigation found ‘dangerous and degrading living and working conditions’ in tea estates that supply to some of Unilever’s brands (Lipton and PG Tips). Unilever stated that it regarded the issues raised in the investigation as ‘serious’ and had made progress to rectify these issues through ‘working with [its] suppliers to achieve responsible and sustainable practices’.

Turkey

In 2014, an external organisation engaged by Unilever carried out an independent assessment of its tea supply chain in Turkey. The assessment found, inter alia, that workers worked excessive hours during the harvest, various health and safety issues (e.g. lack of protective equipment) and migrant worker accommodation did not meet the required standards in some instances. As a result, Unilever decided to remediate the identified issues at the individual site level and also work with external multi-stakeholder groups to address more systemic challenges. It also started a capacity building initiatives in Turkey that focuses on human rights and held training in 2016 focusing on the key non-compliances found. 

Indonesia

In 2016, Amnesty International published a report in relation to labour exploitation on plantations in Indonesia that provide palm oil to Wilmar, which then supplied to Unilever.[36] It was found that serious human rights violations were occurring on the plantations of Wilmar and its suppliers, including ‘forced labour and child labour, gender discrimination, as well as exploitative and dangerous working practices that put the health of workers at risk’, which resulted from systematic business practices (e.g. low wages and the casualisation of labour). Unilever issued a detailed response to a letter from Amnesty International in relation to the report recognising that ‘more attention needs to be paid to social issues at palm oil plantations and that current processes and policies need to be improved to ensure they address issues effectively and create more transparency.’ It also noted that it was in contact with Wilmar regarding the issues raised and committed to continuing to engage to take steps to ‘close the gaps identified’. Unilever also issues a public statement once the report was released, committing to investigating the grievances raised in the report and addressing them. Unilever has continued to engage with Wilmar and Amnesty International on these issues – see for example here (2016), here (2017) and here (2018).

 

Conclusion 

What is clear from these examples of human rights violations in Unilever’s supply chains is that despite its extensive HRDD process that it seeks to roll out across its value chain, in practice there remain weaknesses and blind spots in this process. For example, Unilever does not have a third party grievance mechanism allowing workers to raise complaints directly to the company (except in relation to palm oil). Instead workers must raise their grievances through supplier provided mechanisms, which can discourage the communication of human rights issues. Also, Unilever assesses prospective suppliers through the use of a self-declaration, which is extremely problematic as it relies on potential culprits to assess their own compliance with the Mandatory Requirements for doing business with Unilever, in some cases without verification by Unilever or an independent third party. Weaknesses such as these make it evident that Unilever has far to go on its journey to respecting human rights within its supply chains, despite being a ‘leader’ in implementing HRDD globally. Unilever needs to look beyond remedying human rights abuses as they are alleged and reported. It must also examine the systemic failings in its HRDD process that result in these human rights risks not being identified and therefore prevented or mitigated.


[1] Unless otherwise statement, the information in this section has been obtained from the Unilever 2018 Annual Report and the Unilever Human Rights Report 2015.

[2] Unilever Modern Slavery & Human Trafficking Statement 2019, p 2.

[3] Unilever Annual Report 2018, p 9.

[4] Unilever Human Rights Policy Statement, p 4.

[5] Ibid, p 1; Unilever, Advancing Human Rights in our Own Operations; Unilever Human Rights Report 2015, p 1.

[6] Unilever Human Rights Policy Statement.

[7] Business and Human Rights Resource Centre Action Platform, Unilever.

[8] Unilever Human Rights Report 2015, p 26.

[9] Unilever Human Rights Progress Report 2017, p 15.

[10] Unilever Human Rights Report 2015, pp 26, 58.

[11] Unilever Human Rights Progress Report 2017, p 71.

[12] Ibid.

[13] Ibid, p 70.

[14] Unilever Human Rights Policy Statement, p 2.

[15] Unilever Modern Slavery & Human Trafficking Statement 2019, p 4.

[16] Unilever Human Rights Report 2015, p 51.

[17] Unilever Human Rights Progress Report 2017, pp 18-19.

[18] Unilever’s Supply Chain, p 17.

[19] Ibid.

[20] Unilever Human Rights Report 2015, pp 22-23; Unilever, Engaging with Stakeholders.

[21] Business and Human Rights Resource Centre Action Platform, Unilever.

[22] Ibid.

[23] Unilever Human Rights Report 2015, p 57.

[24] Unilever Human Rights Policy Statement, p 2.

[25] Unilever Human Rights Report 2015, p 32; Unilever, Sharing Best Practice in Fighting Forced Labour; The Consumer Goods Forum, Business Actions Against Forced Labour, p 36; Unilever Human Rights Progress Report 2017, p 32.

[26] Unilever Human Rights Progress Report 2017, p 72.

[27] Unilever Human Rights Report 2015, p 47.

[28] Unilever Human Rights Progress Report 2017, p 72.

[29] Ibid.

[30] Ibid.

[31] Unilever Human Rights Policy Statement, p 3.

[32] Ibid.

[33] See for example: Corporate Human Rights Benchmark 2017 and 2018; and Know the Chain 2018.

[34] Unilever Human Rights Report 2015, p 3.

[35] Oxfam, Business and Human Rights: An Oxfam Perspective on the UN Guiding Principles, p 7.

[36] While Unilever confirmed that the purchase palm oil from Wilmar, they did not provide details on the refineries they source from. Nonetheless, Amnesty International found it ‘highly likely’ that Unilever sources palm oil from one of the 12 Indonesian refineries it investigated (whether directly or indirectly).

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