The Evolution of the Business and Human Rights Legislation in the EU and its Implications for Georgia

Author: Akaki Kukhaleishvili

Business and Human Rights Manager

UN Global Compact Network Georgia

The world generally agrees that human rights are a shared accomplishment. The Universal Declaration of Human Rights and other international human rights instruments show our commitment to these values. The real power of human rights principles lies not just in the existence of legal principles but in finding practical ways to translate aspirations into action. The responsibility to uphold and enforce human rights ultimately falls on mankind. Traditionally, this responsibility has been attributed solely to the states and governments. However, placing this burden exclusively on the state is no longer justifiable. The limitations of state resources and the increasingly significant influence of corporations in a globalized world make this approach both impractical and unfair. 

As we increasingly recognize our shared responsibility, the momentum for justice and fairness grows stronger. It requires both state and non-state actors to get involved, and there has been a significant shift in recent decades. Once viewed primarily through profit generation, businesses are increasingly called upon to consider their impact on people and the planet and take on a more significant role in respecting human rights. Consequently, it has become widely accepted that norms and mechanisms of human rights protection should further evolve and adapt to ensure the continuing effective enjoyment of human rights and accountability for abuses in the business context.

UN Guiding Principles on Business and Human Rights

In response to contemporary challenges, the UN introduced the ‘Guiding Principles on Business and Human Rights’ in 2011. These globally recognized standards were unanimously adopted by the Human Rights Council. The Guiding Principles define concrete, actionable steps for governments and companies to meet their respective duties and responsibilities to prevent human rights abuses in company operations and provide remedies if such abuses occur. They are built on three “pillars”:

• States have a duty to protect rights-holders from abuses by businesses within their territory or jurisdiction.
• All businesses bear a responsibility to respect human rights.
• Victims can access effective remedies for business-related human rights abuses.

While these pillars draw from existing international human rights law, including European regional instruments such as the ECHR and the European Social Charter (ESC), the unique value of the UNGPs lies in clearly delineating their implications for the duties and responsibilities of governments and the private sector. This is particularly important in addressing contemporary threats to human rights posed by business actors.[1]

Despite being a soft law instrument without automatic legal implications, the UNGPs have garnered broad support from governments, businesses, civil society, and international organizations, including the Council of Europe. They have significantly influenced various frameworks and initiatives related to corporate responsibility, including human rights due diligence legislation movements in Europe.

Movements for mandatory human rights & environmental due diligence in Europe

The landscape of human rights due diligence legislation in Europe has undergone notable advancements following the adoption of the UNGPs in recent years. Several countries have taken proactive measures to address corporate accountability and responsibility. France, Germany, Norway, and Switzerland have all enacted such legislation, though with significant variations in scope, due diligence standards, and enforcement mechanisms[2].

In 2017, France became the first country to enact a law requiring large companies to conduct human rights and environmental due diligence (HREDD) and publish an annual Vigilance Plan. The Vigilance Plan requires your company to detail measures taken to identify and prevent human rights and environmental violations related to its activities, subsidiaries, and suppliers. This includes risk mapping, mitigation steps, compliance assessment procedures, and collaboration with relevant unions. Non-compliance can lead to complaints and fines.[3]

On June 10, 2021, Germany adopted a Law on Supply Chain Due Diligence, while the Norwegian parliament passed a Transparency Act on the same day, mandating human rights and decent work due diligence. Despite similar aims, the German and Norwegian laws differ significantly in substance and scope regarding due diligence requirements. Adhering to international standards remains crucial for ensuring compliance across diverse jurisdictions.[4] Switzerland’s rejection of the Responsible Business Initiative led to a reporting-centred counterproposal effective in 2022. Large Swiss companies now must report on various risks, including environmental, social, labour, and human rights concerns, with stricter obligations for those involved in child labour or conflict minerals[5]. 

Overall, these legislative efforts underscore a growing recognition of the need for businesses to proactively address human rights risks and demonstrate accountability throughout their operations.

What is the process at the EU level?

On March 15, 2024, the EU achieved a significant breakthrough by adopting the Directive on Corporate Sustainability Due Diligence (CSDDD). This directive establishes human rights and environmental obligations for large companies across their global operations, making it the first region-wide due diligence legislation. However, it reflects a compromise among EU member states, under close scrutiny from civil society and businesses.

Initially proposed by the EU Parliament in March 2021, the directive aimed to cover all large companies, publicly listed firms, and high-risk SMEs with strict liability for harm. However, the European Commission’s 2022 proposal narrowed its scope to very large companies and others in high-risk sectors, addressing concerns about company size, financial sector involvement, climate obligations, and liability conditions.

The CSDDD introduces two enforcement mechanisms. Member states are required to appoint a public supervisory authority to ensure compliance. These authorities can investigate based on concerns, issue injunctions, adopt interim measures, and impose penalties, including fines of up to 5% of a company’s global net turnover.[6]

EU Directive on Corporate Sustainability Due Diligence: What is it and how might it affect Georgia?

There’s been a significant global and EU-wide effort to ensure that businesses uphold human rights. This is evident through initiatives like the UN Guiding Principles and EU Directives, which hold companies accountable. The EU Directive on Corporate Sustainability Due Diligence (CSDDD) is particularly important, as it will have substantial implications beyond EU borders, especially for countries like Georgia.

Georgian companies must prepare for increased corporate sustainability and transparency demands as they engage with European partners or aim to access the EU market. The CSDDD is expected to integrate policy and operational changes along global value chains for Georgian firms and foreign entities operating within the country.

As Georgia progresses towards potential EU accession, aligning with EU standards becomes imperative. The CSDDD’s emphasis on EU values and the universality of human rights underscores its influence beyond EU boundaries. This may necessitate legislative adjustments in Georgia, aligning its laws with EU directives to ensure competitiveness and create a level playing field for all businesses, regardless of location or affiliation. Furthermore, EU investors and partners will likely examine companies to ensure compliance with the sustainability standards outlined in the CSDDD. Therefore, Georgian businesses may need to rethink their internal procedures and strategies in the sustainability realm to meet European stakeholders’ expectations and requirements effectively.

[1] Council of Europe, Business and human rights – A handbook for legal practitioners, Claire Methven O’Brien (November 2018), Available at: https://shorturl.at/9s5Bx [last seen:31.05.24].

[2] Bueno N, Bernaz N, Holly G, Martin-Ortega O. The EU Directive on Corporate Sustainability Due Diligence (CSDDD): The Final Political Compromise. Business and Human Rights Journal. Published online 2024:1-7. doi:10.1017/bhj.2024.10, available at: https://shorturl.at/oL2DI [last seen:31.05.24].

[3]Worldfavor (WF), All You Need to Know About France’s Corporate Duty of Vigilance Law, Available at: https://shorturl.at/MPLAh [last seen:31.05.24].  

[4] KRAJEWSKI M, TONSTAD K, WOHLTMANN F. Mandatory Human Rights Due Diligence in Germany and Norway: Stepping, or Striding, in the Same Direction? Business and Human Rights Journal. 2021;6(3):550-558. doi:10.1017/bhj.2021.43, Available at: https://shorturl.at/oi4Sq [last seen:31.05.24].   

[5] Worldfavor (WF), What is the Netherlands’ HREDD law? Available at: https://rb.gy/g74svo [last seen:31.05.24].   

[6] Corporate Sustainability Due Diligence Directive. (2024). Articles 24-27.