Mandatory human rights due diligence in Brazil

Clara Pacce P Serva[1]

TozziniFreire Advogados, São Paulo

cpserva@tozzinifreire.com.br

Luiz Carlos S Faria Jr[2]

TozziniFreire Advogados, São Paulo

lcfaria@tozzinifreire.com.br

The emergence of the environmental, social, and governance (ESG) agenda over the last two decades may lead some to the misunderstanding that business and human rights (BHR) is a new topic. However, this agenda is already mature, and states and enterprises must now take bolder steps towards a system of integrity with respect to human rights, encompassing social, environment and climate perspectives.

The United Nations has been discussing the relationship between human rights and the activities of transnational corporations (TNCs) since the 1970s through successive initiatives and forums. Between the 1970s and the 1990s, the UN Centre on Transnational Corporations was both created and then later abolished, and an attempt was made to develop a Code of Conduct for Transnational Corporations.

The new millennium saw a proposal to create legally binding standards on corporate accountability, and there were several frustrated attempts at this. Initiatives on voluntary standards had better outcomes; these were spearheaded by the former UN Secretary-General Kofi Annan, and resulted in the Global Compact and the Millennium Development Goals in 2000.

In 2005, the Secretary-General appointed Professor John Ruggie as his Special Representative on Human Rights, Transnational Corporations and Other Businesses, which resulted in the approval of the UN Guiding Principles on Business and Human Rights (UNGPs) in 2011, the current authoritative framework on the subject.

Constant pressure from civil society, together with the institutional advances generated by the UNGPs and the Global Compact, have pushed the international agenda towards an international binding instrument, which is currently underway. The resulting scenario allows the emergence of national and international norms which establish obligations for companies to respect human rights and to perform due diligence.

The concept of human rights due diligence is often confused with audits or conducting suppliers’ background checks. Refined by the UN Working Group on Business and Human Rights and the Organisation for Economic Co-operation and Development (OECD) since 2011, human rights due diligence has become one of the main tools for companies to incorporate their responsibility to respect human rights, as it requires them to build what we call an ‘integrity system’ that encompasses the risk analysis of actual and potential adverse impacts on human rights arising from their activities, considering the entire supply chain. It requires the creation of mechanisms to prevent, mitigate, monitor and remediate adverse impacts; the reporting and disclosure of results and implemented measures; as well as internal procedures determining the usage of adequate conflict resolutions centred on the potential victims.

Legislation on transparency in the supply chain and against slave labour or mineral extraction in conflict zones has existed since the beginning of the last decade, but it was only in 2017 that the first legislation dedicated to mandatory human rights due diligence was passed. The French Corporate Duty of Vigilance Law[3] has become an important paradigm and drives the debate in several other countries and international forums. In 2021, legislation in Norway[4] and in Germany[5] imposing human rights due diligence obligations were approved, and earlier this year the European Union Directive on Corporate Sustainability Due Diligence[6] was presented as an integral element of the Sustainable Corporate Governance Initiative.

The EU had already been demonstrating its commitment to the sustainable development and climate crisis agenda for several years with the launch of initiatives related to the ESG field, such as the European Green Deal[7] in 2019, in contrast to what is often seen as a timid engagement in the international binding treaty negotiation process at the UN.

The aforementioned proposed European directive is not shielded against criticism but represents a decisive moment in the BHR agenda for its potential impact on the activities and operations of large transnational corporations and their supply chains.

In Latin America there are already some initiatives in the same direction. There are currently (as of April 2022) three National Action Plans (NAPs) on Business and Human Rights in the region, in Chile, Colombia, and Peru; and NAPs in the process of being drawn up in Argentina, Ecuador and Mexico.

There is a progressive incorporation of international standards in the Inter-American Human Rights System. The Inter-American Commission prepared a report in 2019 on the existing regional standards on Business and Human Rights,[8] and the Inter-American Court used the United Nations Guiding Principles on Business and Human Rights as grounds for its decision in the case Miskito Divers (Lemoth Morris et al) v Honduras,[9] issued in 2021.

Normative proposals are emerging in countries in this region to make human rights due diligence mandatory. In Mexico, there is a bill for the creation of a General Law on Corporate Responsibility and Due Diligence, submitted in 2020 as the result of General Recommendation No 37 of the country's National Human Rights Council in the previous year.

In Brazil, Bill of Law 572 was presented in March 2022, aiming to surpass the existing voluntary National Guidelines on Business and Human Rights (Decree No 9.571/2018) and National Guidelines for a Public Policy on Human Rights and Business (Resolution No 5/2020 of the National Human Rights Council).

For over five years there has been a coalition of civil society organisations, social movements, trade unions, and academic centres articulated around the Business and Human Rights agenda in Brazil. Self-named the ‘WG Corporations’, this articulation has been pushing the BHR agenda in the country and making national initiatives and setbacks visible at the UN and in other international forums. This national network, in partnership with four parliamentarians, presented the Bill of Law no. 572 (the ‘Bill’) to the National Congress for the approval of a National Framework on Human Rights and Business. The proposal emphasises the right to integral reparation in accordance with the principle of the centrality of the suffering of the victims.

According to the guidelines of the Inter-American Court of Human Rights, integral reparation has a double dimension: as an obligation of those responsible for human rights violations, and as a fundamental right of the victims. This implies the recognition of those affected, the consequences of the violation and the reparation in practical terms to direct and indirect victims (family members), collective victims (such as indigenous peoples), and potential victims.[10]

The Brazilian Bill proposes repositioning the logic behind the reparation process, to provide victim-centred reparations and to recognise ‘affected communities’ as legal subjects.

Although generally aligned with international trends, the proposal could be improved with the addition of further depth and detail on procedures and mechanisms for monitoring, as well as normative definitions for important concepts that define the obligations of states and companies, and by addressing the lack of reference to other laws and mechanisms existing in national legislation. Two examples are worth highlighting: the proposal intends to attribute new functions to public agencies and institutions that currently do not have material conditions to absorb it; and the project has missed the opportunity to incorporate more detailed provisions regarding the criteria and procedures for companies to comply with the obligation to perform due diligence processes.

That there is scope for improvement does not annul the relevance of the normative efforts, as the Bill plays an important role in advancing the BHR agenda in the country.

The current conjuncture in Latin America and Europe poses the question as to whether this may be a decisive year for the respect of human rights by corporations. We face a turning point toward a possible horizon for corporate action committed to respecting human rights and regulated by voluntarily adopted guidelines and by mandatory national and international legislation.

According to Professor Surya Deva, former member of the UN Working Group on Business and Human Rights, in an interview to the TozziniFreire Advogados podcast[11] earlier this year:

‘Now, in this particular context, we should see the mandatory aspect of due diligence as quite a game changer in my view. That would mean that business can no longer pretend to take human rights responsibilities lightly. They need to take it seriously and there would be multiple pull-and-push factors. These factors could come from litigation, from export and import bans of products and services […], it could also damage the reputation of these companies and, of course, increasingly investors are also waking up to these issues. So, it is not merely about civil society organisations asking for business to respect human rights. […] And that is why it is crucial that business all over the world to wake up to what is happening in Europe and if they don’t wake up then I think this is going to create real challenges in terms of how they make profit.’

The recent discussion about mandatory human rights due diligence in countries around the world could really be a game-changing moment, demanding more and more from business to go beyond the ‘good deed’ – with corporate social responsibility initiatives and philanthropic actions – and to take seriously the commitments to respect human rights, under penalty of considerable financial, legal, and reputational damages.