by Rachel Nicolson, Emily Turnbull, Dora Banyasz and Billy Hade · 8 April 2025
Human rights is an increasing area of focus
As the regulatory and civil society scrutiny of companies' management of human rights issues continues to grow, it is important for directors to ensure a company-wide commitment to identifying and addressing human rights issues. Directors should consider the potential adverse effects that the company may have on the human rights of staff, contractors, the communities in which they work and also customers, and question management about the due diligence and governance procedures that have been, or need to be, implemented.
Is the company conducting human rights risk assessments and due diligence?
Directors should ensure the company has human rights risk assessment and due diligence processes. These should facilitate its understanding of its salient human rights risks, as well as potential risks that may arise with specific activities, projects or third parties (see this section of the Guide for more details on modern slavery).
These processes should be adapted to the company's business and be focused on risks to people, not just to the company. It is also critical that directors oversee and test the adequacy of these processes to check that human rights issues are being identified and escalated to the board as appropriate; and that frameworks are in place to assist the company determine how it can cease, prevent or mitigate adverse impacts.
What are the risks to be aware of?
A company may be exposed to a range of risks in relation to human rights harms. This could occur as a result of it causing or contributing to harm, or being directly linked to the harm (these three potential ways of a business being connected to human rights impacts are set out in the UN Guiding Principles on Business and Human Rights (the UNGPs), the authoritative global standard on the human rights responsibilities of business).
The risks that can materialise include shareholder and other stakeholder activism, private litigation and regulatory enforcement. Although companies themselves have been the focus of legal action and stakeholder scrutiny to date, there is increasing focus on directors' accountability and oversight of companies' management of their human rights risks.
What is next for boards?
- The focus on board-level and director responsibility for managing human rights issues is expected to increase, including as a result of legislative trends overseas.
- For instance, on 25 July 2024, the EU's Corporate Sustainability Due Diligence Directive (CSDDD) entered into force. The CSDDD requires EU member states to pass local laws requiring certain companies to consider and address the human rights consequences of their decisions, and to implement human rights due diligence processes.
- Regardless of whether Australia follows the EU's lead on human rights due diligence, these types of developments continue to encourage local activists and regulators to examine more closely directors' management of human rights issues.
- Accordingly, directors of Australian companies should put structures in place for overseeing and interrogating their company's human rights risk assessment and due diligence programs, in addition to monitoring future developments in the legislative landscape.