What's on the horizon for business and human rights – 2023 themes and 2024 predictions

'S' stays in the spotlight 5 min read

Last year was another busy one for ESG, with several significant developments in the 'S' (social) space, including ones relating to human rights. The focus on businesses' obligations regarding human rights has grown considerably in recent years, and lawmakers, regulators and civil society actors continue to be key drivers of change. In this Insight, we identify some of the central business and human rights themes from 2023, and set out our predictions for the year ahead.

Key takeaways

• Companies may be held accountable for alleged human rights impacts in a range of ways, including judicial and non-judicial avenues. In 2024, this is likely to be propelled by:
  • regulators expanding their focus on different forms of 'S'-related misconduct; and
  • stakeholders elevating their expectations of companies when it comes to addressing human rights matters.
• Human rights obligations will continue to be formalised, through legislation expected to be proposed or passed this year, including in relation to human rights due diligence and prohibitions on the importation and/or use of products connected to forced labour.
• The need for businesses to take a human rights approach when managing and addressing ESG issues will continue to gain momentum. With a growing awareness of the intersectionality of various ESG topics, businesses will, more than ever, need to manage ESG issues holistically – eg a human rights lens needs to be applied to areas such as climate change, biodiversity and generative artificial intelligence. In addition, we expect the existing focus on how businesses engage with the protection and recognition of Indigenous rights will continue.

Theme 1: Holding companies to account in various ways

A key theme from 2023 was companies being held to account for their social commitments, as well as the alleged human rights impacts of their operations, in a range of ways.

Regulators, including the Australian Securities and Investments Commission (ASIC), broadened their enforcement focus to target bluewashing (or misleading conduct as to social matters). Eg ASIC brought enforcement actions  in which it alleged that certain companies had made misleading claims regarding investment screens for social issues such as alcohol and gambling.¹

In addition, civil society groups continued to pursue complaints through non-judicial mechanisms such as the Australian National Contact Point,² as well as international bodies such as the UN Working Group on Human Rights and Transnational Corporations,³ as avenues for seeking to hold companies to account.

There was also noticeable action by activists engaging with companies directly or with their shareholders, including for alleged failures to conduct human rights due diligence consistent with international frameworks and/or their own public commitments, as well as through allegations of bluewashing-type conduct.

Predictions:

In 2024, it is likely that:

• Regulators will continue to expand their focus on bluewashing and other forms of 'S'-related misconduct — in particular, we note that one of ASIC's enduring enforcement priorities for 2024 will be a focus on misconduct impacting First Nations people.⁴
• Companies will be expected to address potential and actual human rights impacts arising from their operations in increasingly sophisticated ways — eg stakeholder engagement and grievance mechanisms are likely to receive considerable attention, as will remedying historical issues in a consistent and principled way.

Stakeholders will seek to hold companies accountable for human rights impacts through more novel and creative methods — whether that be via the way in which claims are formulated (eg alleging that certain conduct caused loss for shareholders); the entities against which claims are brought (including by scrutinising the supply chain to identify companies that may not have caused harm but are alleged to have contributed, or be directly linked, to it); or the avenues through which claims are pursued. 

Theme 2: Codifying businesses' obligations through legislative frameworks

Another key theme from the past year was that of human rights obligations being codified through legislative frameworks. This included new legislation on the international stage requiring companies to conduct human rights due diligence,⁵ adding to the list of similar laws already in place.⁶ While the key legislative reform in this space has, to date, taken place overseas, these reforms are emblematic of the strong focus that lawmakers and regulators in like-minded nations have on securing greater transparency in complex global supply chains.

Predictions:

Looking ahead, we expect:

• The trend in the introduction of mandatory due diligence laws will continue, particularly with multiple legislative proposals still on foot from 2023 — see the EU's proposal for a Corporate Sustainability Due Diligence Directive (the draft text of which captures certain EU and non-EU companies) and similar proposals in the UK⁷ and South Korea,⁸ as well as the recommendation for some form of due diligence to be legislated in Australia, following last year's independent review of the Modern Slavery Act 2019 (Cth).
• Companies' human rights obligations are likely to be expanded beyond simply carrying out due diligence, to imposing direct bans on certain types of conduct — eg the EU's Proposal for a Regulation on Prohibiting Products Made with Forced Labour (which, in its current draft form, proposes to ban products made using forced labour and applies to any company placing products on the EU market, including Australian companies) and Australia's Customs Amendment (Preventing Child Labour) Bill 2023 (Cth) (which proposes to ban the importation of products obtained or produced using child labour).

Theme 3: Intersection of business and human rights and other ESG topics

In 2023, we saw the intersection of human rights and ESG issues gain prominence, with the 'S'  considerations (which human rights form part of), assuming a more notable role within the broader ESG framework.

Key themes in 2023 included:

• Human rights complaints increasingly incorporated environmental and climate change issues, highlighting the intersectionality of human rights impacts with broader ESG issues. Eg environmental NGO ClientEarth lodged a complaint with the UN Special Procedures, alleging that the business activities of Saudi Arabian oil company Saudi Aramco contribute to significant climate change-related human rights impacts.⁹
• Regulatory developments further recognised the interconnectedness of human rights with other ESG issues, through the introduction of laws such as the EU Batteries Regulation 2023, which addresses both the adverse environmental and human rights impacts associated with the entire life-cycle of batteries, from production to disposal.¹⁰
• There was increased pressure on businesses to recognise and protect Indigenous rights, driven by the Australian Government's ambitious agenda.

Predictions

In 2024, we expect that:

• The integration of advanced technologies, such as the use of generative artificial intelligence will continue to streamline business processes; however, this can also pose significant threats to human rights, particularly with regard to privacy, mass surveillance and tracking, and data security. Those businesses who leverage these technological advancements will be under increasing pressure to demonstrate the integration of human rights considerations into their development and operational objectives from the outset, including by assessing how the use of these technologies can impact stakeholders' human rights.
• The need to integrate human rights considerations into businesses' responses to climate change, biodiversity and other environmental issues will shift into sharper focus. This is likely to be driven by a growing awareness of the intersectionality of these issues, including the human rights impacts of climate change, and the connection between biodiversity loss and First Nations rights, given that a significant portion of the world's biodiversity is located in Indigenous peoples' territories. We also expect to see greater scrutiny of how human rights considerations are being built into the development of renewable energy projects to ensure a just transition. Businesses will need to consider these issues holistically as they work towards achieving energy transition targets.
• Indigenous rights will remain a key issue. We expect stakeholder scrutiny of how businesses engage with Indigenous rights to increase, particularly with regard to how businesses conduct cultural mapping; how they consult with Indigenous peoples; how they operationalise obtaining the free, prior and informed consent of Indigenous peoples; and how they approach remediation of any adverse impacts. Companies in a range of sectors – including resources, renewables, and financial institutions – will be in focus.

Actions you can take now

• Companies can get ahead of the above predictions by taking steps that include:
• mapping their human rights obligations under existing laws against current policies and practices, and identifying any gaps which may require uplift — carrying out this analysis in respect of proposed due diligence laws and product import bans (where companies may be within scope of such laws) would also be beneficial;
• evaluating their human rights commitments and public representations against policies and practices, and making corrections to the extent of any inconsistency or bluewashing;
• developing processes for identifying and addressing potential or actual human rights impacts arising from their operations, including in line with international standards such as the UN Guiding Principles on Business and Human Rights; and
• building knowledge and skills from the board down in relation to human rights related issues as a way of enhancing risk monitoring and management throughout the business.