Nearly eleven years ago now, the collapse of the Rana Plaza factory in Bangladesh killed over 1,100 workers and injured two thousand more. The tragedy sparked a global conversation on workers’ protection in the Global South. More than a decade after the tragedy, workplace safety across global supply chains remains an issue for governments, human rights and labour organizations, as well as multinational corporations. Most recently, the European Parliament and the Council of the European Union put forward a proposal for the “Corporate Sustainability Due Diligence Directive” (CSDDD). In December 2023, the Council and the Parliament reached a provisional deal on the proposal.
The Rana Plaza Tragedy
Manufacturers selling their products in the Global North often deal with independent suppliers in countries from the Global South, where lower wages make for cheaper goods and therefore larger profit margins. As NYU law Professor Mark A. Geistfeld argued in 2019, however, the outsourcing of production to another country continues to enable corporations operating in the Global North to avoid paying the full social cost of producing their goods. In a similar vein, the Sociology Professor and author of award-winning scholarship on global value chains and imperialism, Intan Suwandi, observes that as global supply chain leaders decide to outsource production to a jurisdiction where human rights regulations are not stringent enough, they can maximize their profits by neglecting workers’ safety. This can have disastrous consequences, as the world learnt from horrific accidents such as the Ali Enterprise Factory Fire in 2012 in Pakistan, or the Rana Plaza in 2013.
Rana Plaza was an industrial building manufacturing products for important western businesses, including Adler Modemärkte, Carrefour and Walmart. The tragedy occurred a few months after the German certification company TÜV Rheinland had audited the building, as well as the factories in it, and declared it safe and respecting labour standards. Yet, following the collapse, it was revealed that in addition to the precariousness of the building, the factories in Rana Plaza had engaged in human rights violations such as forced overtime and child labour.
The tragedy provoked profound changes to the safety standards in Bangladesh’s garment factories. The state amended its labour law twice since the collapse to better ensure the safety of factory workers. Upon immense public pressure and the efforts of a tirelessly working coalition of unions, human rights organizations and advocacy groups, global retailers also reacted to the collapse by signing up for two international efforts – the binding Accord on Fire and Building Safety in Bangladesh and the less stringent Alliance for Bangladesh Workers’ Safety – to help Bangladesh’s factories improve their safety measures. The “Accord” itself has spurned a series of further workplace safety agreements in the region, while key advocacy groups highlight the remaining root cause problems. Despite the Accord’s impact and an expanding string of national modern slavery laws, egregious workplace problems such as child labour, forced overtime and poverty wages are still blatant across global supply chains, in Bangladesh and elsewhere in the Global South.
In December 2023, the European Parliament and Council of the European Union reached a provisional deal on the Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD aims to enhance the protection of the environment and human rights by requiring European businesses to identify, prevent and mitigate the adverse impacts of their activities. Although the directive has not yet been formally adopted by the Council and the Parliament, its enactment and implementation are imminent. Once officially approved, the directive will join a series of legislations in Europe and worldwide addressing human rights abuses occurring at various levels of global supply chains.
Business and Human Rights Before the Rana Plaza Tragedy
At the time of the Rana Plaza collapse, there only existed a few legal frameworks addressing the protection of human rights across global supply chains. One of those standards are the United Nations Guiding Principles on Business and Human Rights (UNGP), referred to as “the global authoritative standard on business and human rights”. Among other things, the UNGP introduced and depicted the practice of “human rights due diligence” (HRDD), a method companies are asked to use to address, prevent and remediate human rights abuse. The practice consists of identifying potential human rights violations in a business’s supply chain, take appropriate action, track the effectiveness of those actions, and communicate to stakeholders how a potential abuse is being addressed.
Despite the creation of the UNGP, Professor Genevieve LeBaron, a leading international authority on modern slavery law and global supply chain regulation, has been emphasizing the persistence of human rights abuse across supply chains. In her 2020 book Combatting Modern Slavery: Why Labour Governance is Failing and What We Can Do About It, Professor LeBaron argued that if those international measures were successful, the Rana Plaza would never have collapsed. The tragedy sheds light on the ineffectiveness of labour governance systems aiming to safeguard labour standards in global supply chains, and international soft law measures are not an exception. According to Vigeo Eiris, an ESG assessment agency, soft law has little to no impact on corporations, who are failing to meet the minimum requirements of international standards. The collapse of Rana Plaza made it unambiguous that legally binding regulations were necessary to eliminate human rights violations across supply chains.
National Human Rights Due Diligence Legislations
Following the Ali Enterprise Fire and Rana Plaza collapse, different jurisdictions around the world started adopting laws to minimize the risks of further human rights violations. Among the first legislations seeking to implement HRDD requirements were California’s 2010 Transparency in Global Supply Chains Act and the 2015 UK Modern Slavery Act, soon followed, inter alia, by the French Vigilance Law. While drastically different, the supply chain laws in the UK and France are similarly important and both merit particular attention.
In 2015, The UK Modern Slavery Act was the first legislation in Europe to address human rights violations across businesses’ supply chains. When enacted, the Act was considered a major step forward in the fight against modern slavery. After a few years, however, the Act has become the target of criticism from lawyers and NGOs. The principal issue with the Act came from the fact that it only imposed a duty of disclosure on corporations. Essentially, companies who fell within the scope of the Act had to make a statement describing their efforts to minimize human rights abuse on their supply chain. Corporations were never legally compelled to make any effort to minimize such abuse, relying on public scrutiny to influence business decisions. Since its enactment, studies have shown that laws solely focused on disclosure have limited effectiveness in improving a company’s behaviour with regard to human rights. In light of this criticism, the Act has been under review in the past few years with view of how to strengthen it. Still, the new Modern Slavery Bill, which was proposed in 2022, aims only to reinforce the obligation to disclose, without imposing novel due diligence obligations.
In 2017, the French Assemblée Nationale adopted the first national legislation compelling companies to carry out HRDD: the loi sur le devoir de vigilance, or Vigilance Law. Like its name indicates, corporations targeted by the Law must create, implement, and publish a vigilance plan to ensure that the company itself, as well as its subsidiaries, subcontractors, and suppliers, manage their human rights risk. The vigilance plan must include, among others, the identification of potential risks, the steps implemented to address the risk and the procedures conducted to assess the company’s subsidiaries, subcontractors, and suppliers’ adherence to the Law. In addition, the Vigilance Law introduced a new basis for civil liability; victims of human rights violations can seek compensation before French courts for damages arising from the noncompliance of the Law. International organizations, such as the Office of the High Commissioner on Human Rights, praised the Law in 2020 as “the best known and most far-reaching” law on human rights due diligence. But reactions to the Law have not been unanimous. NGOs like Amnesty International have criticized its poor results and its lack of enforcement, raising that some businesses either partially fulfill the Law’s requirements or simply fail to publish a vigilance plan.
Following the adoption of the Vigilance Law, other legislations aiming to protect workers’ human rights across global supply chains started coming into force (which includes Canada’s bill S-211, adopted in 2023). While these sets of laws have a somewhat similar objective, they all subject companies to different duties and obligations. Domestic laws vary from one jurisdiction to another on crucial issues, including the human rights they aim to protect, the businesses falling in the scope of the law and the inclusion of civil and criminal liability. In light of these different domestic laws, the European Commission drafted the first international binding legislation on HRDD.
The CSDDD
As mentioned above, the CSDDD, when formally adopted, would compel companies to integrate human rights due diligence into their corporate policies, and “identify, prevent and mitigate adverse impacts on their activities on human rights”. Both EU companies and non-EU companies operating in the EU could fall under the scope of the directive. As explained in the draft version, EU companies affected by the directive would be separated into two groups: the companies operating in a defined “high impact” sector (Group 2) and the others (Group 1). A company incorporated in the EU with more than 500 employees and a turnover of more than 150 million euros worldwide would fall in Group 1, encompassing approximately 9,400 companies. For businesses operating in high impact sectors (such as textiles, leather, agriculture, forestry, fishery, and mining) the threshold is 250 employees and a turnover of 40 million euros. Around 3,400 companies will be a part of Group 2. As for non-EU companies active in the EU, they will also fall in the scope of the directive if they meet the turnover threshold of Groups 1 and 2 within the EU.
Businesses would be responsible for conducting human rights due diligence for their entire value chain, which includes their subsidiaries as well as their direct and indirect suppliers. They must also integrate new company policies and management systems relative to human rights due diligence. In addition, companies affected by the directive must establish a procedure for complaints accessible to everyone in the supply chain and provide public information regarding their due diligence obligations’ fulfillment.
International lawyers and human rights lawyers argue that a primary and potentially effective distinction between having several national legislations and having one international regime like the CSDDD is the broader scope of an international regime. Instead of having legislations varying from jurisdiction to jurisdiction, with different regulations applying to companies competing in the same industry, the adoption of the directive would make all European companies affected by the directive comply to one set of rules. When the European Commission asked business representatives about the possibility of EU-level regulations on human rights due diligence, a vast majority of them answered that a continental-level regulation would benefit businesses by providing a “single, harmonized EU-level standard”. The broader scope of the directive would bring a “level playing field”, ensuring consistency and uniformity across the continent. The same research showed that a regime such as the one introduced by the CSDDD would create an unalterable and uniform standard to suppliers and third parties, without harming competitiveness or innovation.
The directive also generates a new legal basis for damages : if a company fails to comply with the obligations arising from the directive, and a damage occurs as a result of such failure, the company can be held liable. A new legal remedy would therefore be available to victims of human rights abuses, who currently have insufficient or no legal remedies for the damages they incur. Although the introduction of civil liability for a breach of HRDD obligations has been advocated in many studies conducted by human rights and international lawyers, it remains relatively unique to the directive. Indeed, out of the legislative regimes addressing human rights due diligence in Europe, solely the French Vigilance Law introduced a new basis for civil liability.
Would the introduction of a new basis for civil liability be effective? And to what extent? Some business and human rights lawyers and academics argue that civil liability is a beneficial addition to the directive for many reasons. One of them is compensation for the victims. Unlike other legislations where a company that has been found liable for a breach has to answer to the state, the directive allows victims of human rights violations to seek reparations directly.
Another reason is prevention. Research has shown that civil liability has a positive impact on the prevention of a breach. Two comprehensive studies published in 2022 by economics and law professors and corporate practitioners revealed that the elimination of liability for traffic accidents resulted in an increase in the number of fatal accidents, ranging from 6 to 10%. The experts also showed that an increased liability risk for medical malpractice influenced doctors to attempt less risky treatments. According to Dr. Carola Glinski, an associate professor specialized in environmental law, tort law as well as private governance at the University of Copenhagen, civil liability can add teeth to existing public law rules, discourage circumvention of public law requirements by using legal loopholes, and even become a motive to go beyond public law requirements. Furthermore, the publicity of civil trials, especially against major corporations, can have a deterrent effect against the violation of human rights, as business and human rights lawyers Stéphane Brabant and Elsa Savourey have argued.
Although it has been recognized as an effective complement to public law, human rights lawyers and NGOs have highlighted the shortcomings of civil liability in the context of a breach of human rights due diligence. When analyzing the impact of the new legal basis for damages introduced in the French Vigilance Law, Brabant and Savourey argue that the remediation objective of civil liability was not attained. One of their arguments is that seeking remedies through court can be complicated and costly, especially for victims of human rights abuse, who are mainly from foreign countries. These difficulties can impede victims from seeking and obtaining compensation for their damages. Moreover, a civil liability regime becomes useless if the courts refuse to apply it. Other critics of the Vigilance Law point out that despite the numerous cases brought before the courts since its adoption, as of November 2023 not a single corporation was found liable. Some of these cases have been ongoing for years, while some corporations managed to escape liability on procedural grounds.
The Way Forward
With the Council and the Parliament reaching a provisional agreement, the next step is the formal adoption of the CSDDD, which should be done shortly according to the European Council. When approved, Member States would have two years to transpose the CSDDD into national law.
As mentioned above, the directive’s broader scope and its introduction of a new basis for civil liability can prove to be effective in solving the problems of human rights abuses across global supply chains. However, these elements of the directive will not present perfect solutions, as they will most likely introduce new issues. One of them will be the question of civil liability across a continent with so many different civil liability regimes. Since different jurisdictions require different proofs and have different criteria for causation, for example, how would the EU ensure uniformity across the continent? Another issue will be the accessibility of remedy. Considering the obstacles noted in the French regime with regards to victims seeking compensation, how would the directive ensure that victims are able to claim reparations? While the CSDDD represents a pivotal movement in holding companies accountable, its true impact remains to be seen.