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A practice note for good practices in Human Rights Impact Assessments for the CS3D

21 June 2024

True Diligence – preparing for a new era of corporate responsibility

Our pocket guides are designed to highlight what the practical steps for businesses of identifying and assessing impacts in the risk-based due diligence process.

This practice note represents our first insight to help businesses understand where to start with the EU Corporate Sustainability Due Diligence Directive (CS3D) preparedness and implementation.

Good practice in conducting Human Rights Impact Assessment:

CS3D obliges companies to identify human rights impacts in their global value chain.  Article 6 (1) requires they "take appropriate measures to identify and assess actual and potential adverse impacts arising from their own operations or those of their subsidiaries and, where related to their chains of activities, and those of their business partners…".

The Human Rights Impact Assessment ('HRIA') offers a widely recognised method for identifying and assessing adverse impacts. The CS3D Recital endorses the HRIA steps in the OECD Due Diligence Guidance for Responsible Business Conduct (OECD DD Guidance). This practice note provides an introduction to the HRIA process.

The universally accepted UN Guiding Principles ('UNGP') [2011]  compel businesses to address adverse impacts related to their operations, even if these are carried out by suppliers or partners. The first step is to identify and assess human rights risks (Principle 18) by drawing on expertise to evaluate the types and severity of the risks, consulting with those potentially affected as part of this process.

Practical Tips in identifying and assessing impacts:

  • Assess potential human rights impact as early as possible in the lifecycle of an activity or relationship.
  • Ensure impact assessments are not one-off exercises, but an iterative and incremental process to maintain a true picture of risks over time, taking into account changing circumstances.

Other good practices can be taken from the OECD DD Guidance, referred to above. This guidance specifies six key due diligence steps including identifying and assessing adverse impacts on operations, supply chains and business relationships by gathering information to understand the high-level risks of adverse impacts.

Practical Tips:

  • Consult relevant stakeholders and experts early on in the diligence process to identify, manage and overcome information gaps.

A further knowledge resource on HRIA is the Guide to Human Rights Impact Assessment and Management ('HRIAM') [2010] by the International Business Leaders Forum (IBLF) and the International Finance Corporation (IFC), published in association with the UN Global Compact.   This outlines seven key stages to HRIAM, three of which are relevant to the identification and assessment of adverse impacts:

  • Prepare: A business's human rights due diligence approach by identifying, preventing, and addressing potential and actual human rights risks arising from its activities. This involves implementing policies, risk assessments, and management systems to prevent and address these. The Human Rights Identification and Due Diligence Mapping tools can assist with this through the use of scenarios to help in identifying and responding to potential salient human rights risks and impacts associated with business activities.
  • Identify: Understand the human rights risks and impacts of business activities by considering affected stakeholders, internal policies, and business relationships.
  • Assess: Assess human rights impacts and consequences by using impact assessment tools and bringing in specialist practitioners as appropriate. Businesses should also identify unintended consequences, long-term impacts, and regional trends. Additionally, identify affected stakeholders and critical project lifecycle stages to build on the findings obtained during the first two stages.

Practical Tips:

  • Consult the Human Rights Impact Assessment and Management Table for useful definitions and practical information.
  • Seek to accumulate knowledge from all business activities, specifically identifying how respective functions currently and/ or potentially could impact the human rights of stakeholders.

Practical Tips:

  • Conduct desk research and publicly available sources (e.g. OECD guidelines, NGO reports), internal reports (complaints data, supplier assessment), and trade union reports. Internal stakeholders can offer additional insights.
  • Map business activities and identify and consult with potentially impacted stakeholders, such as employees, supply chain workers, and consumers. The assessment should consider the human rights impacts on these stakeholders and incorporate their perspectives for a better understanding of how these impacts are being experienced.
  • Prioritise salient human rights.

Salient human rights: Salient human rights are those human rights that are at risk of the most severe negative impacts through the company’s operations and value chain. Businesses may need to prioritise a number of them into a group of “salient human rights impacts” for the most immediate attention and action.

And the Danish Institute for Human Rights impact assessment guidance and toolbox refers to various factors to consider and steps to take in the phases of HRIA relevant to identification and assessment:

  1. Planning and Scoping: Define the parameters for the assessment by considering: types of business project or activities, human rights context, and identifying the relevant stakeholders. This would then be used to inform the development of the terms of reference, a written document that presents the scope and purpose of the HRIA.
  2. Data Collection and Baseline Development: Collect data on human rights enjoyment of workers, and community members. This can used to develop a HRIA baseline which can assist with identifying actual and potential adverse impacts.
  3. Analysing Impacts: Analyse the data obtained during phases 1 and 2 to identify any actual/potential adverse impacts and assess their severity.  According to the CS3D, a business "should take measures that are capable of achieving the objectives of due diligence by effectively addressing adverse impacts in a manner commensurate to the degree of severity and the likelihood of the adverse impact…".  This focus on severity and likelihood as found in any materiality matrix is a key tool for assessing and prioritising impacts.
  4. Impact Mitigation and Management: This stage involves designing and implementing a plan for preventing and addressing human rights impacts and its conceptualisation should:
    • Identify actions to address the identified impacts should involve the rights-holders who are impacted, as well as pertinent duty-bearers and other relevant parties;
    • Consider the mitigation hierarchy to be applied compatible with recognised international human rights standards and principles; and
    • For impacts that the business contributes to or is directly linked to, consider the extent of leverage it can exercise in addressing the impacts will need to be examined.

How DWF's Sustainable Business and ESG advisory practice help businesses with HRIA

The DWF Sustainable Business & ESG Advisory Team works with businesses to identify and assess impacts as part of its wider sustainable business strategy and approach to enterprise risk management.  The information generated in this process will also inform your reporting under the sister EU Corporate Sustainability Reporting Directive (CSRD).  We offer a bespoke CS3D Self-Assessment Tool to help businesses assess readiness across five key themes of the new CS3D. The tool generates a tailored risk-based report to identify areas needing attention and focus preparedness efforts that will target and accelerate progress.

 For further information, please contact Hilary Ross, Tracey Groves and Nadine Robinson.

With credit to Kirsty Rogers, Chief Sustainability Officer and Sara Farid, Trainee Solicitor as contributing authors of this practice note in this pocket guide.

Further Reading