The conversation (full transcript)
Kerry Stares: Hello, I’m Kerry Stares, a partner at Charles Russell Speechlys. Welcome to the third how-to video in our series on risk-based human rights due diligence. I’m joined again by Louise Herring, founder of Inherently Human.
If you haven’t already watched earlier videos in this series, including on why doing risk-based human rights due diligence makes good business sense, you can find those on our website.
Today we’re focusing on the concepts of remedy and leverage: what remedy means, how it works in practice, and how companies can use and build their leverage to address human rights risks and impacts.
Under the UN Guiding Principles on Business and Human Rights, or the UNGPs, which have set the benchmark for best practice since 2011, if a company has caused or contributed to harm, it should provide or cooperate in providing remedy to those affected. A company’s role depends on its degree of connection to the harm. Sometimes it leads the provision of remedy, other times it supports a supplier to do so, but it remains responsible for ensuring that remedy happens.
Similarly, under the recently revised EU Corporate Sustainability Due Diligence Directive, or CSDDD, a company must provide remedy to those affected where it has caused or jointly caused an adverse impact.
Louise Herring: Good remedy achieves two goals. The first is making good the harm that’s been caused. To do that, it’s essential to engage with those adversely affected, either directly where this is possible and appropriate, or through dialogue with unions, worker representatives, or trusted community organisations, in order to make the remedy meaningful.
The second goal of good remedy is reducing the chances of the harm happening again, which means companies taking the opportunity to diagnose the root cause of the harm and put in place effective systems to reduce recurrence.
A good recent example is a European food company we worked with that discovered through a social audit that migrant workers had paid hidden recruitment fees, leaving them in debt. The company interviewed workers to understand what meaningful remedy was for them, set up a fund with customers to reimburse fees, reviewed contracts with their third-party labour providers, and improved how future workers were onboarded. They addressed the harm done and changed systems to prevent it happening again, building trust with workers and suppliers and strengthening risk management in the process.
Kerry Stares: Leverage is a company’s ability to influence another entity’s practices – suppliers, for example – to prevent or mitigate adverse human rights impacts. Leverage might be commercial: the ability to set contractual obligations, carry out audits, impose penalties, provide incentives or training. Leverage might also be created through collaborative action by companies or industry-wide initiatives that raise the bar and build the capacity of suppliers, or through direct engagement with governments and civil society to identify solutions to complex problems.
Under the UNGPs, if a company causes or contributes to harm, it must stop or prevent its contribution and use its leverage with business partners to mitigate remaining impacts as much as possible. Even if a company has not caused or contributed to a harm, but is nonetheless directly linked to it through a business relationship, it must take appropriate action based on its degree of leverage.
The principle of leverage is also reflected in the new CSDDD, which provides that a company may use its ability to influence a business partner that is causing an adverse impact to provide remediation.
Louise Herring: The key is to analyse your degree of connection to harm – caused, contributed, or directly linked – and then use any leverage available. Purchasing practices are often a key factor in companies contributing to harms, even if they haven’t caused them. Unrealistic lead times, last-minute changes to orders, aggressive pricing, and long payment terms push risks and costs onto suppliers and then workers, through excessive hours, speed-ups, or wage suppression. Acknowledging and reforming these practices is a form of leverage.
When leverage seems low – for example, where a supplier won’t be materially affected by losing a single buyer – the expectation is to build it: collaborate with peers, engage industry platforms and public authorities, adjust purchasing practices, and partner with suppliers to increase trust, capacity, and problem-solving. There are multiple practical frameworks available to guide this process.
Kerry Stares: Effective remedy requires understanding your role in an adverse impact and the leverage that you have, or can build, to address it. Listen to those affected to ensure your remedy is effective in practice, and take the opportunity to improve systems and processes to strengthen risk management and prevent recurrence.
Thank you for watching. Look out for more videos in this series on how to do risk-based human rights due diligence. These videos are designed to give you a taster of what’s involved. For more information and tailored advice, please get in touch.
