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Corporate Social Responsibility (IVOR nr. 77) 2010/7.5.3
7.5.3 The corporate duty to apply due diligence
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS368270:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
Ruggie 2008, supra note 3 [§ 25].
Ruggie 2008, supra note 3 [§ 25].
Ruggie 2008, supra note 3 [§ 58]. The Bill of Rights consists of the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights with its two Optional Protocols and the International Covenant on Economic, Social and Cultural Rights. The 1998 ILO Declaration on Fundamental Principles and Rights at Work declares four core principles as laid down in several separate conventions to be applicable to all Member States regardless of ratification, as these principles are considered to lie at the heart of the ILO s raison d'être (Article 2). The Conventions relating to the following rights must be respected, promoted and realised: (1) freedom of association and the effective recognition of the right to collective bargaining; (2) the elimination of all forms of forced or compulsory labour; (3) the effective abolition of child labour; and (4) the elimination of discrimination in respect of employment and occupation.
Black S Law Dictionary,8 edition, West Group, United States, 2006. Ruggie 2008, supra note 3 [§ 25].
Ruggie 2008, supra note 3 [§ 57].
Ruggie 2008, supra note 3 [§ 79].
Ruggie 2008, supra note 3 [§ 25].
Ruggie 2008, supra note 3 [§ 57].
Under the "corporate duty to respect human rights," the Report introduces the concept of due diligence.1It states:
Yet, how do companies know that they respect human rights? Do they have systems in place enabling them to support the claim with any degree of confidence? Most do not. What is required is due diligence - a process whereby companies not only ensure compliance with national laws but also manage the risk of human rights harm with a view to avoiding it.2 [Emphasis added]
The concept of corporate due diligence "describes the steps a company must take to become aware of, prevent and address adverse human rights impacts," w ic according to t e Report includes considering t e international Bill of Human Rights and the core ILO Conventions.3 In a footnote, Ruggie referred to the definition of due diligence provided by Black's US Law Dictionary: "the diligence, [i.e. such a measure of prudence, activity, or assiduity, as is] reasonably expected from, and ordinarily exercised by, a person who seeks to satisfy a legal requirement or discharge an obligation."4
Ruggie has indicated that he will develop practical guiding principles on due diligence in his mandate extension. Nonetheless, already in a number of reports produced by him, or by experts at his request, we find clear suggestions as to how to conduct a due diligence process. As an overall comment, the Ruggie Report asserted that the process must be "inductive and fact-based".5 When searching for the standard of knowledge that companies should aspire towards, Ruggie proposes to use the 'should have known' standard:
Legal interpretations of "having knowledge" vary. When applied to companies, it might require that there be actual knowledge, or that the company "should have known", that its actions or omissions would contribute to a human rights abuse. Knowledge may be inferred from both direct and circumstantial facts. The "should have known" standard is what a company could reasonably be expected to know under the circumstances.6
The same standard - have or ought to have knowledge - is used in international law (section 7.4.2 supra). Also in corporate law, due diligence implies a duty to investigate and to acquire knowledge. Certainly when professional parties are involved, a similar standard is often used: could the party have known the facts if he had conducted adequate due diligence (section 7.3.2 supra)?
As regards the scope of the due diligence investigation, the Report contended: "The scope of human rights-related due diligence is determined by the context in which a company is operating, its activities, and the relationships associated with those activities."7 Evidently, three sets of factors need to be considered when undertaking a due diligence investigation: (i) the country context in which the corporate activities take place; (ii) the human rights impacts that the activities may have within such a context; (iii) whether the company might contribute to abuse through the relationships connected to its activities.8 These factors will be further addressed in the following subsections.