Duty of care : Environment and human rights

What is the duty of vigilance on the environment and human rights ?

The duty of vigilance on the environment and human rights is a legal constraint that requires large companies to prevent and reduce environmental and societal risks in their operations and those of their commercial affiliates. This requirement is rooted in renowned global standards, including the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises and the ILO Tripartite Declaration of Principles on Multinational Enterprises and Social Policy.

This responsibility varies according to national legislation and sectors of activity, which may range from the disclosure of information to specific obligations related to products, or broadly cover impacts on human rights and the environment.

In France, for example, the duty of care law requires major companies and contractors with more than 5,000 employees in France or more than 10,000 employees globally to develop and implement a due diligence plan. This plan must prevent human rights violations, environmental damage and risks to health and safety at work within their operations, subsidiaries, subcontractors and suppliers.

At the European Union level, the Council and the Parliament have reached a provisional agreement on the future directive on companies' duty of vigilance regarding sustainability. This initiative aims to improve the protection of human rights and the environment, both within the EU and internationally. The future directive will target large corporations with more than 500 employees and a net turnover of more than €150 million overall, including non-EU companies with a net turnover of more than €150 million in the EU, with implementation expected three years after its entry into force.

It also includes clauses on penalties and civil liability in the event ofcompliance with these obligations and require companies to establish a plan that validates the alignment of their business model and economic strategy with the objectives of the Paris Climate Agreement.

Why implement the duty of vigilance on the environment and human rights for your company ?

Adopting the duty of vigilance on the environment and human rights is not simply a legal requirement. It is a strategic approach to increase your performance, improve your reputation and increase your competitiveness in the market. The duty of care helps you :

In terms of the environment

• Minimize your impact on the environment and actively engage against climate change by adhering to the goals set by the Paris Agreement and implementing sustainable practices across your value chain.
• Identify and prevent environmental risks and their associated costs, such as fines, property damage, litigation, customer losses or punitive actions, monitoring and reducing the potential adverse environmental effects of your operations and those of your partners.
• Encourage innovation and generate value, by developing environmentally friendly offers, meeting the expectations of consumers and investors, By seizing green financing opportunities and entering new market segments.

Human rights

• Ensure respect for human rights and fundamental freedoms, in accordance with international guidelines and local regulations, ensuring that your activities and those of your partners do not negatively impact the rights and interests of individuals.
• Anticipate and reduce human rights risks and associated costs, including reputational issues, boycotts, protests, complaints, legal actions, sanctions or loss of trust, by detecting and mitigating the potential negative human rights impacts of your actions and those of your affiliates.
• Enhance your human and social capital by improving the living and working conditions of your employees, subcontractors, suppliers and customers, promoting social dialogue, diversity, inclusion, participation and mutual respect.

Who is the duty of vigilance on the environment and human rights ?

The duty of vigilance in environmental and human rights matters is intended for companies with a significant impact in these areas. This concerns large-scale companies, those with large turnover, operating in specific sectors of activity, or linked to an extended value chain. This requirement covers both companies based in France and those operating internationally, including the European Union.

In France, the legislation on the duty of vigilance is applicable to parent and ordering companies when their workforce exceeds 5,000 employees on the national territory or 10,000 worldwide. These entities are required to design and implement a due diligence plan. It aims to reveal and mitigate major risks related to human rights, the environment and security within their operations as well as those of their subsidiaries, subcontractors and suppliers.

They incur liability for breaches of these obligations, which must compensate for the damage caused to the victims.

Within the framework of the European Union, the Sustainability Due Diligence Directive applies to large companies with more than 500 employees and a net turnover exceeding €150 million worldwide, as well as non-EU companies with a net turnover of more than €150 million within the EU. The latter are required to establish and monitor a risk management system to detect, prevent or correct any adverse impact on human rights and the environment. An ecological transition plan aligned with the Paris agreement is also to be drawn up.

Failure to do so can lead to sanctions and legal action.

Which organizations propose the duty of vigilance on the environment and human rights ?

The duty of vigilance on the environment and human rights is based on a series of products quality standards and principles put forward by organizations at the international, regional, or national level. Their mission is to establish requirements in terms of respect for rights and the environment, while providing recommendations and tools to support companies in the implementation of these principles.

These organizations are distinguished as follows :

International bodies

• The United Nations (UN) initiated the Guiding Principles on Business and Human Rights in 2011, thus defining the overall reference framework. The UN has also been negotiating an international treaty on the subject since 2014.
• The Organisation for Economic Co-operation and Development (OECD) issued Guidelines for Multinational Enterprises in 2011, advising on responsible management including respect for human rights and the environment. The OECD also offers a mediation service for any complaint regarding non-compliance with these principles.
• The International Labour Organization (ILO) published the Tripartite Declaration of Principles on Multinational Enterprises and Social Policy in 1977, establishing responsibilities for labour rights, safety and environmental social impact.

Regional bodies

• The European Union (EU) introduced in 2023 a directive on the duty of vigilance of companies for sustainability, requiring large companies in the EU to supervise and rectify any negative impact on human rights and the environment, with penalties for violations.
• In 2016, the Council of Europe promoted a recommendation to States to apply the UN Guiding Principles and adopt measures to ensure respect for human rights within companies, including aspects of vigilance and accountability.

National bodies

• In 2017, France ratified a law requiring large companies to establish a vigilance plan to prevent risks related to human rights and the environment within their operations and those of their partners.
• In 2021, Germany passed legislation requiring companies with more than 3,000 employees to adopt preventive measures against human rights violations in their sphere of influence, including aspects such as forced labour or environmental protection.
• The Netherlands established a law in 2019 requiring companies operating on their soil to demonstrate their commitment to preventing child labour in their supply chains.

What are the steps to follow to implement the duty of vigilance on the environment and human rights ?

The duty of vigilance on the environment and human rights requires companies to adopt a continuous and dynamic process, divided into several key stages :

1. Mapping Risks

This step consists of identifying the current and potential risks associated with the activities of the company and its business partners. These risks must be assessed according to their impact on human rights, the environment, and health and safety. A detailed analysis of the context, stakeholders, standards and relevant information is essential. To remain relevant, this mapping must be regularly updated and communicated to stakeholders.

2. Prevent and mitigate risks

This phase involves developing and implementing measures to prevent or minimize identified risks. The measures taken must be adapted according to the severity, probability and urgency of the risks. Such interventions may include training, awareness raising, monitoring, auditing, remediation and stakeholder engagement. They must be effective, measured and aligned with duty of care objectives.

3. Repair Damage

In the event of an infringement caused by the operations of the company or its partners, it is essential to put in place remedial measures towards the victims, respecting their rights and interests. The forms of reparation can be various: restitution, compensation, rehabilitation, guarantee of non-repetition, among others. These measures must be effective, timely, fair, accessible and transparent.

4. Reporting on results

It is important to communicate transparently on actions and results related to the duty of care. The report must include a risk assessment, the presentation of the measures implemented, any damage identified, the repairs undertaken and the areas for improvement envisaged. This report is to be published annually and shared with stakeholders.

How much does it cost to implement the duty of vigilance on the environment and human rights ?

The cost associated with implementing the duty of care related to the environment and human rights varies according to various criteria, including the size of the company, its sector of activity, the extent of its duty of care, its level of experience in this area, resources and tools used, among others. It is difficult to define a precise amount that would be applicable to all companies, however, estimates and testimonials from companies make it possible to get an idea.

A study carried out by Pwc-Orse-Bpifrance estimates the average cost of applying the duty of care for French SMEs at 0.1% of their annual turnover, which represents about 10,000 euros. This includes risk mapping, preventive and corrective measures, remediation, reporting and communication activities. Costs can vary depending on the level of commitment of the company, the number of stakeholders involved and the complexity of its value chain.

For large companies, the costs associated with duty of care tend to be higher due to the diversity and breadth of their business and their networks of business partners. According to a report by the European Parliament, the average cost for large European companies is 0.2% of turnover, or around €200,000 per year. This includes the costs of developing a risk-based due diligence system, the development of an ecological transition plan, external audits and the publication of information. These costs vary depending on the sector of activity, the level of risk and the degree of innovation, among others.

It is essential to emphasize that the expenses incurred by the duty of care should not be perceived as a financial burden only, but rather as a significant investment. Indeed, this approach can generate many benefits for the company, including reducing risk costs, improving performance, enhancing reputation and opening up to new market opportunities, etc.

According to the aforementioned European Parliament report, large European companies could see an estimated net profit of 0.4% of their turnover thanks to the duty of vigilance, a gain of around 400,000 euros per year.

How long does it take to implement the duty of vigilance on the environment and human rights ?

The implementation of the duty of vigilance related to the environment and human rights depends on many different factors: the complexity of a company’s operations, its progress on these issues, the means at its disposal and the tools adopted. There is no set timeframe for all. However, estimates based on the experience of various companies can provide benchmarks.

According to a study conducted by Pwc, Orse and Bpifrance, French SMEs require an average of 18 months to integrate the duty of care. This period covers diagnosis, risk mapping, development and implementation of preventive and corrective measures, as well as reporting and communication actions. The duration may vary depending on the company’s commitment, the number of stakeholders involved and the complexity of its value network.

For large companies, the process can extend over a longer period, usually around 24 months, due to the complexity of their operations and the large number of their business partners. A European Parliament report cites the deadline as the average time required for major European companies to develop an appropriate vigilance system, including the implementation of a climate transition plan, conducting external audits and publishing relevant information. This period varies according to criteria such as the sector of activity, the level of risk associated and the innovation capacity of the company.

However, it is essential to recognize that time to adjust to duty of care should not be seen as a constraint, but rather as an opportunity. This process helps align companies with changing market conditions, stakeholder expectations, standards and new business opportunities.

To be considered as a continuous cycle, the duty of vigilance requires constant updating and optimization, as part of a continuous improvement approach.

Is there a renewal to be done regarding the duty of vigilance on the environment and human rights ?

However, it is essential to recognize that time to adjust to duty of care should not be seen as a constraint, but rather as an opportunity. This process helps align companies with changing market conditions, stakeholder expectations, standards and new business opportunities.

• Update the risk mapping by considering changes in context, stakeholders, current standards and new information available.
• Adapt prevention and mitigation measures according to the results achieved, drawing on best practices, feedback and opportunities for improvement.
• Assess the effectiveness of the due diligence plan with concrete, reliable and verifiable indicators, while taking into account the opinion of stakeholders.
• Communicate progress, obstacles encountered, corrective actions taken and future visions by publishing and distributing an annual vigilance report.

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This renewal process may be governed by legal obligations, which vary according to the country and sector of activity. In France, for example, the law requires that the companies concerned publish and make accessible an annual vigilance report. In the European Union, the Sustainable Vigilance Directive also requires the publication and transmission of an annual report to the European Commission and national authorities.

Beyond legal obligations, renewing the duty of vigilance can be motivated by strategic, ethical or social considerations. Indeed, this approach allows companies to improve their performance, reputation and competitiveness, while respecting human rights and contributing to environmental protection, sustainable development and the green transition.