Human rights and environmental due diligence in the green transition: toward greater accountability amid geopolitical and sustainability challenges

Key messages

• Mandatory human rights and environmental due diligence (HREDD) rules offer a tool to address negative impacts associated with critical raw material supply chains, placing new demands on large companies to identify and address risks related to their business activities.

• At the same time, industrialized countries are prioritizing supply chain resilience, which could undermine EU’s Green Deal and the efficacy of HREDD rules in terms of addressing socioenvironmental risks.

• The European Union (EU) is currently renegotiating legislation on corporate sustainability and human rights obligations. The adopted Corporate Sustainability Due Diligence Directive (CSDDD), which is based on a Human Rights and Environmental Due Diligence (HREDD) approach, is likely to be weakened by the EU’s recent efforts to align it with the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy Regulation through an Omnibus law.

• At the company level, HREDD implementation is further hindered by lack of traceability, poor transparency and over-reliance on private voluntary standards to demonstrate compliance, which, all together, make it challenging to hold companies accountable.

• For HREDD rules to be effective, they must be integrated into policies regulating critical raw material supply chains. These policies should include clear implementation guidance, rigorous monitoring of companies’ due diligence systems (including voluntary standards), strict reporting requirements, and robust enforcement mechanisms.