Human Rights Due Diligence (HRDD): Definition, Importance & Process

What is Human Rights Due Diligence (HRDD)?

Human Rights Due Diligence (HRDD) is the process businesses use to identify, prevent, mitigate, and account for human rights risks in their operations and supply chains. It ensures compliance with international human rights standards, such as the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. HRDD is crucial for companies operating in global markets, helping them avoid complicity in human rights violations, enhance corporate reputation, and meet ESG regulatory requirements such as the EU Corporate Sustainability Due Diligence Directive (CSDDD).

Why HRDD Matters

• Prevents Human Rights Violations – Helps businesses identify risks related to forced labor, child labor, discrimination, and poor working conditions.
• Ensures Compliance with Global Regulations – Aligns with frameworks like UNGPs, OECD Guidelines, and EU CSDDD to avoid legal and financial penalties.
• Enhances Investor & Consumer Trust – Ethical business practices improve brand reputation and attract ESG-conscious investors.
• Mitigates Supply Chain Risks – Provides transparency and accountability across global supply chains.
• Supports Social & Sustainable Development Goals (SDGs) – Contributes to decent work (SDG 8), reduced inequalities (SDG 10), and responsible production (SDG 12).

The HRDD Process: Key Steps

1. Identify Human Rights Risks & Impacts
   • Assess company operations, supply chains, and business relationships.
   • Conduct risk mapping and materiality assessments to pinpoint human rights concerns.
2. Prevent & Mitigate Human Rights Violations
   • Develop responsible sourcing policies, labor rights protections, and grievance mechanisms.
   • Engage with suppliers, workers, and affected communities.
3. Monitor & Track Performance
   • Regularly audit supply chains to ensure compliance with human rights standards.
   • Use independent verification and third-party certifications for accountability.
4. Provide Remedies & Accountability
   • Establish clear grievance redress mechanisms for affected workers and communities.
   • Commit to remediation actions when human rights violations occur.
5. Communicate & Report Transparently
   • Disclose HRDD efforts in sustainability reports, ESG disclosures, and regulatory filings.
   • Ensure compliance with non-financial reporting directives, such as EU CSRD and GRI standards.

Examples of HRDD in Action

• Apparel Industry: Brands like Patagonia and Adidas conduct HRDD to prevent forced labor in textile supply chains.
• Tech Sector: Companies like Apple and Intel assess human rights risks in mineral sourcing for electronics.
• Retail & Consumer Goods: Firms like Nestlé and Unilever monitor agricultural supply chains for fair labor practices.
• Energy & Extractives: Mining giants like Rio Tinto and BHP implement HRDD to protect indigenous land rights.

Challenges in Implementing HRDD

• Lack of Supply Chain Transparency – Complex, multi-tier supply chains make it difficult to track human rights risks.
• Weak Enforcement in Some Regions – Regulatory gaps in certain countries may limit HRDD effectiveness.
• High Costs & Resource Intensity – Conducting thorough due diligence requires investment in audits and compliance teams.

The Future of HRDD

With increasing regulatory scrutiny and investor expectations, HRDD is becoming a business imperative rather than a voluntary initiative. Companies that integrate robust human rights due diligence frameworks will not only reduce legal risks but also enhance resilience, reputation, and long-term ESG performance.