September 13, 2019

Business and Ethical Challenges: Human Rights Requirements, Due Diligence, Remediation and Brand Protection

This Program will (1) provide a brief summary of the cycle of human rights violations in supply chains and summarize the growth of legislative and investor focus on supply chain human rights issues; (2) present feedback and suggested revisions to the 2018 Report and Model Contract Clauses for International Supply Contracts from the Uniform Commercial Code Committee's Working Group to Draft Human Rights Protections in International Supply Contracts; (3) provide practical supplier contracting and due diligence recommendations, tools and risk assessment procedures to avoid human rights abuses; and (4) address attorney ethical obligations and the attorney-client privilege in supply chains as well as in merger and acquisition transactions. 

Human rights violations in the work force (no or insufficient pay, dangerous hourly demands, toxic exposure on the job site and/or sub-standard housing, etc.) most often appear to involve the lower or lowest rung of a multi-tier international supply chain. Typically, this is the result of a breakdown in the company's internal controls and due diligence processes. Red flags slip through the cracks and go unresolved, causing legal, financial and reputational damage that cannot always be fully repaired. As more and more countries outside of the United States adopt law to fight human rights violations, properly assessing the risk of human rights violation within the company's supply chain and implementing an effective vendor risk management program to assure compliance is essential to ensure that goods are not tainted by modem slavery, child labor or other human rights violations. 

The work necessary for coordination of the efforts of the company's internal legal, compliance and procurement departments, however, can be daunting. Corporate resistance and real challenges encountered in drafting human rights policies and contract provisions, including the possible increase in the risk of litigation, have to be addressed. The role of proposed contract provisions that are legally effective and operationally likely given the scope of enterprises, diversity of interests and persons affected by these issues will be considered by the Panelist, along with discussions of the importance of a buyer's code of conduct and contract remedies structured to best further future remediation of human rights violations. An effort will be made by the Panel to map the Working Group's Model Clauses to the UN Guiding Principles on Business and Human Rights.

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