1

Human rights
due diligence
inaction
The tangible business risk
from doing nothing
 2

In today’s business environment, failing to engage often go hand in hand with human rights violations.
with human rights due diligence is no longer a neutral Responsible business conduct is rapidly becoming a
choice but rather a strategic risk. Companies that baseline requirement for market access, financing and
ignore or superficially address human rights exposures license to operate.
in their operations and supply chains face growing
consequences across multiple fronts including tightening This whitepaper aims to provide a clear and practical
regulatory obligations, shifting investor expectations and overview of the key risks companies face when they
increasingly vocal stakeholders who require transparency ignore human rights due diligence. It argues that the
and accountability. strongest business cases combine moral reasoning (what
is right), compliance (what is required) and commercial
The costs of inaction are becoming immediate and pragmatism (what is smart). Embedding robust human
material. Crucially, these risks rarely exist in isolation rights due diligence is part of smart, resilient governance,
with environmental degradation and poor governance a way to anticipate disruptions, protect brand value and
practices, such as corruption or lack of oversight, maintain stakeholder trust.

The intersection of ethics, obligation and

strategy yields durable decisions

Wh
ight at
r is
s
sm
i
at

art
Wh

Moral Commercial
reasoning pragmatism

Compliance

W
h at d
i s re q u i re
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A new era of corporate

responsibility – with or
without the law
The call for companies to respect human rights is hardly That kind of oversight might have gone unnoticed a
new. International frameworks like the UN Guiding few years ago but not today. Regulatory developments,
Principles and the OECD Guidelines on Responsible mounting investor expectations and intensifying
Business Conduct have long set a clear expectation stakeholder scrutiny have pushed responsible business
i.e. businesses must respect human rights across their conduct firmly into the spotlight. Yet despite this shift,
operations and value chains. some companies continue to hesitate, delaying action in
the hope of more definitive legal direction.
Most companies, at least on paper, agree. One would
be hard-pressed to find a corporate website that does The problem is, we are now in a legal holding pattern.
not reference values like “respect”, “accountability” or The EU’s Corporate Sustainability Due Diligence Directive
“integrity.” Yet, when it comes to putting these values (CSDDD) may be diluted, the US is experiencing a
into practice, particularly when it comes to human rights, DEI backlash and global momentum on sustainability
many still treat it as optional. A tick-box for sustainability regulation is in flux. In this vacuum, too many companies
reports. A talking point, not a priority. are mistaking uncertainty for a reason to delay.
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Commitment vs Implementation
The widening gulf between policy
promises and operational reality
Across industries and geographies, companies 3. There is often discomfort or resistance in confronting
increasingly proclaim their commitment to respecting adverse impacts that stem from otherwise profitable
human rights. Such public declarations, typically business practices, particularly when these involve
enshrined in sustainability strategies, codes of conduct suppliers or markets that are economically or
or corporate values are now the norm among large firms. politically sensitive.
However, these statements often mask a significant
implementation gap. Moreover, the absence of clear regulatory mandates in
many jurisdictions has allowed companies to prioritise
According to the World Benchmarking Alliance’s 2024 voluntary disclosure over structural reform. As a
Social Benchmark, while the majority of the world’s result, commitments are made to satisfy reputational
most influential companies have adopted human rights expectations, but without the necessary internal
policies, only 20% have begun to operationalise human alignment, accountability structures or stakeholder
rights due diligence. Even more strikingly, just 6% engagement mechanisms to turn them into action.
demonstrate comprehensive implementation across Respecting human rights is not a static commitment, it
their global operations. This gap between rhetoric and is a dynamic and continuous responsibility that requires
reality reflects a persistent challenge in that companies more than symbolic gestures. Implementation entails a
are adept at making the right promises but struggle structured due diligence process including proactively
to embed them into governance, decision-making and identifying and assessing actual and potential human
commercial practice. rights impacts across the value chain as well as Engaging
meaningfully with affected stakeholders, especially those
There are several reasons for this disconnect namely: at risk or structurally marginalised.
1. Human rights due diligence is often viewed as a
compliance or communications issue rather than a Without this operational depth, corporate commitments
strategic business function. It is siloed, underfunded or risk being perceived as performative or misleading,
delegated to sustainability teams with limited influence undermining trust, exposing people to harm and
over core operations increasing reputation and financial exposure. As
2. Many companies face capacity and knowledge gaps stakeholder expectations sharpen, the ability to
particularly in understanding how human rights risks demonstrate not only intention but verifiable progress on
manifest across complex, global value chains human rights is becoming a critical marker of responsible
business conduct.
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When inaction becomes

liability – the risk of doing
nothing
Failing to undertake meaningful human rights due impacts on market value. Research shows that companies
diligence is not a passive or neutral act. It is an active linked to human rights abuses often experience abnormal
business risk. This is not just a theoretical concern or stock price declines. What may begin as an ethical lapse
a future compliance issue, it is a real and immediate can quickly evolve into a financial and political crisis,
exposure across multiple fronts. Inaction can no longer particularly in sectors where trust, transparency and care
be justified by uncertainty or lack of precedent; the are central to the business model. The lesson? A strong
direction of travel is clear. The degree of risk will naturally human rights stance is not just about values but about
vary, but for companies whose business models rely brand resilience.
heavily on brand reputation, access to capital, strategic
partnerships or a stable and engaged workforce, the
exposure is particularly acute. Below are five tangible
and pressing risks facing companies that fail to When companies fail to walk their
implement robust human rights due diligence. talk on human rights, scrutiny comes
fast and hard. In the age of radical
transparency, silence and inconsistency
erode brand trust. And that erosion carries
1: Reputational risk: trust lost, value lost a price. Reputational damage now ripples
across regulators, communities, and investors,
Let’s start with the most obvious one. Many companies jeopardising not just public image, but market
have learned the hard way that modern consumers access and business continuity.
and civil society can and will hold them to account.
Companies that fail to live up to their stated human rights
commitments are increasingly being called out and not
just by NGOs. Employees, consumers, investors and even
business partners are paying attention.

Most companies now publicly commit to respecting

human rights, whether in codes of conduct, supplier
policies or sustainability strategies. But when actions do
not match the rhetoric, the gap becomes visible. And in
today’s hyper-connected world, that visibility comes fast
and hard. Social media, investigative journalism and civil
society campaigns can turn reputational slippage into a
full-blown crisis. And reputational damage does not stop
at headlines. It erodes trust with governments, business
partners and local communities potentially jeopardising
licenses to operate or access to future contracts.

Crucially, reputation is not only about what you do. It is

about how consistent you are. Companies that quietly
abandon commitments with respect to responsible
business conduct when political winds shift or budgets
tighten, risk being seen as opportunistic. Short-term
savings can carry long-term reputational costs.

The financial implications of human rights failures are no

longer hypothetical. Public exposure of abuse, neglect
or exploitation can rapidly escalate into reputational
crises, legal scrutiny and investor flight, with measurable
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2: Investor and capital access risk: money 3: Talent and culture risk: Human capital is
talks… and is asking questions your most precious resource,, so value it

If reputational damage is the visible risk, access to We have all heard this: today’s workforce wants purpose.
capital is the quieter—but equally consequential—one. And while it may sound soft, the data is not. Companies
Investors are no longer treating human rights as a that prioritise dignity, fairness, and respect, not just
peripheral issue. For many, it has become a core indicator in mission statements but in practice, see stronger
of sound governance and a prerequisite for investment. employee engagement, better retention and
Asset managers, pension funds, and ESG analysts are higher performance.
scrutinising how companies address labour rights, supply
chain ethics, and community impacts, viewing weak Most employees are asked to sign off on Codes of
performance as a proxy for deeper management failings Conduct and sit through ethics training that includes
and future liabilities. commitments to human rights. But when they see
leadership quietly sideline those commitments, whether
This shift is already reshaping capital flows. Exclusion during a strategic shift or when profit margins are tight,
lists, divestments, and enhanced scrutiny of human the message lands clearly that the values are optional.
rights due diligence are becoming standard practice That disconnect can accelerate turnover.
across institutional investors and ESG-aligned portfolios.
Companies that lack transparency or are linked to Moreover, ineffective human rights due diligence can hurt
systemic abuses are increasingly screened out (or priced employees directly. Weak grievance mechanisms may
out) of markets. Credit rating agencies and banks are lead staff to escalate issues externally, through media or
also adapting, embedding human rights factors into social platforms. What begins as internal discontent can
creditworthiness assessments and offering better terms quickly spiral into reputational damage. Disrespect for
to companies with strong ESG credentials. workers’ rights also fuels labour unrest or unionisation
efforts. These developments do not just disrupt
Insurers are following suit, factoring ESG into premium operations. They also signal to investors, customers,
models. A poor human rights track record can raise costs and employees alike that the company’s values and
and reduce competitiveness. Even privately held firms statements may not be much more than performative.
are feeling the pressure, as ESG due diligence becomes a
gating issue in growth capital, IPOs and M&A activity.

Human rights due diligence is now a Purpose is not a slogan. it’s a retention
filter for capital. Investors, insurers and strategy. Employees want to see
credit agencies view inaction as a red integrity in action, not performative
flag and price it accordingly. Firms that policies. If a company’s treatment of
fall short face exclusions, higher premiums, and people doesn’t match its stated values, the best
tighter financing conditions. Strong governance talent will disengage or walk. Internally and
on rights is now an entry ticket to the externally, credibility is currency.
capital markets.
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4: Operational and supply chain risk: fragility 5: Liability and legal exposure:
starts at the bottom the EU CSDDD is not the only regulation
to be concerned about
Operational efficiency depends upon predictability and
stability i.e. reliable suppliers, uninterrupted production Legal risks tied to human rights due diligence are no
and on-time delivery. But, without robust human rights longer hypothetical, they are multiplying, global and
due diligence, that stability becomes increasingly fragile. costly. Companies operating across borders face an
When labour rights violations, unsafe working conditions increasingly fragmented but tightening web of laws from
or environmental abuses emerge within the supply chain, the Canadian Fighting Against Forced Labour and Child
the consequences often extend far beyond the initial site Labour in Supply Chains Act, Norwegian Transparency
of harm. Act and UK and Australian Modern Slavery Acts, to
Forced Labour import bans in the US and EU. While
Production sites can be shut down, deliveries delayed these frameworks vary in scope, they are converging
and contracts terminated. Companies may be forced around a shared expectation that businesses must
to pivot to new suppliers mid-cycle, inflating costs identify and address adverse human rights impacts and
and disrupting customer commitments. Regulatory not just say they do.
enforcement, stakeholder campaigns and shifting
expectations around ethical sourcing have made human This patchwork poses a serious challenge for
rights performance a critical operational risk factor. multinationals. Complying with legal requirements in
one country may not shield a company from legal or
Local communities impacted by exploitation or reputational exposure elsewhere. In fact, disclosures or
environmental degradation are also taking action practices deemed sufficient in one jurisdiction can trigger
more frequently. Protests, legal challenges and public scrutiny, or even liability, under stricter laws in another,
mobilisation can halt operations, attract negative media particularly in cross-border supply chains. Moreover,
coverage and prompt formal investigations. What once companies may now face contractual requirements to
might have been considered externalities are now demonstrate human rights due diligence, especially when
recognised as business-critical issues, especially as working with buyers in jurisdictions with stricter laws.
social licence to operate becomes more contingent on Failure to comply can trigger contract termination or
demonstrated responsibility. liability shifts. Simply put, the cost of inaction, or poorly
executed compliance, can escalate rapidly.
Further pressure comes from within the value chain
itself. Major buyers and business partners are Risk does not always come from courtrooms.
increasingly conducting human rights audits, and failure Enforcement is ramping up through less visible but
to meet their standards, often aligned with frameworks equally serious channels. Government agencies,
like the UN Guiding Principles, can result in the loss of National Contact Points under the OECD Guidelines
preferred supplier status or termination of contracts. and competition and customs authorities are
At the same time, upstream suppliers are also under increasingly involved.
scrutiny, with risk cascading both ways. Without visibility
and proactive due diligence, companies are exposed to
avoidable disruptions, reputational harm and
strategic misalignment.

Ignoring human rights risks at the The global legal environment is

source builds fragility into your business tightening. From Europe to North
model. Disruptions from abuse, neglect America to Southeast Asia, mandatory
or backlash in the value chain can shut due diligence laws are proliferating and
down sites, delay deliveries and sever contracts. enforcement is intensifying. Whether through
Human rights are no longer externalities, they are courts, contracts or customs, companies without
operational stress points in waiting. credible human rights processes face mounting
legal exposure and financial fallout.
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How inaction can turn costly

When oversight becomes exposure
Treating human rights due diligence as optional or Moreover, delays in addressing human rights risks can
deferring it until after harm has occurred is a high- amplify their downstream consequences. Problems that
risk posture in today’s regulatory and stakeholder might have been manageable through early intervention
environment. The consequences of inaction are no longer can escalate into major crises once they reach the
speculative or abstract. They are tangible, recurring and public domain triggering regulatory investigations,
increasingly severe. litigation and loss of commercial partners. In some
cases, entire projects have been suspended or divested
When companies fail to proactively identify and address due to unresolved social and human rights concerns,
human rights risks, they expose themselves to a undermining years of investment and planning.
spectrum of negative outcomes including legal sanctions,
loss of investor confidence, supply chain instability, What unites these scenarios is not industry, geography,
operational shutdowns and reputational erosion. These or company size but a shared failure to integrate human
impacts are not limited to high-profile crises but can rights due diligence into core risk management and
often emerge from systemic issues left unaddressed governance systems.
such as poor working conditions, lack of stakeholder
engagement, or sourcing practices that overlook This is not simply about compliance, it is about foresight,
social impacts. resilience and long-term value protection. Ultimately,
companies that treat human rights risks as peripheral
Inaction is particularly costly in an environment where face rising exposure. Those that take early, structured
transparency expectations are rising and tolerance for action position themselves not only to avoid harm but to
harm is diminishing. Regulators, civil society, investors build trust, enhance stakeholder relationships, and secure
and consumers now expect companies to demonstrate a more sustainable and stable operating environment.
not just intent, but credible, verifiable action. The
direction of rights due diligence is shifting from a
voluntary norm to a legal and financial imperative, with
emerging frameworks establishing clearer expectations
and liability pathways.
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Why companies hold

back - and why that is
short-sighted
Despite growing global expectations, many companies oversight can rapidly evolve into a financial or operational
continue to hesitate when it comes to implementing crisis. The illusion that inaction buys time or avoids risk is
meaningful human rights due diligence. Common not the reality.
reasons include perceived cost, operational complexity,
fear of drawing attention to potential issues or simply Moreover, dropping or scaling back on human rights
a lack of clarity on where to start. Some assume that if work when external focus shifts, can make organisations
no crisis has emerged, then the risk must be minimal. appear unprincipled. Values like responsibility and
Others interpret shifting or uneven regulatory signals respect, which most companies embed within their
as permission to delay. This mindset is understandable, own corporate cultures upon their establishment, should
but short-sighted. In today’s fast-evolving business not be conditional. Companies that change course too
landscape, the risks of doing nothing are significantly frequently, risk eroding internal alignment and
higher than they appear. external credibility.

Inaction does not preserve stability but can actually Ultimately, delaying action is not a neutral choice but a
erode it. Over time, companies that defer action quietly strategic gamble with increasingly poor odds. As legal
accumulate hidden exposures, what might be thought frameworks mature, stakeholder scrutiny intensifies and
of as reputational debt, regulatory debt or stakeholder global expectations continue to rise, companies that fail
debt. These risks may remain out of view for a while, but to embed human rights into core governance processes
when they surface through whistleblowers, investigative will find themselves reacting to crises rather than
journalism or regulatory inquiries, the consequences can managing risks.
be immediate and costly. What may begin as an ethical

“
Too many companies shy away from human rights due diligence
because it might reveal risks they would rather not face. But that is
precisely the point. Human rights due diligence is not about being
perfect from the very beginning, it is about being accountable
and adaptive. It is a continuous cycle, not a one-off fix, and it must
evolve alongside the operational realities it is meant to address.
Tereza Kramlova
Senior advisor
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Doing it right
What does strategic human rights
due diligence look like?
We have all seen the diagram of “Commit, identify, Engage the people affected
address, track, communicate and remedy”. The UNGPs Human rights risks cannot be understood
and OECD Guidelines remain the backbone of good from behind a desk. Engaging directly with
practice. But what does that mean in real life, for a workers, communities, and other affected people (where
company with complex operations, limited leverage or a possible and safe) should inform how risks are identified,
decentralised supply chain? prioritised and addressed. It also builds credibility
and trust.
The answer is not a one-size-fits-all checklist. It is a
question of proportionality, risk exposure and continuous
improvement. Integrate across the business
Human rights need to inform decision-making,
Strategic human rights due diligence means more than be reflected in how suppliers are selected and
having a policy and a supplier questionnaire. It requires managed, how complaints are handled, how contracts are
a mindset shift from ‘do we have a process?’ to ‘is this drafted and how performance is measured. Procurement,
process fit for purpose in our context, and can we prove Legal, HR, and Compliance all have a role.
that it is having an effect?’

Respond, remediate, and report

Know your risks and act on them Grievances should be viewed as insights, not
Not a once-a-year workshop. A working liabilities. Mechanisms must be safe, accessible,
understanding of where people might be and capable of triggering real action. That also goes for
harmed across operations, value chains and business reporting, which should be linked to real outcomes and
relationships, and what can actually be done about it. business performance. If you cannot explain how your
And just like any other material risk, human rights should actions are reducing risk to people, the process is
be integrated into enterprise risk management not working.

Ownership where it matters Doing it right does not mean perfection. It means
If human rights sit exclsuvely in CSR, nothing being accountable, context-aware, and willing to adapt.
changes. It needs to be on the radar of boards, Consistently and over time.
risk committees and business unit leads. Otherwise it
stays performative and disconnected from
business reality.
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Conclusion
The case for principled
pragmatism
Much has been written about the business case for case for human rights due diligence must be articulated
sustainability such as ESG ratings, investor pressure, not just as a normative imperative, but as a pragmatic
shifting consumer sentiment etc. Yet when it comes to business necessity.
human rights, the argument is often less defined, more
uncomfortable to quantify. Perhaps that is because it Principled pragmatism means embedding respect
should not need to be made at all. The belief that every for human rights as a core business function, not a
person deserves to be treated with dignity, free from marketing line, not a compliance tick-box and not a
harm and exploitation, is foundational, a principle that philanthropic side-project. It means understanding that
should stand on its own, without needing to pass through human rights failures are not isolated incidents but
the filters of profitability or market logic. We cannot, and are indicators of systemic weaknesses that can affect
should not, try to assign a financial value to human life or supply chains, investor confidence, employee morale
human suffering. and long-term viability. The companies that grasp
this and, most importantly, act on it are not chasing
But here is the reality, businesses operate in systems that headlines or appeasing critics. They are future-proofing
demand rationalisation, prioritisation and clear evidence their operations, safeguarding their reputation and
of materiality. In boardrooms, budget cycles and strategy strengthening the trust they depend on to survive and
reviews, abstract values alone are rarely persuasive, grow. In short, they are not doing it because it looks
especially in the absence of consistent legal mandates or good. They are doing it because it works.
amid political and commercial headwinds. That is why the

Principled pragmatism – why it matters

In today’s regulatory, social, and investment landscape, neither moral intent nor technical execution alone is sufficient.
Companies are increasingly judged not just by what they say, but by how they operationalise their stated values
particularly when navigating complexity, controversy or uncertainty. In this environment, principled pragmatism offers
a credible path forward. It helps companies:

• Avoid performative compliance and rigid idealism: • Maintain credibility under pressure: Stakeholders
Rather than relying on superficial policies that exist increasingly scrutinise how companies respond to
for optics, principled pragmatism enables companies difficult situations such as operating in high-risk
to take measurable, good-faith action that aligns with jurisdictions or engaging with controversial partners.
core values, even when constraints exist. It resists both Principled pragmatism helps companies stay grounded
box-ticking and moral absolutism, replacing them with in their values while acting decisively and transparently.
thoughtful, proportional and integrity-based It signals authentic leadership, not reactive
decision-making. crisis management.

• Navigate conflicting expectations across geographies • Balance moral clarity with commercial realism:
and stakeholders: Global operations often involve Businesses must meet financial, operational and
tensions between legal requirements, stakeholder legal obligations alongside ethical ones. Principled
pressures and operational realities. Principled pragmatism does not ignore these pressures, it
pragmatism equips companies to make consistent, integrates them. It enables companies to prioritise
values-based decisions, while allowing room to human rights and sustainability without losing sight
adapt implementation to local conditions without of commercial realities, strengthening both long-term
undermining ethical commitments. value creation and stakeholder trust.
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Authors

Tereza Kramlova
Senior Advisor
Responsible Business Conduct
trkm@[Link]

Thomas Trier Hansen

Global Lead
Responsible Business Conduct
ttha@[Link]

Patrick Moloney
Global Director
Sustainability Consulting & ESG
pcm@[Link]

Find out more on

[Link]/management-consulting