Japan Update: Business and Human Rights – Overview of the Guidelines on Respect for Human Rights in Responsible Supply Chains

On September 13, 2022, the Japanese government released its Guidelines on Respect for Human Rights in Responsible Supply Chains (the “Guidelines”).

The Guidelines have been established in order to deepen corporate awareness of these issues by outlining measures that should be implemented in order to ensure the respect of human rights, as based on international standards, including the UN Guiding Principles and the OECD Guidelines for Multinational Enterprises (Guidelines at 1.1). The Guidelines do not impose new obligations on companies conducting business in Japan or set rules, but rather organize international standards.

Scope of efforts for respecting human rights

Any companies conducting business in Japan should, regardless of their size, sector, status of activities, ownership and organizational structure, endeavor to respect human rights to the fullest extent possible. The companies should further strive in their effort to respect human rights in the following relevant entities (Guidelines at 1.3):

• The companies themselves and their group companies;
• All companies in their supply chains inside and outside Japan; and
• Other companies relating to their business, products or services (such as companies in which they invest, partners of joint enterprises, and business operators providing maintenance, inspection or security services)

Human rights policy

Companies are encouraged to express, both internally and externally, their commitment to fulfill their responsibility to respect human rights by establishing a human rights policy that meets the following five requirements (Guidelines at 3):

1. It is approved at the most senior level of the business enterprise.
2. It is informed by relevant internal and/or external expertise.
3. It stipulates the business enterprise’s human rights expectations of personnel, business partners and other parties directly linked to its operations, products or services.
4. It is publicly available and communicated internally and externally to all personnel, business partners and other relevant parties.
5. It is reflected in the operational policies and procedures necessary to embed it throughout the business enterprise.

The Guidelines state that companies should make efforts to respect human rights throughout the course of their corporate activities, including recruitment, procurement, manufacturing and sales, and emphasize the importance of commitment by the management (Guidelines at 2.2.1).

Human Rights Due Diligence

The Guidelines also encouraged companies to conduct a Human Rights Due Diligence (“HRDD”), which is a series of actions to be taken by companies in order to identify, prioritize, remedy, evaluate their success, and publicize the results of their efforts.

First, companies are asked to identify adverse human rights impacts in the company, its suppliers and others concerned. The process of identifying and assessing adverse human rights impacts can be divided into the steps in (a) to (d), as shown below (Guidelines at 4.1.1).

(a) Identify business fields with material risks

(b) Identify the process where adverse impacts arise

(c) Assess the company’s involvement in creating adverse impacts 3

(d) Prioritization

Companies are then asked to use best efforts to prevent or mitigate their human rights-adverse risk. If it is difficult to immediately stop the relevant processes due to operational, contractual or legal constraints, the Guidelines allow companies to gradually wind down the activities (Guidelines at 4.2.1.1). The suspension of all transactions with a supplier causing adverse human rights impacts is a final option. Companies should first try to prevent and mitigate such adverse impacts while maintaining their relationship with such supplier (Guidelines, at 4.2.1.3).

Next, companies are asked to assess the effectiveness of the efforts. Methods for assessing the effectiveness of the efforts listed in the Guidelines include interviews with employees, suppliers or others concerned, use of questionnaires, on-site visit, audits, and surveys by a third party (Guidelines at 4.3.1).

Finally, they are asked to disclose the results of their HRDD by posting them on the company’s Website in the form of integrated reports, sustainability reports, or by other means (Guidelines, at 4.4.2).

Future of Business and Human Rights in Japan

Although there is nothing that Japanese companies are obliged to do in response to the Guidelines, the concerns encapsulated in the concept of business and human rights are increasingly being emphasized in Western markets, and the process of the establishment of rules, including hard law, is gradually accelerating. This is an internationally consistent trend, and companies doing business in Japan cannot escape the logic of its progression.

By Anderson Mori Tomotsune, Japan, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact japan@transatlanticlaw.com

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