Japan Publishes Guidelines on Corporate Human Rights Due Diligence

The Guidelines state that businesses should adopt a comprehensive policy expressing a commitment to respect for human rights. The policy must be approved at the most senior level of the business, informed by appropriate expertise, effectively communicated, and embedded into operational policies such as procurement guidelines. The policy must also set out the business' expectations of employees, business partners, and any other relevant parties in relation to human rights.

The Guidelines emphasise that businesses should conduct human rights due diligence. This requires continuously evaluating human rights risks, including through stakeholder dialogues, and undertaking steps to prevent and mitigate adverse human rights impacts involving the business.

The Guidelines recommend that businesses collect information to track the effectiveness of measures taken to address adverse human rights impacts, which may involve, amongst other things, conducting employee interviews, site visits, and third-party audits. Businesses are also expected to disclose details to the public and affected stakeholders regarding the steps they are taking in relation to human rights risks, in a manner which is accessible, but which has due regard to confidentiality considerations. The UNGPs and the OECD Guidelines contain similar recommendations but it is notable that the Government has not decided to impose mandatory human rights due diligence obligations, as has been done in other OECD countries.

Although the Guidelines state that the content and scope of human rights disclosures are a matter for each business to decide, they recommend including basic information covering issues such as how the business is identifying, prioritising between, and preventing or mitigating human rights risks. The Guidelines also reference the Tokyo Stock Exchange's Corporate Governance Code, which prescribes disclosures on similar matters by companies within its scope.

Importantly, as well as evaluating human rights risks, the Guidelines set out that businesses have responsibilities to "make efforts" to prevent and mitigate adverse human rights impacts with which they are linked through both their direct and indirect suppliers. This will mean exercising "leverage" to ensure that suppliers and other business partners also respect human rights. The Guidelines recognise that the influence businesses have over their suppliers will vary, and treat the directness of a business' link to a supplier as relevant when prioritising between different adverse human rights impacts. The Guidelines also caution that leverage exercised over suppliers and other entities must remain compliant with Japanese competition law. This is likely a reference to the Japanese competition law prohibition on "abuse of superior bargaining position", meaning imposing unfair disadvantages on counterparties by virtue of their economic dependence.

The Guidelines state that disengagement from entities causing or contributing to adverse human rights impacts is a measure of last resort, which should only be considered in exceptional circumstances. Further guidance is provided in the Guidelines on doing business in places affected by conflict or other systemic human rights issues.

Finally, the Guidelines state that businesses are responsible for implementing and supporting appropriate remedies for adverse human rights impacts they have caused or contributed to. Under the Guidelines, businesses are not responsible for remediating adverse human impacts they are merely linked to through third parties. However, the Guidelines emphasise that it is often difficult to distinguish between such impacts and those which a business has more directly contributed to. The Guidelines recommend that businesses establish an effective grievance mechanism in accordance with the UNGPs, through which individuals affected by adverse human rights impacts may seek remediation.