Putting workers and the community in the driver’s seat in human rights risk identification and remediation
Aligned with the United Nations Guiding Principles on Business and Human Rights, the European Union’s Corporate Sustainability Due Diligence Directive has reiterated the importance of stakeholder engagement in the fulfillment of mandatory due diligence standards. Despite the proposed scaling-back of stakeholder engagement compliance “burdens” on companies in the European Commission’s “Simplification Omnibus Package”, the obligation on companies to engage with rights-holders during the risk identification and remediation stages is preserved. Through examining the difference in outcomes between adopting a worker- and community-led approach and a corporate-led approach in human rights due diligence, this post calls for the prioritisation of direct consultations with workers and community members in stakeholder engagement to achieve better outcomes in risk identification and the provision of effective remedies.
Introduction
The European Union’s Corporate Sustainability Due Diligence Directive (“CS3D”), entered into force on 25 July 2024, introducing mandatory obligations for companies to conduct appropriate human rights and environmental due diligence. It aims to foster sustainable and responsible corporate behaviour in companies’ operations and across their global value chains. Notably, Article 13 of the CS3D specifically highlights the requirement for companies to take appropriate measures to carry out effective engagement with stakeholders. It helpfully lays down operational guidelines in conducting meaningful stakeholder engagement, including, inter alia, for companies to provide stakeholders with relevant and comprehensive information as appropriate to carry out effective and transparent consultations. Companies should also identify and address barriers to engagement and ensure that participants are not the subject of retaliation or retribution, including by maintaining confidentiality or anonymity.
Further, Article 13 of the CS3D reiterates the importance of meaningful stakeholder engagement throughout different stages of the due diligence process including the identification, assessment and prioritisation of adverse impacts and development of prevention and corrective action plans. Aligned with recent trends, this blog reinforces the growing recognition of the significance of stakeholder engagement in human rights due diligence (“HRDD”), which is grounded in internationally recognised standards such as the United Nations Guiding Principles on Business and Human Rights (“UNGPs”). The UNGPs not only stress the need for stakeholder consultation throughout the HRDD process (Principle 18b), but meaningful stakeholder engagement also forms part of the effectiveness criteria for non-state-based, non-judicial grievance mechanisms (Principle 31). It is also specific to operational-level mechanisms that businesses administer as part of their risk mitigation (Principle 31h).
Most recently, on 26th February 2025, the European Commission released its first “Simplification Omnibus Package” (“EU Omnibus”) containing proposed amendments to, inter alia, the requirement of meaningful stakeholder engagement in the CS3D. The “stakeholder” notion is now limited to workers and their representatives, and to individuals and communities whose rights or interests are or could be “directly” affected by the products, services and operations of the company, its subsidiaries and its business partners. On “meaningful” engagement, companies are only required to engage with “relevant” stakeholders that have a link to the specific stage of the due diligence process being carried out. Stakeholder engagement would only be required for certain parts of the due diligence process, namely impact identification, development of prevention and corrective actions plans and design of remediation measures. Although the EU Omnibus has scaled back stakeholder engagement compliance “burdens” on companies, the requirement to engage rights-holders during at least the risk identification and remediation stages is preserved, reflecting its irreplaceable role in the HRDD process. However, the framing of the stakeholder engagement requirement in the text of the EU Omnibus (Paragraph 24) as a “burden” for companies is problematic. Stakeholder engagement should be framed positively as an essential and beneficial component in the protection of rights and such negative framing does not bode well for the promotion of a rights-based corporate culture.
While stakeholder engagement encompasses a range of rights-holders and duty-bearers, adopting a bottom-up, worker and community-led approach is paramount in HRDD as it is critical in addressing some of the risk-blind spots inherent in top-down, corporate-led approaches in risk identification and remediation. This complementary approach provides a better risk picture and as a result mitigation interventions are better targeted.
Difference in outcomes between the corporate-led approach and worker- and community-led approach
The distinctive and most integral feature of the worker- and community-led approach in HRDD is direct consultation with workers and local community members who are potentially impacted by a business’ operations. It should be borne in mind that stakeholder engagement does not exclusively refer to consultations with rights-holders; the views of different types of stakeholders, including duty-bearers such as company management, suppliers and contractors and other business partners should also be accounted for to render a comprehensive picture of adverse risks and impacts. However, if a business has to prioritise its efforts under finite time and resources, engagement with workers and community members should be prioritised in the HRDD process. Where direct consultation with workers and community members is not possible or appropriate, it may be necessary to engage through rights-holder representatives or representative institutions that are deemed to be credible. Nevertheless, the core idea is to get as close as possible to rights-holders to gather their views, interests and concerns on actual and potential adverse human rights impacts.
Human rights risk identification
Workers and local community members act as “eyes and ears” on the ground that help cover the blind spots in risk identification when a top-down, corporate-led HRDD approach is adopted. For instance, when a company conducts an internal review of documentary evidence such as pay slips, time-in and time-out sheets, attendance records, etc., certain types of risks such as non-payment of wages, refusal of paid statutory leave and excessive working hours may be uncovered. However, other types of risks, such as forced labour, child labour, gender-based violence and harassment are more nuanced and less apparent from internal company records. In these circumstances, testimonies gathered directly from workers and local community members, which are a more accurate reflection of on-the-ground realities, offer invaluable insight into adverse human rights impacts that are not easily detected without on-site assessments.
The same can be said for the identification of environmental risks which has been increasingly recognised as an important component of HRDD. When business activity causes the release of toxic chemicals or polluted water into the environment, community members of the subject locality are best positioned to give prompt, first-hand observations and accounts of the environmental impacts resulting from business operations in the area. A more novel example exemplified by a multi-stakeholder HRDD program in the Bangladesh garment sector involves, after obtaining informed consent, the collection of hair samples from local community members over a several-month period to test for pollutants caused by emissions from a nearby factory. This approach empowers local community members to document actual adverse impacts that are happening to them and their community, bridging the gap between the assessor and the locality where adverse environmental impacts are occurring and producing more credible data.
Mitigation and remediation
Besides risk identification, the worker- and community-led approach also plays an integral role in providing effective and sustained relief to adversely impacted rights-holders. Worker and local community engagement is essential in the design of preventive and corrective remediation actions that are tailored to the adverse impacts the workers and community are facing in reality. For instance, remediation for gender-based violence and harassment is not possible without a first-hand account of the workers’ experience of their work environment; similarly, remediation for the dumping of toxic waste into a river necessitates the local community’s expertise on the geography of the river and how it is used in the day-to-day living of the community, etc. The worker- and community-led approaches to remediation empowers right-holders to become part of the solution to the adverse impacts they are suffering from.
Furthermore, maintaining worker and community engagement during the implementation of remediation actions allows such actions to be continuously revised and improved. Central to this is the establishment of clear channels of communication, or grievance mechanisms, for workers to report human rights violations, enabling near-constant rights monitoring which is lacking in a corporate-led approach. Worker- and community-based monitoring also addresses the "self-regulating" nature of the corporate-led approach where the company attempts to design solutions to the problems it is causing itself. Without the participation of rights-holders, companies may mold remediation efforts to fit their existing corporate practice framework instead of reforming their underlying business models to tackle the root causes of their adverse human rights impacts.
Conclusion
The CS3D dedicated a standalone Article to stakeholder engagement, reiterating its importance throughout the HRDD process in line with the UNGPs. However, the scaling back of stakeholder engagement obligations proposed in the EU Omnibus signifies a step backwards in this regard, and the framing of stakeholder engagement obligations as “burdens” in the text of the EU Omnibus is problematic. The realisation of a rights-based corporate culture necessitates a change in businesses’ mindset to view stakeholder engagement as an essential and beneficial component not only in rights protection, but also in the enhancement of risk identification and as a matter of corporate best practice.
Nevertheless, the requirement to engage rights-holders during at least the risk identification and remediation stages remains after the introduction of the EU Omnibus. Therefore, direct consultation with rights-holders remains a crucial part of HRDD. In addition to helping fulfill the legal requirements of the new mandatory due diligence framework, the worker- and community-led approaches complement the shortcomings of the corporate-led approach to achieve better outcomes in human rights risk identification and remediation, resulting in more targeted and effective relief for rights-holders. Ultimately, it empowers workers and community members to act as drivers of change in the quest to realise responsible corporate practice.