Values-Based Trade and Due Diligence Legislation

As a nation develops, with its physiological and safety needs satisfied, more attention is turned towards sustainability and values.

Consequently, many economically developed nations are beginning to turn attention towards their complicity in undermining human rights within global supply chains.

One way some have sought to resolve this issue is through the introduction of due diligence legislation designed to encourage companies to address human/labour rights issues within their supply chains. This type of legislation presents a challenge to policymakers who must balance competing interests between the companies they wish to regulate and those companies’ competitiveness concerns. Moreover, as the progenitors of these frameworks — primarily western developed economies — decline in relative global economic importance, the effectiveness and potential negative impacts of due diligence legislation moves into the frame.

Rationale

This research collaboration with Friedrich Schiller University, Jena, and Edith Cowan University, Perth, seeks to map current and emerging regulatory approaches in key Western markets, develop a derivative taxonomy, and use it to determine the important considerations that should be engaged with when developing due-diligence legislation.

It is our contention that a failure to engage with these considerations runs the risk of producing ineffective legislation that will perpetuate already damaging global practices. 

Our Objectives

  • Provide practical, evidence-based analysis of the current and emerging regulatory approaches towards due diligence in key Western markets.
  • Analyse the economic and political impacts of the different approaches taken by each jurisdiction, on their own countries and on developing countries impacted by them.
  • Develop proposals for policymakers regarding the considerations that should be made when developing their own due diligence legislation.

We gratefully acknowledge the funding support we received from Universities Australia and the German Academic Exchange Service (DAAD) that made this work possible.

  • Opinions

  • Working Papers

    The Impact of Due Diligence Legislation on International Trade and Business: An Analysis of Potential Trade-Offs
    As countries increasingly adopt due diligence legislation to promote human rights, labor standards, and environmental sustainability in global value chains, a complex dilemma arises. While these laws commendably aim to address moral and political issues in international trade, they may also impose significant costs on companies, potentially disincentivizing investment and trade. This study examines the impact of due diligence laws on international trade and business, analyzing some 60 cases. 

    READ FULL WORKING PAPER HERE

  • Policy Briefs

    Due Diligence Legislation and Policies: Australia’s TransparencyBased Approach to Addressing Risks of Modern Slavery in Supply Chains
    Australia’s Modern Slavery Act, enacted in 2018, represents a transparency-based approach to combating modern slavery in supply chains. Unlike its counterparts in Europe and North America, the Act lacks penalties for non-compliance and imposes no specific positive due diligence obligations beyond reporting requirements. However, recent studies and the government’s statutory review highlight significant compliance challenges, suggesting that substantial reforms to the current due diligence system are imminent.

    READ FULL POLICY BREIF HERE

    The Political Economy of Due Diligence Legislation
    Western democracy increasingly values human and social rights, civil liberties, and sustainability issues. This is materialising into legalisation, obliging domestic businesses to both comply and enforce these values along supply chains. However, this legalisation has its controversies regarding compliance costs, impacts on foreign relationships, and effectiveness, inter alia. Due diligence legislation is inherently complex. This policy brief develops a conceptual overview of the political economy challenges when designing these laws and evaluates how Western countries could enforce values-based trade along international supply chains.

    READ FULL POLICY BREIF HERE

  • Research Brief

    Modes of Due Diligence Legislation: Lessons from Oceania, North America, and Europe
    Due diligence in relation to human rights protection in supply chains is increasingly being legislated in developed economies. An important consideration for policy makers’ when designing supply chain due diligence legislation is which regulatory approach to take. This analysis considers approaches taken in the Oceania, North American and European contexts. The first is the ‘reporting mechanism’ approach, in which targeted firms are obligated to produce reports in accordance with prescribed regulations. The second is the ‘import control’ mechanism, which generally utilises pre-existing legislation to create de facto due diligence requirements through prohibiting the importation of goods produced with the use of offending processes. 

    READ FULL RESEARCH BRIEF
     

Contact

If you would like further information, please get in touch with the programme coordinator:
Professor Andreas Freytag, Visiting Professor Institute of International Trade.