Scotland and Wales Tie Trade and Investment Deals to Human Rights Due Diligence

Scotland and Wales Tie Trade and Investment Deals to Human Rights Due Diligence

In recent weeks, both Scotland and Wales have taken steps to promote corporate respect for human rights, by ensuring all public contracts are subject to additional relevant requirements prior to signing. This adds to the wave of due diligence measures governments are implementing to ensure the companies they do business with are taking responsibility for their human rights impacts.

The Scottish government has determined that all trade and investment deals will be subject to human rights screening. Specifically, it has agreed to “always consider the human rights implications of its engagement with countries and business” and has signaled its belief that “investment agreements should only be signed where appropriate due diligence, including on the human rights record of companies involved, has been undertaken”.

The pledge came after Amnesty International raised concerns over the country’s signing of a memorandum of understanding with two Chinese companies, SinoFortone and China Railway No.3 Engineering Group (CR3), which have both been accused of compromising the human rights of workers in their supply chains.

In Wales, the government has released a Code of Practice on Ethical Employment in Supply Chains which all organizations receiving funding from the Welsh government, either directly through grants or within contracts, must sign. Other organisations are being encouraged to voluntarily sign up. The twelve commitments in the code are aimed at public, private and third sector organizations and include tools and advice for conducting human rights due diligence.

More broadly, these decisions build on the intent of the United Nations Guiding Principles on Business and Human Rights, and go even further than action plans currently in place (such as the National Action Plan of the United Kingdom), highlighting the potential for Scotland and Wales to emerge as global leaders in the field of business and human rights due diligence.

This development fits into the trend of increased requirements for mandatory corporate due diligence on human rights. As Scotland and Wales push human rights due diligence to the forefront of its global dealings, it is only a matter of time before other countries follow suit. Companies found to use human trafficking, forced labor and other unethical practices in their supply chains may therefore find themselves unable to access government contracts in the future. Beyond the possibility of missed financial opportunities, reputational, operational and other setbacks may emerge if information about these practices becomes public or industry-wide knowledge.

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Furthermore, these ground-breaking commitments signal that, even if your company maintains wholly ethical human rights practices, it may still be excluded from government contracts in the future if unable to tangibly demonstrate evidence of this upon request. This dramatically increases the need for comprehensive supply chain surveying, audit trails, data collection and data organization.

Open source tools like the Human Trafficking Risk Template (HTRT) and the Conflict Mineral Reporting Template (CMRT) help companies gather data relevant to respect for human rights from their supply chains, screen for risk and inform further due diligence actions. Armed with this data, companies can take appropriate steps to identify and mitigate instances of human rights violations in their supply chains and protect themselves from risks associated with these activities.

For more details on human rights due diligence and leveraging data from the HTRT and CMRT to minimize financial, reputational and other risks to your organization, contact our regulatory experts at As human rights due diligence continues to make waves in many European countries, it is important to stay informed about the regulatory changes that may affect your company, such as the French Duty of Vigilance Law. Learn more about this regulation in our upcoming webinar on May 9th, 2017, at 10 AM ET.