Over the last decade, a patchwork of national and supranational “business and human rights laws” has emerged requiring employers to conduct due diligence of their global operations to address human rights risks such as forced labor and child labor. The vast majority of these laws were passed in Western jurisdictions like European Union countries, the United States, and the United Kingdom.1 On September 13, 2022, however, Japan released the “Guidelines on Respecting Human Rights in Responsible Supply Chains” (the “Japan Guidelines”). In doing so, Japan became one of the first non-Western countries to develop a legal framework on business and human rights (BHR).
To be sure, the Japan Guidelines are just that – non-binding guidelines. In other words, they are not enforceable, in contrast to Western BHR laws like the French Due Diligence law or the German Supply Chain Act. Nonetheless, the adoption of these Japan Guidelines by Japanese companies has been rapid. According to a recent report,2 a majority of large Japanese companies have already taken significant steps that are in compliance with the Japan Guidelines.
What are the Japan Guidelines?
The Japan Guidelines were issued by the Ministry of Economy, Trade and Industry (METI), and adopts the international standards of the UN Guiding Principles on BHR, the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, and the International Labour Organization (ILO)’s Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.
Generally, the Japan Guidelines state that businesses should respect human rights – i.e., internationally recognized human rights, including freedom from forced labor and child labor, freedom of association, right to collective bargaining, and freedom from discrimination.
The Japan Guidelines also emphasize how respect for human rights can have a positive impact on a company’s competitiveness and corporate value, including, for example, mitigating certain management risks, such as the boycott of products by consumers and business partners, and improving a company’s global reputation.
To whom do the Japan Guidelines apply?
The Japan Guidelines apply to all companies or independent contractors conducting business in Japan, regardless of their size or industry, and regardless of where they were incorporated or registered. Therefore, for example, a U.S. company’s branch office or subsidiary in Japan would be covered under the Japan Guidelines.
They also apply to Japanese companies’ group companies, and their service providers, suppliers, and other entities in which they invest. Thus, the impact of the Japan Guidelines will be felt not only in Japan, but also among Japanese companies’ business partners around the world.
What do the Japan Guidelines require covered businesses to do?
The Guidelines suggest businesses demonstrate respect for human rights by taking the following steps:
- Adopt a human rights policy, developed in consultation with experts and stakeholders, approved at the most senior level of business, and publicized both internally to employees, business partners, and other relevant stakeholders, and externally to the general public.
- Conduct human rights due diligence, in which the company identifies adverse human rights risks and impacts in its operations, takes actions to prevent or mitigate those adverse risks and impacts, and evaluate the effectiveness of those actions over time. “Adverse impacts” are those a company’s activities directly or indirectly cause or contribute to, or to which a company is linked through its business relationships. Thus, the Guidelines contemplate, for example, suspending or terminating the contracts of global suppliers that do not respect human rights.
- Implement grievance mechanisms, which are open to all stakeholders, to receive complaints of and remedy adverse impacts to human rights.
As mentioned above, Japanese companies’ adoption of these steps have been rapid. 64.8% of large Japanese companies have already implemented a human rights policy. About 28.8% of these companies are already conducting human right due diligence, but it is expected that this number will increase to 71.9% in a few years. Among the companies that already conducting due diligence, over 70% of them are requiring their global suppliers to be compliant with their human rights policy.
How will the Japan Guidelines impact other APAC countries?
As one of the first non-Western countries to implement a BHR legal framework, Japan will likely influence other countries in the APAC region, as well as the overall Western focus of BHR developments.
First, as noted, Japanese companies’ suppliers and other business partners in other APAC countries such as Vietnam and India will feel pressure from those Japanese companies to adopt and implement human rights policies and practices that are in line with the Japan Guidelines.
Second, the Japan Guidelines may serve as an example to other APAC governments on how to introduce BHR concepts to their jurisdictions’ businesses. Indeed, the Japan Guidelines evolved from Japan’s 2020 National Action Plan (NAP) on BHR, which stated that all Japanese companies should adopt human rights due diligence processes. As APAC countries like Thailand implement and develop their own NAPs, those countries may consider how Japan’s NAP resulted in the Japan Guidelines.
Indeed, the Japan Guidelines may signal the start of a shift in the patchwork of BHR legislation from its current focus on Western companies.
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