Corporate Accountability in Global Supply chains? The effectiveness of Human Rights and Environmental Due Diligence Regulations (Global Supply Chains)
Third party funded individual grant
Acronym: Global Supply Chains
Start date : 01.07.2024
End date : 31.12.2027
Project details
Short description
This project focuses on a new wave of regulations building on a human rights and environmental due diligence (HREDD) approach, which aim to hold corporations accountable for severe adverse impacts in distant sites of production. These laws represent a potentially ground-breaking shift from voluntary measures to binding rules. The project analyzes to what extent and under what circumstances the recent wave of state intervention in global trade actually contributes to enhance corporate accountability across borders.
The project will advance the research frontier in three ways. First, while accountability has mainly been studied at the domestic and global level, this project develops a novel theory on accountability in the realm of global supply chains. Specifically, the theory analyzes how the following independent variables shape the effectiveness of HREDD laws: institutional design of HREDD laws, firm-level characteristics, supply chain characteristics, and domestic context conditions. Second, while previous research has focused on private governance, this project provides for the first comprehensive mapping of company compliance with HREDD obligations across importing countries, sectors and types of companies. In addition, we analyze how the accountability mechanisms enabled by the three laws operate in practice and shape the effectiveness of HREDD laws. Third, while existing research primarily relies on single-case studies, this project carries out comparative case studies in different supply chains and exporting countries for explaining variance in the effectiveness of HREDD regulations.
The project employs a mixed-methods design, combining document analysis, semi-structured interviews, comparative case studies, and survey methods. This four-year project brings together a team with a track record of successful collaboration. Altogether, the project enables a better understanding of how states can govern complex global supply chains more effectively.
Scientific Abstract
The proposed project focuses on a new wave of regulations aiming to make companies
responsible for adverse impacts of their business activities in distant sites of production.
Transnational corporations often control or are part of complex supply chains, but, until recently,
there had been few avenues to hold them accountable for human rights and environmental
impacts that occur in the course of production (Ruggie 2018). Especially, when suppliers or
subsidiaries operate in countries where law enforcement is weak and civil society faces
repression, severe impacts, such as child labor, the destruction of rainforests, pesticide pollution,
and grabbing of indigenous lands, can easily remain unaddressed. Well-known retailers and
brands have set up voluntary standards, but these have often proven insufficient for preventing
adverse impacts (LeBaron et al. 2017; Locke 2013).
In recent years, governments in the Global North have begun to adopt regulations that
require companies to exercise human rights and environmental due diligence (HREDD). These
regulations build on the United Nations Guiding Principles on Business and Human Rights
(UNGPs), and obligate companies to assess and address the environmental and human rights
impacts caused by their subsidiaries and suppliers. Examples of such laws are the French Duty
of Vigilance law (2017), the German supply chain due diligence law (2021), the Norwegian
transparency act (2021) and the emergent EU laws on deforestation-free products and corporate
sustainability due diligence (Schilling-Vacaflor & Lenschow 2021). These regulations represent
a groundbreaking shift from voluntary measures to binding rules. Non-compliant companies face
the risk of lawsuits, penalties, civil society campaigns, and pressures from investors, all serving
as important mechanisms to hold companies accountable for malpractices. Hence, HREDD
regulations promise to enhance “foreign corporate accountability” (FCA) by holding companies
in one jurisdiction responsible for harm caused abroad (Gustafsson et al. forthcoming).
However, we still know little about the real prospects of such laws to effectively address
corporate misconduct and provide victims with access to remedy. We face mixed evidence, with
some regulations being more stringent and, thus, more likely to harden FCA than others (Bueno
& Bright 2020; Krajewski et al, 2021) and some companies complying more effectively than
others with HREDD obligations (Lafarre & Rombouts 2022; Smit et al. 2021). However, there
is little empirical research that explains this variance and identifies the precise conditions and
mechanisms that foster corporate accountability across borders. Existing theories on
accountability tend to narrowly center either on domestic, global or private governance (Bexell
et al. 2010; Grant & Keohane 2005). Therefore, the overarching aim of this project is to develop
and apply an empirically grounded theory on FCA. To this end, we ask:
1. To what extent and how do companies comply with HREDD regulations?
2. How do different accountability mechanisms embodied in public policies operate, and
what are their consequences for the effectiveness of HREDD regulations?
3. To what extent do supply chain characteristics and domestic context conditions in
producing sites explain variation in the effectiveness of HREDD regulations?
Empirically, the project focuses on the only three comprehensive HREDD regulations that have
entered into force to date: the French Duty of Vigilance law (2017), the German Supply Chain
Due Diligence law (2021), and the Norwegian Transparency Act (2021). These laws differ in
terms of their institutional design, which is likely to carry important consequences for their
effectiveness in terms of fostering FCA. We combine a large-n, descriptive mapping of how
companies in three high-risk sectors have complied with the regulations, with research into
accountability mechanisms and their consequences in France, Germany and Norway and
comparative, explanatory case studies on the effectiveness of HREDD systems in different
supply chains and producing countries.
Involved:
Contributing FAU Organisations:
Rechts- und Wirtschaftswissenschaftliche Fakultät
Lehrstuhl für International Business, Society and Sustainability
