Companies which fail to check for infringements on human rights in their business and their suppliers are putting themselves at legal and reputational risk, according to a new report.
The study published on Monday from British Institute of International & Comparative Law (BIICL) and global law firm Norton Rose Fulbright found that almost half of major companies are not performing a due diligence assessment of potential human rights impact on their business or their supply chain.
Using online surveys, the study found only 51 percent of 152 companies were performing a dedicated assessment. Of these, 77 percent identified actual or potential human rights impacts and 72 percent found impacts linked to the activities of third party relationships.
According to the surveys, the two main incentives for those undertaking human rights due diligence was to avoid legal risks and protect the company's reputation.
Human rights due diligence is taking on a "hard legal dimension", Robert McCorquodale, director of BIICL, said in a press release.
"Although significant changes to national and EU laws have made the human rights performance of companies an increasingly important corporate issue, our report has found that half of companies don't even have a dedicated human rights due diligence process," he said
"As a result, they are failing to pick up adverse human rights impacts in their business, and with third parties, such as suppliers."
The issue of human rights and the treatment of workers have come into sharp focus recently. For example, The U.K. has introduced new legislation in 2015 in the form of the Modern Slavery Act, which requires any company with annual turnover of £36 million or more ($43 million) to produce yearly report on what steps it is taking to prevent slavery and human trafficking in any part of its business and supply chain.
The clothing industry as a sector has frequently been criticised for human rights abuse within its supply chain. Factories in Cambodia and Bangladesh, which supply clothing to many fashion retailers in the west, have been accused of employing children and providing unsafe conditions for workers; in 2012, a clothes factory fire in Bangladesh killed more than 100 people.
"Companies are realising that they may be responsible for activities of their business partners and third-party suppliers," Robin Brooks, partner at Norton Rose Fulbright, said in a press release.
"There is an emerging body of legal claims in a number of different jurisdictions against companies for human rights abuses in their supply chains and we expect this to continue."