Human Rights Due Diligence and the EU market

By Gemma Livingston
KPMG New Zealand

Prime Minister Christopher Luxon has announced that modern slavery legislation is “not a priority” for New Zealand. His comments came in response to recommendations by the UK and USA that New Zealand enact modern slavery legislation as part of the peer review process during the United Nations Human Rights Council. Other key human rights issues discussed during the UN Council included the need for New Zealand to address forced labour, human trafficking and migrant worker protections.

So, does the Government’s stance on enacting modern slavery legislation mean businesses do not need to consider and mitigate modern slavery risk in their business operations and supply chains?

In short, no. Good practice relating to modern slavery goes beyond just legislative compliance under New Zealand law. Awareness of modern slavery has seen increased public scrutiny on businesses and increased expectations from stakeholders - including clients, investors and business partners. Choosing not to address modern slavery risk, creates elevated reputational risks, and this is compounded by changes in global regulation which are also increasingly impacting New Zealand businesses.

EU regulations

CSDDD Obligations

On 24 April 2024, the European Parliament formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD).

The CSDDD sets out minimum requirements for EU Member States to ensure that companies engaging in business relationships with the EU adhere to robust sustainability practices.

Under the CSDDD, in-scope companies are obligated to undertake human rights and environmental due diligence across their global supply chains. This means that businesses must effectively identify, address, prevent, mitigate, and remedy any negative human rights and environmental risks associated with their operations. 

Furthermore, in-scope companies are required to adopt and implement transitional plans for climate change mitigation, in alignment with the goals outlined in the Paris Climate Agreement.

Forced Labour Regulation and the Deforestation-free products Regulation

In addition to the CSDDD, recent EU regulations, such as the Forced Labour Regulation and the Deforestation-free products Regulation, place even greater emphasis on ethical and sustainable business practises across global supply chains.

The Forced Labour Regulation empowers the EU to prohibit the import and export of goods produced using forced labour. 

The Deforestation-free products Regulation ensures companies will only be allowed to sell products in the EU if the supplier has issued a “due diligence” statement confirming that the product does not come from deforested land or has led to forest degradation. Goods included in the Regulation include cattle, cocoa, coffee, palm-oil, soya, wood, rubber, charcoal and printed paper products.

The Regulation also requires companies to ensure that commodities are produced in conditions that comply with “relevant laws” in their country of origin including consideration of labour rights and human rights.

While New Zealand is likely to be considered a low-risk country for deforestation under the proposed benchmarking criteria, additional diligence compliance burdens are expected for New Zealand exporters of covered goods.

What do the EU regulations mean for New Zealand businesses

On 1 May the New Zealand-European Free Trade Agreement came into force. The Free Trade Agreement presents a tremendous opportunity for New Zealand businesses to further expand their exports, particularly in the primary industries.

However, it is crucial to consider the strong emphasis the EU is placing on environmental and human rights concerns when engaging with trading partners.

New Zealand businesses looking to enter, grow or maintain business relationships with the EU will likely need to enact sustainability due diligence as a minimum requirement of doing business. This includes modern slavery due diligence.

By adopting and implementing sustainable practises, including undertaking human rights due diligence, businesses will not only meet the minimum standards set by the EU but also enhance their reputation, foster long-term relationships, and contribute to a more environmentally and socially conscious global trade landscape – as well as satisfying the expectations of their local stakeholders.

About Gemma Livingston

Gemma Livingston leads KPMG’s human rights and social impact offerings in New Zealand. Gemma works with KPMG clients across the ‘S’ and ‘G’ of ESG to identify and address human rights risks and opportunities in business operations and supply chains.  Specialising in modern slavery, Gemma provides advice on global legislation and due diligence, assisting clients to effectively identify, address, prevent, mitigate, and remedy negative human rights risks.

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