Clifford Chance

The government plans to prepare non-binding guidelines on human rights due diligence "at top speed" to help companies to identify and prevent human rights-related abuses in their global supply chains.

The plan was announced on 15 February 2022 by the Minister of Economy, Trade and Industry, Koichi Hagiuda, and reportedly will target human rights in the supply chains of Japanese enterprises. The guidelines could be introduced as early as summer 2022.

The government has yet to provide details of the guidelines, but they are expected to be drawn up by reference to international standards such as the OECD Guidelines for Multinational Enterprises. The reported intention is to offer clarity on a number of issues, including the principles for identifying and evaluating human rights-related risks within enterprises' supply chains, including in relation to forced or child labour. Importantly, the guidelines are also expected to offer practical guidance for how enterprises might investigate potential human rights violations – for example, by interviewing the employees of suppliers without the presence of managers and by conducting surprise inspections.

As reported in our recent briefing on Insights into ESG in Japan, Japan's 2020 National Action Plan on Business and Human Rights (the NAP) made it clear that the government expects all Japanese enterprises to adopt human rights due diligence processes based on the UN Guiding Principles on Business and Human Rights and other international standards and to engage in dialogue with stakeholders across their supply chains. However, the NAP itself did not offer any specific guidance on the steps that companies should take to give effect to these standards. The proposed guidelines on human rights due diligence seem intended to address that gap.

The guidelines could be the first in a series of measures designed to target human rights-related abuses in corporate supply chains; according to the Minister, depending on how discussions on international cooperation progress, the government might also look to enshrine human rights due diligence principles in legislation. If this happens, Japan would join a number of other governments around the world, including the UK, which are implementing legislative initiatives designed to govern businesses' management of their negative impacts on human rights. For an overview of key legislative developments on business and human rights related issues across the world, please see our recent briefing with the Global Business Initiative on Human Rights, 'Business and Human Rights: Navigating a Changing Legal Landscape'.

The government will form a panel to prepare the draft guidelines. This panel is likely to include government officials and legal experts as well as company representatives from across industries. The panel will aim to formalise a draft of the guidelines before it is presented to relevant government agencies at a meeting this summer.