Questions and Answers about the NAP

Adopted by the Federal Cabinet in December 2016, the National Action Plan (NAP) is the Federal Government’s first-ever framework on corporate human rights due diligence for German companies. In the NAP, the Federal Government expresses its expectation that enterprises will uphold human rights due diligence and respect human rights in their supply and value chains. 

The NAP supports the national implementation of the UN Guiding Principles on Business and Human Rights, as adopted by the United Nations Human Rights Council in June 2011. The Guiding Principles are the culmination of six years of research and consultation led by UN Special Representative Professor John Ruggie, a process that has been actively supported by the Federal Government. The Guiding Principles are regarded as the definitive guidelines on corporate responsibility and human rights due diligence ( for a more detailed overview of international declarations, guidelines and standards, see Question 11). 

The UN Guiding Principles refer back to existing human rights instruments, such as the Universal Declaration of Human Rights and the ILO core labour standards.

They do not create any new human rights but set out expectations concerning the observance of existing human rights through adherence to specific processes.

As an international frame of reference that formulates requirements for policy-makers and businesses, they represent the first generally recognised framework on the obligation of states to protect human rights as well as companies’ responsibilities for their global supply and value chains.

The UN Guiding Principles and the NAP are based on the three pillars of human rights protection:

• The first pillar describes the obligation of states to protect human rights (state duty to protect). 
• The second pillar deals with companies’ responsibility to respect human rights (corporate human rights due diligence).
• The third pillar calls for access to remedy and complaint mechanisms for persons affected by business-related human rights abuse.

Since early 2017, an inter-ministerial committee on Business and Human Rights has been coordinating the NAP implementation process. More precisely, it verifies implementation and coherence of the adopted measures and drives forward the NAP process. In addition, the National CSR Forum of the Federal Government has set up a Working Group on Business and Human Rights, whose members include the Association of German Chambers of Commerce and Industry (DIHK), the Confederation of German Employers’ Associations (BDA), the Federation of German Industries (BDI) and the German Confederation of Skilled Crafts (ZDH). Under the Committee, the Working Group participates in the NAP implementation process and is authorised to make appropriate recommendations for action. 

More information on the status of NAP implementation and links to other resources are available on the Federal Government’s Business and Human Rights website: www.wirtschaft-menschenrechte.de 

In Chapter III of the NAP, the Federal Government sets out its expectations regarding corporate human rights due diligence. Enterprises are expected to give due consideration to the five core elements described in Chapter III when structuring their corporate processes, including supply chains (see Question 3).

The five core elements of human rights due diligence are defined in Chapter III of the NAP:

• Policy statement: ‘With the aid of a policy statement, enterprises should state publicly that they are meeting their responsibility to respect human rights. This statement should be adopted by the senior management of the enterprise and be communicated both internally and externally. It should be used, on the one hand, to address human rights issues of particular relevance to the enterprise and/or the sector in which it operates, citing the international reference instruments in the field of human rights and, on the other hand, to describe the procedure used by the enterprise to exercise human rights due diligence.’
• Procedure for the identification of actual and potential adverse impacts on human rights: ‘Central to the exercise of due diligence is the establishment of a procedure that serves to identify, to prevent or to mitigate potentially adverse effects of corporate activity on human rights. It is not – or not only – a matter of considering risks to the company’s own business activity but is primarily about risks to the human rights of those who may be affected by corporate activity, such as employees of the enterprise itself or of other companies in the supply chain, local populations and customers. The consideration of potentially adverse impacts on human rights is a continuous task that accompanies work processes and, in particular, is performed with a sectoral focus. It should take place when new divisions, products or projects are launched as well as in the context of existing business activities. When potential risks are examined, a distinction must be made between the following types of impact: those generated directly by the enterprise itself; those to which the enterprise contributes, for example through direct contractual relations with suppliers; and those connected indirectly with the enterprise through its business relations, its business activity or its products or services even though no direct contractual relationship exists, for example in situations involving numerous intermediary dealers.’ 
• Measures and effectiveness tracking: ‘On the basis of the results of the analysis, measures should be identified and incorporated into business activity. Such measures may, for example, comprise specialised training of particular employees in-house or with suppliers, adaptation of particular management processes, changes in the supply chain and participation in sectoral initiatives. […] With the aid of effectiveness tracking, the enterprise should regularly review the efficacy of the measures it has taken and, to this end, engage in dialogue with affected stakeholders.’ 
• Reporting: ‘Enterprises should keep information at their disposal and communicate it, where appropriate, to external recipients in order to demonstrate that they are aware of the actual and potential impact of their corporate activity on human rights and are taking appropriate steps to address the situation. […] Such reporting may be done in the framework of the company’s existing reporting format or take the form of separate reports focused on human rights. At the same time, such reporting obligations should not impose disproportionate administrative burdens on the reporting companies or on the SMEs in their supply chains.’ 
• Grievance mechanism: ‘For the early identification of (actual or potential) adverse impacts, enterprises should either establish their own grievance procedures or play an active part in external procedures. Such procedures may, for example, be established by sectoral associations. The mechanism should be structured to match the target group. Accordingly, the target group should be consulted when the procedure is being devised. When new mechanisms are established as well as when existing mechanisms are used, care should be taken to ensure that they provide a fair, balanced and predictable procedure which is accessible to all those who might be affected (for instance by eliminating linguistic or technical barriers). As an extra measure, consideration should be given to the creation of offices with which complaints can be lodged anonymously. The procedure should provide maximum transparency for all stakeholders and should comply with international human rights standards. Existing complaints offices within an enterprise or its environment should be screened for compliance with the criteria defined above. The grievance mechanism of each enterprise and its whole process of corporate due diligence should be subjected to regular practice-based reviews to assess their effectiveness.’ 

There is currently no legal obligation to implement the NAP. 

However, the Federal Government expects all German enterprises to incorporate the elements of human rights due diligence described in the NAP into all their business activities. 

The NAP clearly states that this responsibility extends not only to an enterprise’s own business activities but also to the management of supply and value chains.

The NAP was an important first step and relied on companies implementing the requirements on a voluntary basis.

The status of this voluntary implementation was reviewed from 2018 to 2020 as part of a broad-based monitoring process. The process examined the extent to which companies based in Germany with more than 500 employees fulfil their human rights due diligence obligations as required by the NAP. 

The results showed that only 13 to 17 percent of the companies reviewed fulfilled the NAP requirements, which means that the target set by the federal government of at least 50 percent "NAP compliance" was not attained. 

In this case, the coalition agreement provides for the German government to take legislative action and also to advocate for binding due diligence obligations at the European level. 

More information on the legislative process can be found here.

The purpose of human rights due diligence is that enterprises should prevent and mitigate any adverse impacts their business activity might have on human rights. The relevant corporate processes must therefore be structured with that aim in mind.
 
In some cases, enterprises may already have introduced processes which integrate a human rights perspective, such as environmental and social management systems, particularly if they are based on international standards. These processes can offer an important starting point for human rights due diligence. These existing processes should be reviewed to determine whether they meet the NAP’s requirements and whether they could be upgraded to serve as a basis for NAP conformity. For example, a robust workplace safety management system based on ILO core labour standards may fulfil some of the NAP’s requirements. ILO core labour standards are among the existing human rights norms that the UN Guiding Principles and the NAP require to be respected. 
However, since these and other similar systems and processes are not necessarily fully congruent with the NAP’s requirements, it is essential to review on a case-by-case basis whether an existing environmental and social management system already complies with the NAP’s criteria and objectives. Being a member of a business or industry initiative may also support NAP implementation. 

In addition to describing the five core elements, the NAP sets out some general criteria to be considered when introducing and implementing human rights due diligence: 

• Regardless of their size, the sector in which they operate, or their operational context within a global supply or value chain, it should be possible for the enterprise to incorporate its due diligence obligations into its existing processes in an appropriate manner without creating undue bureaucratic burdens.
• Depending on the size of the enterprise, the nature of its products or services, the potential risk of particularly adverse impacts on human rights and the operating context, the measures to be taken are likely to vary in scope.
• When due diligence in the realm of human rights is defined and exercised, consideration should be given to the beneficial effects of corporate activity and to the diverse perspectives of the company’s own employees, the relevant stakeholders and others who may be affected. Particular attention should be given to the rights of their respective employees and to those of local populations who may be affected.
• It may be appropriate to conduct certain elements of the process in combination with other enterprises within an association or industry. It is advisable for companies within a given sector to formulate a specific common definition of due diligence. The Partnership for Sustainable Textiles should serve as a model for the definition of due diligence requirements in other industries.

Guidance on introducing appropriate processes is available on the Partnership for Sustainable Textiles website and the German UN Global Compact Network Germany website, for example.

Yes, being a member of such an initiative may be beneficial to NAP implementation. The measures and reporting introduced for existing initiatives (e.g. Partnership for Sustainable Textiles, German Initiative on Sustainable Cocoa, Forum for Sustainable Palm Oil) are being considered during the NAP monitoring process. If they are found to be compatible with the NAP’s requirements, these measures and reports also count towards the monitoring result, thus keeping the additional effort required by member companies within reasonable limits. 

Information about lawsuits, both ongoing and closed, in all parts of the world, including Germany, is available on the website of the non-profit Business and Human Rights Resource Centre. Users should note that the accuracy and completeness of this content are not verified by the Federal Government of Germany. 

The NAP Helpdesk on Business and Human Rights within the Agency for Business and Economic Development provides advice to companies and associations on the implementation of the NAP’s requirements. The core task of the NAP Helpdesk is to provide initial advisory and referral services related to business and human rights. There is no charge for these advisory services, which are funded by the Federal Ministry for Economic Cooperation and Development (BMZ). 

Many other sources of practical support and guidance on human rights due diligence are available to your company. An overview of these services in Germany can be found on the Federal Government’s main website on NAP implementation (www.wirtschaft-menschenrechte.de) and on the web pages of the Helpdesk on Business and Human Rights.

Various industry initiatives involving a range of stakeholders (e.g. Partnership for Sustainable Textiles, German Initiative on Sustainable Cocoa, Forum for Sustainable Palm Oil) and business associations offer their members support, advice and guidance on NAP implementation. Sector-specific corporate engagement (e.g. Roundtable Human Rights in Tourism, Drive Sustainability for the automotive industry and Chemie3 for the chemicals and pharmaceuticals sector) can also contribute to NAP implementation. 

The UN Global Compact Network Germany provides information to companies about NAP implementation and runs a tailor-made training programme entitled ‘Fit for the NAP’ (German: ‘Fit für den NAP’). The UN Global Compact Network Germany website also offers a range of best practice examples.

Information about measures adopted by companies across various sectors is also available on the Business and Human Rights Resource Centre website. The Business and Human Rights Navigator also offers numerous case studies, background information and guidance on ten specific human rights topics . econsense – a network of German companies committed to sustainability and a member of the NAP Steering Group in 2014-2016 – is another useful contact.

Comprehensive human rights due diligence and compliance with reporting obligations can benefit your company in a variety of ways: 
Operational

• They reduce day-to-day business risks by mitigating conflicts within your company, as well as disputes with local communities/other third parties.
• They enhance your company’s reputation as well as protect and increase brand value. 
• They safeguard and expand your client base by boosting your company’s reputation. 
• They improve your supplier relationships and make them more sustainable. 
• They cast you in a positive light which means you are perceived as a trustworthy partner, giving you an advantage over your competitors. 
• They increase your company’s ability to attract high-quality staff by boosting employee satisfaction and loyalty. 

Legal 

• They help you to prepare for or implement national and international governance regimes, many of which refer to the UN Guiding Principles ( see also Question 11). 
• They reduce the risk of human rights-related lawsuits. 

Financial 

• They increase your company’s ability to attract institutional investors, including pension funds, whose investment decisions are increasingly based on ethical factors. 

Respect for human rights  – such as the ILO core labour standards – is already enshrined in a range of national and international guidelines, standards and policy statements, with the UN Guiding Principles generally serving as a key frame of reference here.

Examples of these international standards and guidelines include: 

• The OECD Guidelines for Multinational Enterprises 
• The Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) adopted by the International Labour Organization (ILO)
• The IFC Performance Standards
• The EU Non-Financial Reporting Directive
• The Summit Declaration adopted by the Heads of State and Government at the G7 Summit in Schloss Elmau in 2015 and the Leaders’ Declaration adopted at the G20 Summit in Hamburg in 2017.

The OECD Guidelines for Multinational Enterprises are the most comprehensive multilateral instrument for corporate responsibility. They are targeted at multinational enterprises domiciled and/or operating in a participating country. The term ‘multinational’ applies to any enterprise engaged in extraterritorial activities linked to trade and investment, regardless of its size. The Federal Government fully expects multinational enterprises based in Germany to meet the standards defined in the OECD Guidelines. 

The OECD Guidelines establish principles for responsible business conduct in a global context in areas including social affairs, the environment, anti-corruption and taxation. A new human rights chapter, which is consistent with the UN Guiding Principles on Business and Human Rights, was added in 2011. 

Practical support to enterprises on the implementation of their corporate due diligence is provided in the OECD’s recently published Due Diligence Guidance for Responsible Business Conduct and can also be found in sector-specific guidelines: 

• OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas 
• OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector 
• OECD-FAO Guidance for Responsible Agricultural Supply Chains 
• Practical actions for companies to identify and address the worst forms of child labour in mineral supply chains 
• OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector 
• Responsible business conduct for institutional investors 

The governments of participating states (35 OECD member countries and 13 others) are required to set up a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises. Germany’s National Contact Point is based at the Federal Ministry for Economic Affairs and Energy (BMWi). Its remit is to raise awareness and disseminate information about the OECD Guidelines. In addition, in the event of complaints arising over alleged non-observance of the Guidelines, NCPs provide a mediation and conciliation platform between the parties and thus serve as an extrajudicial grievance mechanism.
 
The NAP heightens the significance of the NCP and its grievance mechanism in the context of the Federal Government’s foreign trade promotion schemes. In future, an enterprise’s meaningful participation in grievance proceedings initiated against it before the National Contact Point will be considered when extending export credit guarantees, investment guarantees and untied loans. The Federal Government reserves the right to exclude enterprises that do not respond to such allegations from accessing these foreign trade promotion instruments.

Independent of the NAP, legislation on Corporate Social Responsibility (CSR) reporting entered into force in Germany in April 2017. Both these processes establish a human rights reporting obligation for enterprises and thus have similar objectives. Nonetheless, they are legally distinct processes. Compliance with the NAP’s human rights due diligence obligations is not sufficient to satisfy CSR reporting requirements or vice versa. 

The German CSR Directive Implementation Act – or, more precisely, the ‘Act to Strengthen Non-Financial Reporting by Companies in their Annual and Consolidated Annual Management Reports’ (CSR-RUG) – obliges enterprises to disclose the main impacts of their activities on the company situation and the corporate environment. 

The Act transposed the EU Directive on disclosure of non-financial and diversity information by certain large undertakings and groups (Non-Financial Reporting Directive) into German law. The reporting obligations apply to major capital market-orientated companies, credit institutions and insurance companies with more than 500 employees, defined by reference to the average number of employees, balance sheet total and net turnover. Compared with the NAP, the legislation’s scope of application and the number of companies affected are therefore much more limited. 

Companies must report, for example, on environmental, social and employee issues, human rights, anti-corruption and anti-bribery matters. Negative impacts of corporate activity in these areas, risks and the company’s management of/strategies for dealing these matters must be described if they are significant. 

Non-financial information may be reported in a variety of ways: for example, it may be integrated into the annual report, published as a separate section within the annual report, or issued as a self-standing non-financial statement. Separate sustainability reports may also qualify towards compliance with reporting requirements. 

Companies may find it helpful to refer to existing reporting frameworks, such as the Global Reporting Initiative Standards or the German Sustainability Code. By way of exception, companies may withhold information if disclosure would be highly detrimental to their interests, but they must justify this non-disclosure (‘comply or explain’ principle). Penalties may be imposed on any enterprise which fails to comply fully or partially with non-financial reporting requirements.

Further information is available here: http://www.csr-in-deutschland.de and http://www.csr-berichtspflicht.de/ 

Besides Germany, many other countries have adopted National Action Plans to support implementation of the UN Guiding Principles. They currently include Belgium, Chile, Colombia, the Czech Republic, Denmark, Finland, France, Georgia, Ireland, Italy, Lithuania, Netherlands, Norway, Poland, Spain, Sweden, Switzerland, the United Kingdom and the US. 
Many other countries are also currently developing NAPs or have stated their intention to do so. 
Some countries have additionally adopted legislation of relevance to human rights due diligence, such as: 

• UK Modern Slavery Act 2015: Commercial organisations (which have a total annual turnover of £36 million or above and conduct business in any part of the United Kingdom) are required to report on the steps they have taken to ensure that slavery and human trafficking are not taking place in any part of their own business or supply chains. 
• UK Companies Act: Includes provisions on human rights reporting. 
• France’s Loi de vigilance 2017: French companies with at least 5,000 employees in France or 10,000 employees worldwide must produce and implement a ‘vigilance’ or due diligence plan that addresses human rights risks.
• Australia: Modern Slavery Act 
• Netherlands: Child Labour Due Diligence Act 2019.

For some sectors, there are also European law (EU regulations) in place that entail human rights due diligence obligations: 

• The EU Regulation laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas entered into force in June 2017. This Regulation also provides for a transitional period in order to guarantee its efficient rollout. The provisions concerning the implementation of supply chain due diligence obligations thus apply from 1 January 2021.
• The EU Timber Regulation (EUTR) and its provisions on operators’ due diligence systems entered into force in March 2013.