Japan is joining the global trend toward pushing companies to prevent human rights violations in their supply chains.

The government plans to establish a system next fiscal year for giving preferential treatment to businesses that take human rights into consideration when soliciting bids for public works projects, procurement of goods and other services.

Officials hope to motivate businesses, which tend to lag behind their Western counterparts in the field, to work more seriously on human rights issues and achieve mid- and long-term growth.

“To set an example by taking the initiative to respect human rights on the national level, we will consider setting up a mechanism for respecting human rights in government procurement projects,” Gen Nakatani, a special adviser to Prime Minister Fumio Kishida for international human rights issues, told a meeting of the U.N. Development Program in Bangkok on Sept. 22.

The government’s inter-ministerial committee on business and human rights, led by Nakatani, compiled a document titled “Guidelines on Respecting Human Rights in Responsible Supply Chains” on Sept. 13.

The guidelines are designed to create a system that helps businesses set policies for fulfilling their responsibilities to respect human rights and take corrective measures when problems arise.

Presented in the document is an approach called “human rights due diligence,” under which businesses are supposed to regularly check whether there have been any cases of human rights violations among their respective suppliers.

FEAR OF NEGATIVE IMPACT ON ECONOMY

The guidelines are not legally binding, however. They do not entitle the government to give guidance to businesses or penalize them.

The government therefore plans to set up a system for giving higher marks to businesses working on human rights issues in government procurement projects concerning public works, information technology and other services.

Officials are establishing concrete criteria to introduce the incentives in fiscal 2023, which starts in April.

The Kishida administration is being clear in its focus on “business and human rights” because a delay in addressing the question could work against Japanese businesses and could, by extension, have a negative impact on the nation’s economy.

In Japan or abroad, only suppliers are punished when human rights violations such as forced labor and child labor arise in supply chains. Little headway has been made for a long time because procurers are not held legally responsible.

In hopes of changing that structure, the United Nations in March 2011 approved a set of Guiding Principles on Business and Human Rights, which obligate nations and businesses to respect human rights. International agencies and national governments have been establishing rules on the basis of that document.

The United States has toughened its rules for controlling the exports and imports of products of businesses involved in human rights violations.

In January, Germany will enforce its supply chain law, which will obligate businesses of certain scales to exercise human rights due diligence. The law will also be applied to foreign companies that deal with German businesses, including Japanese suppliers.

COMPANIES SLOW IN DUE DILIGENCE

Questions have long been raised internationally about Japan’s practice of hosting “technical intern trainees” from abroad and drawing on them in essence as cheap labor.

In the light of the U.N. principles, an issue was previously raised about the human rights of technical intern trainees who worked for a sewing factory in Japan.

The government in October 2020 formulated the National Action Plan on Business and Human Rights, which spelled out efforts that should be made by businesses and the government to ensure that no human rights violations or exploitation will take place in the businesses’ group companies and their connections.

The document prompted businesses to implement human rights due diligence measures. However, only half of the respondents to an industry ministry survey of listed companies conducted in autumn 2021 said they were doing due diligence of human rights.

Ministry officials believe the corresponding proportion is even lower in small and midsize companies, which account for more than 90 percent of all businesses in Japan. Officials have pointed out the importance of introducing incentives.

“The trend in trade is shifting from an all-out preoccupation with liberalization toward a focus on setting rules for defending shared values, such as human rights and eco-friendliness,” said Kyoko Kashiwabara, deputy director-general for business and human rights policy at the industry ministry.

Kashiwabara said it is important to ensure that the government works on setting rules that are the foundation of business operations and that companies make their own efforts accordingly.

Sakon Kuramoto, a lawyer well-versed in the issue, said: “Some believe that human rights and the economy are at odds with each other, but businesses should definitely work on the matter for their mid- to long-term growth and international operations.”

(This article was written by Shino Matsuyama and Mari Fujisaki.)