(Photo by geralt via Pixabay)

It is hard for companies to know when, where and how each of their products will be used by customers and end users after they are sold. They can be passed from one person to another through distributors, second-hand markets and other channels, and at times, may even be used to support disaster relief efforts following an earthquake or other disaster. On the other hand, they could be used for warfare or in a military invasion.

What human rights risks lurk downstream?

The international research organization, Who Profits Research Center, publishes a database of companies that may be commercially involved in Israel’s military occupation. It lists hundreds of companies worldwide, including several Japanese corporations.

For example, Hitachi Construction Machinery, one of the companies listed in the database, acknowledged in response to a Toyo Keizai report (in Japanese), that an excavator photographed in Israel is one of its own products. However, the company clarified that it does not directly supply products to the Israeli government or its military, and emphasized that even though its products are sold through distributors in Israel, it pledges not to use its equipment in any way that threatens international peace and security. Hitachi also made mention of the possibility that its products may have entered the second-hand markets of other countries.

Recently, there has been a growing number of cases in which companies have faced criticism for being complicit in human rights violations because their products are being used in places or for purposes not intended by the companies after passing through the hands of distributors and second-hand markets.

What actions should companies take?

Conducting human rights due diligence on the risks associated with downstream products and services has been incorporated as one requirement in the UN Guiding Principles on Business and Human Rights (UNGPs), which were endorsed in 2011. Also, the European Sustainability Reporting Standards (ESRS), the final version of which were adopted in July 2023, requires companies to report and disclose severe human rights issues and incidents connected to its consumers and end users.

It is likely that most companies already implement some measures concerning the use of their products as part of their efforts in compliance with sales laws and regulations and export controls, but there is also a need to incorporate human rights perspectives in those efforts.

・Intel

Intel’s Global Human Rights Principles and Approach states that even though the company does not always know nor can it control what products its customers create or the applications end-users may develop, it does evaluate potential concerns and implements a ‘High Confidence Standard’ to prevent and mitigate product misuse. The document also says that when the company becomes aware of a concern, it will restrict or cease business with the third party.

・Hitachi, Ltd.

Hitachi conducts human rights due diligence in each business unit and group company, taking into account the characteristics of group companies, the value chain, operating regions, and other factors. Based on the results of its risk assessments, human rights issues have been identified in high-risk regions (conflict zones) of customers and end users.

Focusing on product use downstream is also needed

Nowadays, many companies are implementing human rights due diligence, but it is imperative that they pay attention to not only primary and secondary suppliers upstream in the supply chain, but also consumers and end users downstream. As seen in the cases of Intel and Hitachi, companies are being urged to conduct human rights due diligence in consideration of downstream circumstances and adopt preventive measures as much as possible, including the examination of countermeasures in advance. In order to gauge the tangible and potential risks that may arise from inaction, companies are required to continuously monitor whether one’s own company appears in data published by NGOs and regularly set up opportunities to engage in dialogue with NGOs and other stakeholders.

(Author: Shiho Funahara, Translation: Alex Koolhof)