The global spotlight on "Business and Human Rights" is intensifying, compelling companies worldwide to scrutinize their operations and supply chains for potential human rights impacts. Japan is an integral part of this global movement. While traditionally known for a strong emphasis on quality and long-term business relationships, Japanese companies and the government are increasingly acknowledging the imperative of proactive human rights due diligence (HRDD). For U.S. businesses with Japanese suppliers, partners, or customers, understanding these evolving expectations is critical for responsible engagement and risk management.

This isn't just about avoiding negative headlines; it's about aligning with international standards, meeting stakeholder demands, and contributing to a more sustainable and equitable global economy. The core idea is a shift from reactive damage control to proactive prevention and mitigation of human rights abuses throughout a company's value chain.

The International Bedrock: UNGPs and OECD's RBC

The foundation for current expectations around business and human rights rests on two key international frameworks:

1. The UN Guiding Principles on Business and Human Rights (UNGPs): Endorsed by the UN Human Rights Council in 2011, the UNGPs are built on three pillars:The UNGPs clarify that the corporate responsibility to respect exists independently of a state's ability or willingness to fulfill its own human rights obligations. It applies to all businesses, regardless of size, sector, operational context, ownership, and structure.
   • The State Duty to Protect: Governments must protect against human rights abuses by third parties, including businesses.
   • The Corporate Responsibility to Respect: Businesses have a responsibility to respect human rights, which means acting with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved.
   • Access to Remedy: Victims of business-related human rights abuses must have access to effective remedy, both judicial and non-judicial.
2. OECD Guidelines for Multinational Enterprises and Responsible Business Conduct (RBC): The OECD Guidelines are government-backed recommendations to multinational enterprises operating in or from adhering countries (including Japan and the U.S.). They provide non-binding principles and standards for responsible business conduct in a global context, consistent with applicable laws and internationally recognized standards. A key component is the expectation that companies will conduct risk-based due diligence to identify, prevent, and mitigate actual and potential adverse impacts related to human rights, labor, environment, bribery, consumer interests, and corporate governance in their operations and supply chains.The OECD has also published detailed "Due Diligence Guidance for Responsible Business Conduct," which offers practical support for enterprises on implementing these expectations. This guidance emphasizes a proactive, risk-based approach that involves:
   • Embedding responsible business conduct into policies and management systems.
   • Identifying and assessing adverse impacts in operations, supply chains, and business relationships.
   • Ceasing, preventing, or mitigating adverse impacts.
   • Tracking implementation and results.
   • Communicating how impacts are addressed.
   • Providing for or cooperating in remediation when appropriate.

These international standards form the baseline against which corporate human rights performance is increasingly measured globally, and Japan is no exception.

Japan's Evolving Approach to Business and Human Rights

Japan's engagement with business and human rights has been evolving, moving from a more general awareness of CSR to a more specific focus on human rights due diligence in line with international frameworks.

Government Initiatives and Policy Direction

A significant milestone was the Japanese government's formulation of a National Action Plan (NAP) on Business and Human Rights (2020-2025) in October 2020. The NAP outlines the government's policies and measures to promote the UNGPs. While it doesn't create new legal obligations for businesses, it signals the government's commitment and sets expectations for corporate behavior. The NAP encourages companies to:

• Establish and implement human rights policies.
• Conduct human rights due diligence.
• Provide access to remedy.

Following the NAP, in September 2022, Japan's Ministry of Economy, Trade and Industry (METI) released "Guidelines on Respecting Human Rights in Responsible Supply Chains." These guidelines are designed to help companies, including small and medium-sized enterprises (SMEs), understand and implement HRDD. They emphasize:

• Top Management Commitment: The importance of leadership buy-in for effective HRDD.
• Risk-Based Approach: Focusing efforts where risks are most severe.
• Supplier Engagement: Working collaboratively with suppliers to address human rights issues, rather than simply terminating relationships at the first sign of trouble.
• Transparency and Reporting: Communicating efforts and progress to stakeholders.
• Grievance Mechanisms: Establishing or participating in effective mechanisms for addressing complaints.

While these guidelines are not legally binding, they represent a strong push from the government and are becoming a de facto standard for good corporate practice in Japan. The government has also indicated it will consider human rights initiatives in its public procurement processes, potentially creating further incentives for companies to adopt robust HRDD.

The Role of Japan's National Contact Point (NCP)

As an adherent to the OECD Guidelines for Multinational Enterprises, Japan has a National Contact Point (NCP). The Japan NCP is a governmental body (operated jointly by the Ministry of Foreign Affairs, Ministry of Health, Labour and Welfare, and METI) responsible for promoting the Guidelines and handling inquiries and specific instances (complaints) related to alleged non-observance of the Guidelines by companies operating in or from Japan.

The NCP provides a non-judicial grievance mechanism. While its primary function is mediation and conciliation rather than adjudication or imposing sanctions, it plays a role in raising awareness and encouraging dialogue around responsible business conduct. The effectiveness and visibility of NCPs, including Japan's, remain areas of ongoing discussion and potential strengthening within the OECD framework. The 2023 revision of the OECD Guidelines included recommendations to enhance the visibility, effectiveness, and functional equivalence of NCPs.

Corporate Adoption Trends: A Gradual but Growing Movement

The adoption of HRDD by Japanese companies is a work in progress. Larger multinational corporations, particularly those with extensive global supply chains and significant international exposure, have been more proactive in developing human rights policies and due diligence processes. This is often driven by a combination of factors:

• International Customer and Investor Expectations: Many Japanese companies are part of global supply chains where major international buyers (often U.S. and European) require their suppliers to meet certain human rights standards. Similarly, ESG investors are increasingly scrutinizing companies' human rights performance.
• Reputational Risk Management: High-profile cases of human rights abuses in supply chains globally have highlighted the significant reputational and financial risks for companies.
• Alignment with Global Best Practices: There is a growing recognition that HRDD is becoming a global standard for responsible business.

However, challenges remain, particularly for SMEs, which may lack the resources and expertise to implement comprehensive HRDD processes. Awareness and capacity building are ongoing efforts. Industry associations are also playing a role in developing sector-specific guidance and tools.

Examples of Japanese corporate efforts include:

• Publishing human rights policies that commit to respecting international standards.
• Conducting human rights risk assessments within their own operations and for key suppliers.
• Incorporating human rights clauses into supplier contracts and codes of conduct.
• Providing training to employees and suppliers on human rights issues.
• Establishing grievance mechanisms for workers in their supply chains.
• Reporting on their human rights efforts through sustainability reports or dedicated human rights reports.

The Current Legal Landscape

Currently, Japan does not have specific, overarching legislation mandating comprehensive human rights due diligence in the way that some European countries have introduced (e.g., France's Duty of Vigilance Law, Germany's Supply Chain Due Diligence Act). The METI guidelines are, as noted, non-binding.

However, this does not mean there is a complete legal vacuum. Existing Japanese laws can be relevant to addressing human rights impacts:

• Labor Laws: Provide protections for workers regarding working conditions, wages, safety, and non-discrimination. These apply to a company's own employees and can be a reference point for assessing conditions in supply chains.
• Contract Law: Companies can use contractual clauses to impose human rights standards on their suppliers.
• Tort Law: In certain circumstances, companies could potentially face civil liability for harm caused by their operations or in their supply chains, although establishing such liability can be complex.
• Anti-Discrimination Laws: While Japan's anti-discrimination framework is not as comprehensive as in some other jurisdictions, certain forms of discrimination are prohibited.

The pressure for more explicit HRDD legislation may grow, influenced by international trends and the expectations set by the government's NAP and guidelines.

Core Elements of Effective Human Rights Due Diligence

Regardless of the specific legal framework in Japan, the core elements of effective HRDD, as outlined in the UNGPs and OECD guidance, provide a robust roadmap for companies:

1. Embedding Policy Commitment: Companies should issue a formal policy statement expressing their commitment to respect human rights, approved at the most senior level. This policy should be informed by relevant internal and/or external human rights expertise and stipulate the company's human rights expectations of personnel, business partners, and other parties directly linked to its operations, products, or services.
2. Identifying and Assessing Adverse Human Rights Impacts: This involves an ongoing process to identify and assess actual and potential adverse human rights impacts that the enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products, or services by its business relationships. This assessment should draw on internal and independent external human rights expertise and involve meaningful consultation with potentially affected groups and other relevant stakeholders.
3. Integrating Findings and Taking Action (Ceasing, Preventing, or Mitigating Impacts): Based on the findings of their impact assessments, companies must integrate these findings across relevant internal functions and processes and take appropriate action.
   • If a company causes or contributes to an adverse impact, it should cease or prevent its causation or contribution and remediate the harm.
   • If an impact is directly linked to its operations, products, or services by a business relationship (e.g., a supplier), the company should use its leverage to prevent or mitigate the impact. If leverage is insufficient, the company should explore ways to increase it. If the impact cannot be prevented or mitigated, the company may need to consider ending the relationship, but only after considering potential adverse human rights consequences of doing so.
4. Tracking Performance: Companies should track the effectiveness of their responses to ensure that adverse human rights impacts are being addressed. This involves developing appropriate qualitative and quantitative indicators and periodically verifying outcomes.
5. Communicating How Impacts Are Addressed: Companies should be prepared to communicate externally on how they address their human rights impacts. This communication should be accessible to intended audiences, provide sufficient information to evaluate the adequacy of an enterprise’s response, and should not pose risks to affected stakeholders, personnel, or to legitimate requirements of commercial confidentiality.
6. Providing for or Cooperating in Remediation: Where a company identifies that it has caused or contributed to adverse human rights impacts, it should provide for or cooperate in their remediation through legitimate processes. This includes establishing or participating in effective operational-level grievance mechanisms.

The "Cyclical System": A Dynamic Interaction

The landscape of business and human rights is not static; it's a dynamic and cyclical system involving multiple actors.

• States have the primary duty to protect human rights, which includes setting clear expectations for businesses through laws, regulations, and NAPs.
• International Organizations like the UN and OECD develop norms, provide guidance, and facilitate dialogue.
• Businesses are increasingly recognized as having a direct responsibility to respect human rights and are key actors in implementing due diligence.
• Civil Society Organizations (CSOs), NGOs, and Labor Unions play a crucial role in advocacy, monitoring, raising awareness, and providing access to remedy for victims.
• Investors and Consumers exert pressure through their financial decisions and purchasing choices.

Information flows between these actors: CSOs might expose issues, leading to investor pressure or government scrutiny, which in turn prompts companies to act. Corporate best practices can then inform the development of new standards. This interplay means that expectations are constantly evolving, and companies need to be agile and responsive.

Practical Implications for U.S. Companies Operating In or With Japan

For U.S. companies, the evolving landscape in Japan has several practical implications:

• Understand Supplier and Partner Expectations: If you source from Japan or partner with Japanese companies, be aware that they may increasingly be conducting their own HRDD and will expect their business partners to meet similar standards.
• Conduct Due Diligence on Japanese Counterparts: Conversely, when investing in or partnering with Japanese entities, conduct thorough HRDD to understand their human rights risks and management systems.
• Manage Reputational and Operational Risks: Human rights issues in Japan, whether in your own operations or your supply chain, can lead to reputational damage, consumer boycotts, and operational disruptions.
• Align Global Policies with the Local Context: While global human rights policies are essential, tailor their implementation to the specific cultural and legal context of Japan. This includes understanding local labor laws, stakeholder concerns, and effective communication strategies.
• Leverage as an Opportunity: Companies that demonstrate leadership in human rights can differentiate themselves, build stronger relationships with stakeholders, and potentially gain a competitive advantage.

Challenges and the Path Forward

Despite progress, challenges in fully implementing HRDD in Japan remain. These include:

• Complexity of Modern Supply Chains: Tracing impacts through multi-tiered, global supply chains is a significant undertaking.
• SME Engagement: Smaller and medium-sized enterprises, which form a large part of the Japanese economy and its supply chains, often face resource constraints in implementing HRDD.
• Data Availability and Verification: Gathering reliable data on human rights impacts, particularly deep within supply chains, can be difficult.
• Ensuring Effective Remediation: Establishing grievance mechanisms that are accessible, legitimate, and effective for all affected stakeholders is a complex task.

The trajectory, however, points towards increasing expectations for corporate human rights accountability. The global trend is towards greater transparency and, in some regions, mandatory HRDD legislation. While Japan is currently emphasizing guidelines and voluntary action, continued international developments and domestic stakeholder pressure could lead to a more formalized legal framework in the future.

In conclusion, navigating the landscape of business and human rights in Japan requires a proactive and evolving approach. U.S. companies that embed human rights due diligence into their core operations and engage constructively with stakeholders will be better positioned to manage risks, build resilience, and contribute to a more sustainable and equitable future, both in Japan and globally.