Looking Back on 2021: ESG Management and Human Rights in the Supply Chain

At the G7 Summit held in June this year, the leaders of the Group of Seven expressed concerns in a joint statement regarding forced labor occurring within global supply chains and announced that specific measures to eradicate forced labor would be discussed in detail at the subsequent G7 Trade Ministers' Meeting.
 

At the G7 Trade Ministers' Meeting held in October, forced labor within global supply chains was addressed as a major agenda item, and on October 22, a joint statement reflecting the outcome of those discussions was released.
 

According to the statement, approximately 25 million people around the world continue to suffer from forced labor. The statement specifically identified the agricultural, solar energy, and textile sectors and declared that participating countries would work together to eradicate forced labor imposed on vulnerable groups and ethnic minorities. The ministers also announced that trade policy would be utilized as an important tool in combating forced labor and signaled that businesses would be expected to follow international standards established by the ILO, the UN Guiding Principles on Business and Human Rights (UNGPs), OECD guidelines, and due diligence guidance. Although the statement did not explicitly mention China, many observers interpreted it as being largely directed at human rights issues in China's Xinjiang Uyghur Autonomous Region.
 

In November, U.S. President Joe Biden and Chinese President Xi Jinping held their first summit meeting. As expected, President Biden raised concerns regarding human rights issues, including allegations of forced labor in Xinjiang. President Xi responded by arguing that such concerns had been exaggerated and characterized the criticism as interference in China's internal affairs. Shortly thereafter, on December 14, the U.S. House of Representatives unanimously passed the Uyghur Forced Labor Prevention Act. Under the legislation, products manufactured in China's Xinjiang region are effectively prohibited from entering the United States unless the U.S. Customs and Border Protection agency determines otherwise. Korean companies are therefore likely to require prompt and careful responses to these developments.
 

Viewed in isolation, these developments may create the impression that the eradication of forced labor and the promotion of human rights within supply chains are newly emerged political issues. In reality, however, international organizations such as the ILO, the United Nations, and the OECD have been discussing these matters for many years. International frameworks such as the UNGPs, OECD Guidelines, and OECD Due Diligence Guidance, all designed to support the implementation of corporate human rights management, are the result of extensive research and collaboration among experts worldwide.
 

There are even institutions dedicated specifically to resolving business and human rights disputes. The OECD has established its Guidelines for Multinational Enterprises to encourage responsible corporate conduct and ensure that multinational companies operate in harmony with the policies and societies of the countries in which they conduct business. Because the Guidelines themselves are not legally binding, the OECD Council resolved in 2000 to establish National Contact Points (NCPs) within member states to improve their effectiveness. Korea established its NCP in 2001 and continues to operate it today.
 

Where the activities of a multinational enterprise allegedly infringe human rights and violate the OECD Guidelines for Multinational Enterprises, any stakeholder may file a grievance with the NCP.
 

After receiving a complaint, the NCP considers the positions of both parties, evaluates the matter, and initiates a mediation and conciliation process aimed at reaching a mutually acceptable resolution. If no agreement can be achieved, the NCP may issue recommendations through a formal decision-making process. The handling of such cases by individual NCPs is reported annually to the OECD. The number of complaints filed with the Korean NCP has been increasing, and Korean companies are likewise facing a growing number of complaints before overseas NCPs.
 

The Korean government has also sought to support ESG management. In August, it announced measures aimed at strengthening ESG infrastructure, and in December it unveiled the K-ESG Guidelines through a joint inter-ministerial initiative.
 

Particularly with respect to supply chain management, beginning next year costs associated with ESG management support provided to business partners will be eligible for tax credits under Korea's research and human resources development tax incentive program. Under the new framework, companies that provide ESG education and management support to suppliers may receive tax credits equal to up to 2% of qualifying expenditures for large corporations, 8% for mid-sized enterprises, and 25% for small and medium-sized enterprises.
 

Looking back, it is remarkable that such significant developments have occurred globally within a single year. Yet it is important to recognize that improvements in supply chain human rights and the advancement of ESG management are not temporary trends. They are part of a broader movement built upon years of research, commitment, and efforts to address longstanding issues. Businesses should also recognize that these changes are likely to accelerate even further in the coming year and respond proactively to the evolving landscape.


Related Article
한국투명성기구 TI-KOREA FORUM 뉴스레터 [제2호] 2021년을 돌아보며 -ESG 경영과 공급망 인권 (2021.12.27. 제2호)