Once more, companies are found in the middle of a regulatory quicksand with escalating geopolitical tension taking place globally, making it increasingly disorienting for them to cope with human rights compliance. The EU Commission’s February proposal to simplify, or even deregulate, rules has already impacted how businesses approach their environmental and social responsibilities.

Companies operating in critical zones grapple with political, financial, and logistical risks as the global demand for raw material is nowhere near settling down. Businesses must balance compliance costs against potential penalties, particularly under frameworks such as the Corporate Sustainability Due Diligence Directive, which affects larger companies with turnover exceeding EUR 450 million in the EU.

Nevertheless, businesses can still do well in this volatile environment while maintaining a balance between profitability and ethical standards if they follow practical approaches to risk assessment, supply chain management, and sustainable business procedures.

Human Rights in Business

Business enterprises worldwide are accountable for their effects on fundamental human rights, thus adding them pressure during identification and dealing.

The UN Guiding Principles clarify that businesses have an independent responsibility to respect human rights, whatever states do to fulfill their obligations.

When referring to human rights violations in business contexts, these are actions that infringe upon people’s basic rights to dignity, respect, and fair treatment. These violations often manifest through unsafe working conditions, unfair wages, discrimination, or environmental damage that harms community health. Moreover, businesses must acknowledge risks to human rights defenders and other critical voices when they assess potential violations.

 Business activities can affect human rights either directly, through their operations, or indirectly through business relationships. For example, workplace conditions might affect employees’ rights to health and safety, and some supply chain operations can lead to forced labor. Additionally, operations can damage the environment or threaten communities’ access to clean water.

On the other hand, companies can positively influence human rights by offering work opportunities or using ethical practices that protect employee rights.

While human rights compliance rules continue to evolve, international human rights law requires some states, including businesses, to protect against human rights abuse within their territory by third parties.

Companies must also implement human rights due diligence processes that include, among others, the identification and assessment of actual or potential adverse human rights impacts,  findings across the company’s processes, and checking whether these preventive measures are effective. To name an example of legislation that strengthens enforcement mechanisms, France’s Duty of Vigilance Act requires companies to demonstrate the measures they take to prevent  human rights risks in their activities and supply chains.  Similarly, Norway’s Transparency Act and Germany’s Supply Chain Due Diligence Act have introduced more rigid reporting requirements.

The main focus of human rights due diligence is to prevent adverse impacts. Risks differentiate through time, so that means this is not a one-off process. Involve all affected stakeholders and cultivate a collaborative and supportive environment to effectively handle working issues.

Current Challenges in Corporate Sustainability

Global supply networks have also been greatly disrupted by climate-related events. The projected cost of environmental risks in supply chains will reach USD 120 billion by 2026.  Events globally have highlighted vulnerabilities in this matter. Drought and heat stress halting production in water-intensive manufacturing processes (China) affected the automobile industry; flooding in the Netherlands and Germany pushed late shipments between 26% and 32%, whereas the drought in 2023 affected a key Amazon port in Brazil, disrupting food and water delivery.

These events are a big deal, as it means that global sustainable assets are expected to reach GBP 42.09 trillion by this year, and companies will need a major investment to reach climate goals.

The growing costs of maintaining sustainable operations, particularly for companies located in conflict zones, are primarily caused by high insurance premiums to protect premises against potential disasters, issues with hyperinflation or revenue losses during production halts, and potential market restrictions due to financial sanctions. In fact, most executives are concerned with the political instability affecting their operations as they contemplate the need to uphold their environmental commitments against rising costs. This creates a gap between plans and actions, mainly due to financial constraints rather than lack of dedication, alongside the increasing percentage of consumers choosing socially responsible products and services.

Balancing Profits and Human Rights

Modern businesses understand that social responsibility and profitability are linked, not mutually exclusive. A study from 2024 found that senior leaders responsible for corporate social impact and sustainability stressed how important it was to address broad economic, social, and environmental issues while still making money.

With regards to human rights effects, during the systematic process of risk assessment, a business should consider priorities and how risks may impact not only on the business per se but also on the people.

It’s all about evaluating the actual and potential results for stakeholders and analyzing effects throughout the value chain.

Since operations and conditions do not stand still, regular tracking to detect emerging risks is imperative, as this helps them take stronger positions and allocate the right resources into socially responsible projects.

 There are prime examples of companies demonstrating that social impact and revenue growth can thrive side by side.

Beyond its people, Patagonia’s dedication to community involvement benefits areas throughout its supply chain. IKEA is committed to providing fair wages throughout its supply chain, closely cooperating with suppliers to ensure living wages are paid, eventually promoting economic stability and reducing poverty.

Starbucks has committed to ethically sourcing 100% of its coffee by 2025, verified by third-party auditors,  improving the livelihoods of farmers, and also securing a more sustainable supply chain.

Companies that are purpose-driven and are involved in such initiatives are more likely to have long-lasting resilience, proving that they can make a difference while earning profits.

Creating Sustainable Business Models

Businesses need a detailed approach that goes beyond basic compliance to successfully implement sustainable practices. It is vital to understand that ethical supply chains and resilient due diligence processes are the lifeblood of responsible operations.

Supply chain sustainability covers environmental protection and social responsibility throughout product lifecycles. When the focus is on consumers, who can easily stop supporting organizations that don’t align with their values, there is additional pressure. Some of the steps that businesses must follow:

• Save resources to reduce environmental effects.
• Maintain fair labor practices and worker welfare.
• Build transparent and traceable supply networks.
• Encourage meaningful stakeholder involvement

We have witnessed supply chains exposing vulnerabilities in human rights and modern slavery when they became more complex. Unfortunately, the lack of stringent reporting laws will make it more difficult to terminate future violations.

 Human rights due diligence (HRDD), a core requirement of the CSDDD, provides the main framework for businesses to spot and fix potentially harmful effects.

This should not just be approached voluntarily rather than as a liability, an ongoing process according to which:

· Human rights risks are identified (e.g., forced labor, child labor, discrimination).

·     Adverse impacts in supply chains are prevented & mitigated.

·      HRDD compliance is monitored and reported.

·     Affected stakeholders have access to remedies.

For this process to be implemented and prove its efficiency in the long run, it is highly important to set up specific centers of excellence that draw knowledge from the entire business, with teams of environmental and human rights experts who will be capable of handling these matters.

The fact is that geopolitical tensions will never cease, and organizations will never be exempt from challenges to balance human rights compliance with profits. Yet we cannot overlook that there are organizations that have proven the harmonious coexistence of ethical practices and financial success. Smart businesses blend human rights into their core strategies instead of viewing compliance as a burden. The ones that run thorough background checks and manage ethical supply chains can identify potential risks in advance and handle problems before they grow. Organizations should maintain sustained growth by prioritizing both profit and principles, even in the face of geopolitical or regulatory upheavals.

Through systematic risk assessment and meaningful stakeholder engagement, organizations can build resilient operations that benefit both their bottom line and society at large.