Business is only as good as its human rights and environmental diligence.

As we enter year three in the COVID-19 epidemic, and with war looming, protecting peoples and the planet is more than a nice-to have. There is a growing consensus that business has a responsibility to respect human rights, even if and when states fail to protect workers, communities, and the natural environment.

The European Commission will release a draft of standard-setting legislation regarding sustainable corporate governance next week. This is intended to ensure that the environment and human rights are protected in all EU-based companies’ value chains. Despite multiple delays, this could prove to be a pivotal moment in corporate accountability if the EU achieves its high ambitions two years back. As Didier Reynders, EU Justice commissioner, said April 2020It’s time to make responsible business conduct and sustainable supply chain the norm.

There is increasing pressure on boards and companies to identify and solve problems in their value chains. This includes from investorsIt extends to the need of engaging more directly with communities affected by business activities. This is a great opportunity for business to practice inclusion. It is essential that the company’s top leadership champions proactive behaviors. Roche, my company has recognized the benefits to creating an environment in that all people are active participants, treated fairly and respectfully and have equal access to resources and opportunities. This allows them to be themselves while contributing fully towards the success of the company. This can only be achieved through the involvement of the company’s business partners. The same approach can be applied to communities throughout the value chain.

A wide range companies, investors, and business initiativesCompanies have already realized that effective mandatory human right and environmental due diligence can help them raise the bar, ensure long-term stability, and sustain their business performance.

A voluntary regime was established by the government to guide business due diligence efforts over the past ten years.UN Guiding Principles on Human Rights and BusinessTheOECD Guidelines for Multinational Enterprises. Due diligence is a mitigation strategy that allows companies to identify and show their risks, then take appropriate action. However, it is not widely used according to a 2020 study done by the British Institute of International and Comparative Law. Only 37% percent of businesses are currently doing environmental and human rights due diligence. Businesses continue to pose a risk to people and the environment. Abuses still persist in areas where visibility is poor. As the natural world becomes more fragile, the risks to vulnerable workers will only increase.

We must understand how business activities affect and depend on all forms of capital to transform businesses for the better. While management systems are essential to company performance, company boards must also be responsible for their due diligence and the consequences. Corporate governance must keep up with the demands of investors, stakeholders, and shareholders.

As a board director responsible to corporate compliance for many decades, I’ve learned that corporate responsibility shouldn’t be a box-ticking exercise. Due diligence in company culture, practice, and policy not only respects human rights and the environment but also creates a business opportunity that leads to business stability, inclusive economic growth, and a virtuous cycle of business stability. A successful stewardship approach to our businesses can and should be combined with responsible stewardship for our workforces, impacted communities, and the natural environment.

It is crucial to understand and act on the company’s impact. Due diligence aligns investment, practice, and policy with purpose. The path to sustainable business performance is to measure and then invest in all capitals. This will give us a real chance of achieving the European Green Deal or the UN Sustainable Development Goals. Impact management can open up new business opportunities for companies and give new meaning to the idea of business as a force for change. Corporations and boards must integrate sustainability into existing corporate governance procedures and risk management processes.

Many European countries, including France and Germany, have already established national standards for mandatory human right and environmental due diligence. The Netherlands and Belgium are also preparing their plans. It is sensible to coordinate and consolidate these efforts through EU, elevating Europe to the top of the list for enforcing such practices. European companies could also raise the bar in addressing environmental and human rights issues around the globe. This would help to level the playing field between regions and stakeholders. If we want to scale up these efforts, international coherence will be necessary.

The EU must act now and act boldly. The EU will set a new standard for companies and their boards with its legislation. Business leaders will be able to demonstrate their commitment to good corporate governance and a sustainable tomorrow by introducing mandatory human rights and environmental due diligence.