STRATEGIC COMPLIANCE. General Law of Corporate Responsibility and Corporate Due Diligence January 18, 2021
Currently is under discussion at the Mexican Senate, the draft Decree by means of which the General Law of Corporate Responsibility and Corporate Due Diligence (Law) is created, which will seek to regulate a comprehensive and sustainable domestic development by recognizing that in Mexico’s economic development necessarily involves aspects of social responsibility and respect for human rights. In this regard, it will determine the applicable provisions to guide the conduct of the Companies towards good corporate practices and thus mitigate any type of negative impact on their daily activities carry out.
Such draft Decree argues that, derived from a lack of regulation of the business sector, the Companies have been affecting and violating different aspects such as labor rights, environment, human rights, and international responsibility.
It is highly likely that the Law will be approved, published, and entered into force in 2021, as it intends to prioritize the figure of Corporate Responsibility, both in its social and human rights areas, creating a framework for comprehensive compliance with the purposes of a Company considering aspects in economic, social, and environmental matters.
Every Company must have a Corporate Social Responsibility Program duly registered before the Ministry of Economy, in order to prevent and mitigate any negative impact that may result from its activities and guaranteeing the promotion and protection of human rights through policies and proper procedures.
Likewise, Companies must adapt to the human rights paradigm to promote mutual respect among their members, making it necessary to develop a due diligence mechanism through the establishment of a specialized department that is responsible for the implementation and monitoring of policies and responsible business conduct measures.
Those Companies that incur corporate responsibility for human rights violations will be entitled to sanctions which will range from a warning, a fine and even ordering their dissolution, among others; however, the sanctions may be reduced by up to a third if, prior to the alleged act there was a permanent control body in charge of verifying compliance with the Law.
From a strictly legal perspective, it is questionable that a Company violates human rights when its activities are carried out exclusively in its private character; however, due to the new international practices around the figure of Corporate Social Responsibility the purpose of the Law is understandable.
The Law provides a considerable administrative burden for the Companies; therefore, it will be important to review and analyze that within their corporate governments there are mechanisms of analogous regulatory compliance and, in any case, modify, develop, and/or implement policies and procedures in accordance with the Corporate Social Responsibility standards required by Law, which will have to be registered in the National Registry of Corporate Responsibility.
If you have any questions regarding the foregoing, please do not hesitate to contact us.
Mexico City, January 18, 2021