1. New social and legal requirements.
Public debate has started to bear fruit. In particular, political and legislative bodies have responded to it with various proposals involving binding standards, such as the draft UN treaty on business and human rights [1] and the European Parliament resolution of 10 March 2021 [2]. Likewise, the implementation of a number of national laws such as the French Duty of Care Law [3], the German Due Diligence and Corporate Responsibility Act [4], the Norwegian Transparency Act [5], the US Forced Labour Act for Uighurs [6], the UK Environment Act 2021 [7] and the UK Modern Slavery Act 2015 [8] are further examples of such positive impact.
These new regulations mean greater social and legal requirements imposed on companies. Business risks are the focus of the "new judges" who today may be customers, stakeholders and even shareholders. Legal risks also arise, as national regulations can give rise to tort liability and impose sanctions.
1.1 The obligations arising from French law.
With respect to French Duty of Care law, Article L225-102-4.-I of the French Commercial Code sets out a clear obligation to publish the measures undertaken to identify all risks and prevent serious human rights abuses in the vigilance plan. This may turn out to be a difficult task, especially in the case of large multinational companies.
Indeed, the French law is considered to be a law of extraterritorial application, since the identification of risks and the prevention of serious abuses must be conducted all along the value chain. This means that if the company operates abroad, its activities outside French borders must also comply with the vigilance law.
A legal obligation that has no geographical borders calls for a borderless traceability tool : the blockchain.
2. The blockchain ensures traceability and transparency in the value chain.
Transactions, particularly within the context of supply chains, are becoming much more sophisticated over time and involve multiple operations such as the extraction of raw materials, the assembly of components, the delivery of products, occurring in remote locations and between unrelated parties sometimes unaware of each other [9]. A major issue that companies face is achieving traceability and transparency in their operations.
To this end, blockchain is an effective tool in terms of its sharing and storage capabilities. In fact, the European Parliament resolution of 10 March 2021 states in paragraph 24 that blockchain technology can help improve the traceability and transparency of supply chains.
2.1. Potential and promising features of the blockchain.
To appreciate the extent to which blockchain could be such an effective tool for implementing better traceability, it is important to acknowledge its different strengths and potential.
a) Traceability.
A blockchain is a ledger of transactions and operations, companies can register and update the production and distribution status of any product on a real-time basis. The blockchain not only records each transaction, i.e., the parties, time, certification, and other relevant details in a block, but also links the information in each block of transactions together, providing a full picture of the life of a product.
Thus, it paves the way for efficient and sustainable transactions, as it can identify and trace the production and distribution history of products. In this way, the parent company will be able to monitor whether its subsidiaries are complying with not only human rights and environmental law but also the fight against corruption and money laundering.
b) Transparency.
The blockchain allows full transparency and symmetrical access to information with an “open source” registry code [10]. This code enables each party in the blockchain to obtain a copy of the larger shared ledger, and each party has the authority to approve the trustworthiness of a piece of information, thereby enhancing the accuracy of the information. In the event of an authorised change, each party would be notified accordingly and could access the changes to approve or reject them.
Participants in the blockchain together maintain the reliability of the records and events that have occurred and have the tools to monitor each other for any discrepancies in the data stored on the chain.
3. Blockchain as a solid evidence of corporate compliance with due diligence.
It is clear that blockchain technology can significantly contribute to ensuring greater credibility of transactions, as it allows for secure archiving and full traceability of all changes made to an archived document. In addition, each blockchain is protected by a unique digital signature which acts as a key, thus overcoming remaining doubts, if any, as to the security of the blockchain.
3.1 Preventing serious human rights abuses through the due diligence process.
The traceability and security offered by the blockchain are solid proof of compliance with due diligence.
Indeed, besides requiring the identification of all risks of human rights violations, the French due diligence law requires the prevention of "serious harm". In other words, a commitment is imposed on companies to exercise all due diligence and care to prevent "serious harm". Companies that are subjected to due diligence laws have an obligation to establish a due diligence process.
3.2. Blockchain and the due diligence process.
With the blockchain, companies would be able to apply a rigorous and transparent due diligence process that displays, tracks, and highlights each transaction and removes any potential inconsistencies. Companies could even consider making some of their stakeholders a “party” or “participant” in the blockchain so that they can corroborate information and authorise or reject changes.
The enhanced security of the blockchain would provide evidence of all actions a company has taken to prevent serious human rights violations by publishing all the measures carried out and previously recorded on the blockchain. For example, Article 1358 of the French Civil Code embodies the principle of freedom of proof in matters of legal facts, admitting that proof can be provided in any form "except where the law provides otherwise". Therefore, in the event of a dispute arising under the law of due diligence, the blockchain would furnish the company with almost unquestionable adequate and solid evidence, likely to meet any standard of proof.
As such, the blockchain is trustworthy and tamper-proof, making it an excellent tool in complying with the obligations imposed by due diligence laws, as well as providing evidence in case of litigation.
