The recommendation was made in a government-commissioned study by Dr Basak Baglayan, from the University of Luxembourg, examining the possibilities of a new due diligence legislation that would respect human rights along companies’ value chains.

Luxembourg law does not currently oblige firms to practice due diligence with regard to human rights and the environment, with the exception of some sector-specific obligations related to timber trade and conflict minerals. Corporate law includes reporting obligations which have a limited scope of applicability, Dr Baglayan wrote in her report.

Luxembourg has, however, adopted a national action plan based on a voluntary approach to due diligence, awareness raising and capacity building.

Meanwhile, discussions are underway to impose a due diligence directive at EU level, which the current coalition government agreed to support.

Dr Baglayan argues that since due diligence laws will be a reality in future, Luxembourg could start exploring its approach. She writes: “Once Luxembourg has devised an approach that fits both its human rights ambitions and its economic reality, it can also present its proposals at the level of the EU and influence developments in an assertive and pre-emptive manner.”

On Tuesday, the Luxembourg government issued a press statement saying that the foreign affairs ministry would establish an inter-ministerial committee to ensure follow-up the recommendations.

The announcement follows growing pressure from human rights activists in Luxembourg to enshrine due diligence in law.

Human rights concerns have been raised in relation to a small number of Luxembourg-based companies, including Israeli spyware firm NSO Group’s subsidiary Q Cyber Technologies. It is alleged the firm’s spyware technology was linked to the killing of Saudi Arabian journalist Jamal Kashoggi in 2018. An October 2020 survey for Luxembourg found 92% of people polled supported such legislation.