Introduction 

As foreign investors and businesses look to expand into Ethiopia, understanding the intersection of business operations and human rights regulations is becoming increasingly important. Ethiopia’s growing commitment to international standards, such as the UN Guiding Principles on Business and Human Rights (UNGPs), is shaping the legal landscape in ways that directly affect corporate conduct, investment security, and profitability.

For investors, compliance is not merely a formality, it is a safeguard. Failure to understand or integrate human rights considerations into business operations can expose companies to legal penalties, reputational damage, project delays, and even license suspensions. In contrast, proactive compliance is essential not only to mitigate legal and reputational risks but also to unlock significant strategic advantages and secure a sustainable, profitable operation. This piece, written by Mr. Yiheyis K/Mariam (A human rights law consultant at Makkobilli), breaks down the UN Guiding Principles on Business and Human Rights (UNGPs), existing Ethiopian legislations impacting business and provides compliance tips for investors operating in Ethiopia.

1. Understanding the UN Guiding Principles on Business and Human Rights (UNGPs) 

Adopted by the United Nations in 2011, the UN Guiding Principles on Business and Human Rights provide a globally recognized framework for preventing and addressing business-related human rights abuses. They rest on three interrelated pillars:

1.1. The State Duty to Protect Human Rights

States bear the primary responsibility to protect individuals from human rights violations linked to business activity. In practice, this includes:

Enacting and enforcing laws to prevent corporate human rights abuses.

Overseeing state-owned enterprises and ensuring compliance with human rights standards.

Embedding human rights principles in public procurement and privatization processes.

Ensuring policy coherence across trade, investment, and development policies.

Providing guidance to companies operating in high-risk or conflict-affected regions.

1.2. The Corporate Responsibility to Respect Human Rights

Businesses—regardless of size or sector—have an independent responsibility to:

Avoid causing or contributing to human rights abuses.

Address adverse impacts connected to their operations, products, or partnerships.

To meet these responsibilities, businesses should:

Adopt a Human Rights Policy: Clearly commit to ethical and rights-respecting conduct.

Conduct Human Rights Due Diligence: Regularly assess and mitigate potential and actual risks.

Provide Remediation: Offer or support effective remedies for any harms caused.

1.3. Access to Effective Remedy

Both States and companies must ensure that victims of business-related human rights abuses can access justice through:

Judicial Mechanisms: Courts and tribunals with authority to enforce accountability.

Non-Judicial Mechanisms: National human rights institutions, mediation systems, and company-level grievance procedures.

2. The Business Case: From Risk Mitigation to Competitive Advantage in Ethiopia

Understanding and implementing the UNGPs is not merely about ethical alignment or avoiding penalties; it is a strategic investment that safeguards and enhances your business value. While non-compliance carries tangible consequences, proactive management of human rights offers clear competitive benefits.

2.2. The Legal and Reputational Risks of Non-Compliance

Key Ethiopian legislation already creates direct legal obligations for your business:

The Revised Commercial Code (Proclamation No. 1243/2021): Article 316 requires company directors to consider the impact of the company’s operations on the community and the environment, creating a fiduciary duty to oversee human rights risks.

Investment Proclamation (No. 1180/2020): Article 54 imposes a duty on all investors to observe domestic laws and give due regard to social and environmental sustainability. Failure to comply can result in the suspension of your investment license under Article 13(1)(f).

The Labour Proclamation (No. 1156/2019): Mandates minimum working conditions, occupational safety, and the protection of workers’ rights. Non-compliance can lead to fines, and operational suspension.

Mining Operations Proclamation (No. 678/2010): Requires environmental impact assessments (Article 60) and adherence to safety standards (Article 34), with violations leading to license revocation under Article 44.

Environmental and Social Impact Assessment Proclamation (No. 1371/2025): Demands environmental and social impact assessments before project approval or commencement. Breach can lead to fines and suspension or revocation of licenses.

2.2. The Strategic Advantages of Proactive Human Rights Management

While non-compliance carries tangible consequences, proactive management of human rights offers clear competitive benefits. Companies that are recognized as respecting human rights gain a significant advantage by:

Enhancing Risk Management: Reduce the likelihood of costly business disruptions, litigation, public campaigns, and reputational harm, while also improving employee retention and recruitment.

Unlocking Business Opportunities: Gain better access to government tenders, financing, and partnerships with international buyers who preferentially select partners with proven human rights due diligence.

Strengthening Stakeholder Relationships: Build greater trust with local communities, workers, and civil society, resulting in a stronger "social license to operate" and more resilient operations.

Attracting Investment and Talent: Appeal to the growing pool of socially responsible investors and the next generation of young leaders who prioritize corporate responsibility, giving you a comparative advantage in the market.

3. Actionable Compliance Tips for Investors

To mitigate risks and capitalize on these strategic advantages, we recommend integrating these proactive steps into your business strategy:

Conduct Human Rights Due Diligence: Integrate ongoing human rights risk assessments into your core operational planning to identify and address risks within your operations, supply chain, and business relationships.

Develop a Robust Human Rights Policy: Establish a clear, public policy statement, endorsed by senior management, that outlines your company’s commitment and procedures for addressing grievances.

Establish an Effective Grievance Mechanism: Create an accessible and transparent process for workers and community members to raise concerns, serving as an early-warning system to resolve issues proactively.

Provide Targeted Training: Equip your managers and employees with the knowledge to implement your human rights policies effectively, embedding a culture of respect and accountability.

How We Can Help: Our Business and Human Rights Services

At Makkobilli Law Firm LLP, we provide strategic guidance to help investors navigate this complex regulatory environment, ensure compliance, and protect their investments. Our tailored services are designed to integrate human rights due diligence seamlessly into your business operations.

We assist our clients with:

Human Rights Impact Assessments & Due Diligence: We conduct thorough assessments to identify, prevent, and mitigate human rights risks within your operations, supply chains, and business relationships.

Compliance Strategy & Policy Development: We help you develop robust human rights policies and practical compliance strategies that align with both Ethiopian law and international standards like the UNGPs.

Training & Capacity Building: We offer customized training programs for your management and staff to foster a culture of compliance and ensure your team is equipped to manage human rights issues proactively.

Grievance Mechanism Design & Dispute Resolution: We assist in establishing effective operational-level grievance mechanisms and provide expert representation in mediation or other dispute resolution processes to address issues efficiently and fairly.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. The business and human rights landscape is evolving. Please consult with a qualified legal professional for advice tailored to your specific situation.

Keywords: UN Guiding Principles on Business and Human Rights, Business and Human Rights Ethiopia, National Action Plan on Business and Human Rights (NAP-BHR), Corporate human rights responsibility, Human rights due diligence, Ethiopia investment law, Commercial Code Ethiopia, compliance risk Ethiopia.