CSR - Five core elements of due diligence (2024)

The first step is the strategic decision by management to strengthen human rights. Companies should publicly state that they are meeting their responsibility to respect human rights in a policy statement.

The policy statement should be adopted by management and address human rights issues of particular relevance to the company and, where appropriate, the industry, as well as international human rights conventions and recommendations such as the Universal Declaration of Human Rights, the UN covenants on human rights (the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and the ILO--International Labour Organization's core labour standards. The policy statement should also describe the procedures by which the company fulfils its human rights due diligence obligations. In practical terms, this means explaining the processes for identifying human rights risks and effects, as well as the plans for measures to prevent and mitigate adverse effects on human rights. This may include contractual obligations, screening and audits of suppliers and business partners, training and capacity building for the company's own employees and particularly high-risk suppliers, taking human rights risks into account in making strategic business decisions and in product development.

Within a company, employee and department-specific responsibilities must be identified at an early stage. Employee training in all relevant business fields aid with the further implementation of the due diligence obligations. This process takes time and sets learning processes in motion - for this reason, the policy statement should also be continuously updated.

How can potential effects on human rights, especially deteriorations in the human rights situation resulting from corporate activities be identified and prevented at an early stage? The answer to that question depends on the context and the question must therefore be asked and answered anew for each context. The question arises not only for ongoing business activities, but also when new activities are initiated.

When examining possible risks, a distinction must be made between effects:

• which are directly caused by the company,
• which the company contributes to, for example, through direct contractual relationships with suppliers, and
• which the company is indirectly associated with by virtue of its business relationships, its business activities, its products or services despite a lack of direct contractual relationships, e.g. when there is a large number of intermediary companies.

This systematic approach to determining the key aspects and risks is not new and is already part of established management systems and processes (for example, in Annex I of the European EMAS Regulation 1221/2009 on voluntary corporate environmental action, which sets out a company's internal environmental audit/assessment).

The size of a company, its industry affiliation and the nature of its business activities influence the risk of contributing to human rights violations. These factors are therefore also decisive for the depth and breadth of risk assessment. It makes sense to conduct a multi-stage analysis that first identifies potential risks and then examines them in depth. The starting point for risk assessment can be an overview of the company's most important activities, existing supply chains and value chains, as well as business relationships. An initial risk analysis of the company could be carried out according to business fields, products or locations. This overview can be used to identify possible risk areas by comparing the results with international human rights standards, such as the Universal Declaration of Human Rights, the UN covenants on human rights (the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and the International Labour Organization's core labour standards. For example, if work in a sector is done predominantly by women, particular attention should be paid to regulations for anti-discrimination, prohibition and prevention of sexual harassment and to maternity protection. The context-dependent factors of a location such as the political framework conditions, like legal uncertainty or the absence of freedom of expression in a country and the situation of vulnerable groups such as the indigenous population, should be taken into account. Identifying and evaluating possible risks can be promoted through document research and discussions within the company itself, in subsidiaries, with business partners as well as the involvement of external experts. An in-depth analysis is particularly necessary if there are many potentially affected persons or if the possible consequences are serious, unpredictable or irreversible. This should also include discussions with potentially affected people where they live. It may also be useful to involve both internal and external experts in the field of human rights, for example, through cooperation with local and international NGOs or trade unions.

Once the risks have been identified, preventive measures and counter-measures must be taken and integrated into business activities. The measures taken should adequately address the severity of the potential and actual impact on human rights.

In some cases, specialised training for certain employees in the company can help, in other cases, training of suppliers is needed. Other problems can be solved by making changes to management processes or supply chains, for example, through reformed procurement procedures or working with suppliers to improve their management of human rights risks. If the company's sphere of influence is limited, or if support in the implementation of industry-specific human rights diligence and reporting is desired, joining an industry initiative to create synergy effects may be useful. It is important that the responsibilities for the measures to fulfil the human rights due diligence requirements are clearly assigned within the company and that efficacy is monitored.

Companies should have information ready and, where appropriate, communicate that information outside the company in order to demonstrate that they are aware of the actual and potential effects of their business activities on human rights and that they are dealing with this issue in an appropriate manner. This information should be made available in a form that is appropriate for the target audience. Companies whose business activities have a particularly high risk of negative effects should regularly provide public reports. Both existing company report formats and independent human rights-related formats can be used for such reporting. Reporting obligations should not lead to disproportionate administrative burdens for SMEs in supply chains or companies required to provide reports.

There are many advantages to communicating in a professional, consistent manner. That can prevent damage to the company's reputation, save time and money and create long-term trust - with customers, investors, business partners and the company's own employees.