Governance, risk and compliance
Walk the line A
lot has been said about the importance of the UN Guiding Principles on Business and Human Rights (UNGPs) since they were published back in 2011. Putting them into practice has not been so easy.
Cristian Ducu, president of the European Ethics and Compliance Association.
Johannes Blankenbach, the EU and Western Europe representative at the Business and Human Rights Resource Centre.
Since 2015, KnowTheChain (KTC) has made it possible to see how well large companies in the highest risk sectors have implemented the due diligence recommendations of the UNGPs to prevent forced labour in their supply chains. Drum roll, please. Ten years since the guidelines were laid out, ten years since our task was defined, the average score achieved by the 129 companies in KTC’s benchmarks has soared – all the way to 29%. More than half scored 25% or less, while just two, Adidas and Lululemon, were judged to have taken “advanced steps”. KTC is not alone in its negativity either: 46.2% of the 229 companies assessed for due diligence in the 2020 Corporate Human Rights Benchmark failed to score any points at all. Perhaps that shouldn’t be too much of a surprise: the UNGPs – like the similar OECD Guidelines for Multinational Enterprises – are not legally binding. As it stands, even companies that profess to align with them are under no obligation to actually do anything, even when dealing with their closest partners. Only a fifth of corporations benchmarked by KTC offer evidence that they have adopted responsible purchasing practices, which ease the strain placed on their first-tier suppliers and limit the risk of causing harm further down the chain. After so long spent seeing so little change, EU lawmakers have grown frustrated with the voluntary paradigm. Over the past two years, the Parliament and Commission have been working on due diligence legislation that would ‘level the playing field’ and hold EU-based and EU-operating companies legally responsible for the actions of their global supply and value chains. Soon, as Cristian Ducu, president of the European Ethics and Compliance Association puts it, companies may have to “walk the talk”.
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The era of voluntary compliance is ending. New EU regulations could soon force companies operating in the bloc to sharpen due diligence around their global value chains, but it’s not yet clear what exactly that will mean. Isabel Ellis asks Cristian Ducu, president of the European Ethics and Compliance Association; Johannes Blankenbach, the EU and Western Europe researcher and representative at the Business and Human Rights Resource Centre; and Rosie Monaghan, researcher and representative for KnowTheChain, about the different perspectives infl uencing EU decision-making – and considers what progressive companies can do to seize the moment.
Walking the walk? To quote the Commission, what Ducu calls “the talk” is about identifying, preventing, mitigating and accounting for “external harm resulting from adverse human rights and environmental impacts in a company’s own operations, its subsidiaries and in the value chain”. It’s a complex topic, but it fits in compliance documents. Walks, however, are harder to transcribe. “Many companies have drafted and approved ESG [environmental, social and governance] strategies,” says Ducu, “but they haven’t got to the point of really implementing them from the company itself to the last business partner on the supply chain. To be able to walk the talk you would have to know the entire chain. You have to go from your offices all the way to the door of the last company in the supply chain, or the last family that provides products to it.” Ducu’s probably being a bit rhetorical. Even the Parliament’s 2021 recommendations to the Commission, which asked for far more than the draft directive the Commission has since issued, called for ‘undertakings’ to engage in value chain due diligence ‘proportionate and commensurate to the likelihood and severity of their potential or actual adverse impacts and their specific circumstances’. As Johannes Blankenbach, the EU and Western Europe researcher and representative at the Business and Human Rights Resource Centre explains, this refers to the risk-based approach outlined in the UNGPs. In almost the same breath, Blackbench is at pains to point out that it does not mean every business has to meticulously police every link in its supply chain – a misconception often used to argue due diligence is too difficult to implement. “Companies have to identify and assess risks along their value chains, prioritise them and focus on the most severe,” he says. “The UNGP concept is you go where the risks are, be it tier one or tier 12, and do something meaningful about them.”
Finance Director Europe /
www.ns-businesshub.com
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