Human rights duty of care in the supply chain

What is the duty of human rights vigilance in the supply chain ?

The duty of human rights vigilance in the supply chain requires companies to ensure that their operations, as well as those of their business partners, do not harm human rights and the environment. This process requires identifying, preventing, mitigating and correcting any negative impact on human rights and the environment, in consultation with all stakeholders.

This responsibility is based on international standards such as the United Nations Guiding Principles for Business and Human Rights, the OECD Principles for Multinationals, or the ILO Core Conventions. National and regional legal frameworks, such as the French law on due diligence, the German legislation on due diligence obligations in the supply chain or the European directive on due diligence on sustainability, support these products quality standards. They include sanctions for breaches and redress mechanisms for victims of human rights and environmental violations.

All companies, regardless of size, industry or location, are subject to the duty of care. The latter covers the entire value chain, involving the direct activities of the company as well as those of its subsidiaries, suppliers, subcontractors, distributors or customers.

It encompasses the protection of all human rights, including civil, political, economic, social and cultural rights, as well as environmental rights, such as the right to a healthy environment, water or a sustainable climate.

Why implement the duty of vigilance of human rights in the supply chain for your company ?

Adopting the duty of vigilance in terms of human rights within your supply chain is enriching, both ethically and strategically. This is why it is essential to take this path :

• You align with international standards and current human rights and environmental legislation. Thus, you minimize the legal, financial and reputational risks that may arise in the event of non-compliance with these rights.
• You boost your credibility and build your reputation with your stakeholders, including customers, investors, shareholders, employees, suppliers, subcontractors, distributors, public authorities, NGOs, unions and media.
• You improve your performance at all levels - economic, social and environmental. This improvement is reflected in improved risk management, cost reduction, increased productivity, innovation, talent retention, increased competitiveness and openness to new markets.
• You contribute effectively to sustainable development. This is done by aligning your strategy and practices with the United Nations Sustainable Development Goals (SDGs), supporting the rights of vulnerable populations, preserving natural resources and fighting climate change.

‍

Ultimately, establishing human rights due diligence in your supply chain is an opportunity for your company to generate shared value. This allows you to balance your economic ambitions with the social and environmental needs of society.

Who is the duty of human rights vigilance in the supply chain addressed to ?

This duty concerns any entity with an influence on human rights and the environment, whether it contributes directly to it or through its commercial partnerships. Thus, it not only affects ordering companies but also includes their subsidiaries, suppliers, subcontractors, distributors and customers.

Regardless of their size, industry or geographical location, all companies are subject to this duty of care. However, specific provisions, introduced by regulations such as the French law on the duty of vigilance of parent companies and ordering companies or the European directive in favor of the sustainable vigilance of companies, define the criteria according to which certain undertakings are particularly targeted. These criteria may include the number of employees, turnover, or status of the company within the European Union.

The foundations of this duty of vigilance are aligned with the international principles established by the United Nations around business and human rights, applying to all countries and societies. The aim is to promote respect for human and environmental rights, thus encouraging companies to establish vigilant and appropriate controls and practices.

Which organizations propose the duty of vigilance of human rights in the supply chain ?

The duty of vigilance of human rights in the supply chain is supported by a variety of organizations, influential at different levels. Here is an overview of the key entities involved in promoting and implementing this important responsibility :

The United Nations

The Guiding Principles on Business and Human Rights, adopted in 2011, are based on the United Nations. These international principles are based on the protection of human rights by States, the obligation of companies to respect them and the guarantee of access to effective remedies for victims. In addition, the United Nations is working to create a binding international treaty aimed at strengthening the current legal framework and ensuring the effective application of the duty of vigilance by companies.

The European Union

Committed to the adoption of a directive on the duty of vigilance of companies on sustainability, scheduled for 2021, the European Union aims to level the playing field for all companies operating on its market, including those outside the EU. This initiative focuses on human rights, the environment and the fight against corruption, imposing due diligence obligations, including sanctions and redress mechanisms for breaches.

The Member States

Some EU Member States, such as France, Germany, the Netherlands, Switzerland, Italy and Belgium, have already begun to adopt national legislation in line with international standards to strengthen the European legal framework. These national laws vary according to the criteria of application, the areas concerned, the methods of control and possible sanctions.

Civil society organizations

Civil society organizations, such as Amnesty International, Human Rights Watch, Greenpeace, Sherpa, ActionAid, and CCFD-Terre Solidaire, play a key role in promoting the duty of vigilance among the public, putting pressure on decision-makers, supporting businesses, supporting victims and ensuring that companies respect human and environmental rights.

Key steps to integrate human rights due diligence into the supply chain

The adoption of human rights due diligence in the supply chain requires a continuous process, closely involving all stakeholders. Key steps for effective implementation include :

1. Define the vigilance policy

Start by formalizing your company’s vigilance policy by highlighting your commitment to respect for human rights and the environment. This policy must not only gain management buy-in but also be widely communicated to employees and partners and must be integrated into the company’s overall strategic vision.

2. Mapping risks

Then identify human rights and environmental risks across the value chain. This mapping must be based on the geographical and sectoral context, the regulations in force, as well as the expectations of stakeholders and must be constantly updated and shared transparently.

3. Evaluating Third Parties

Conduct a thorough assessment of business partners (suppliers, subcontractors, distributors, customers) to ensure compliance with human rights and environmental practices. This assessment should be based on clear criteria and verified sources, also aimed at identifying potential gaps and establishing appropriate action plans to address them.

4. Prevent and mitigate impacts

The goal is to prevent and mitigate any negative impact on human rights and the environment that may result from your operations or those of your partners. Measures taken must be proportionate to the risks identified and may include employee training, partner awareness, changes in practices, contractual reviews, or the suspension or termination of commercial relations if necessary.

5. Repair Damage

The fifth phase involves rectifying any damage caused to human rights and the environment by the activities of the company or its partners. When such damage is irreparable or unsuccessful in preventing or reducing it, it is essential to remedy it in an adjusted way to the harm inflicted on the victims. This reparation must be done in close collaboration with the victims and may include financial compensation, restoration of property damage, moral rehabilitation, insurance against recidivism, among other measures.

6. Monitor and report

The sixth step requires a rigorous monitoring and reporting of the initiatives taken under the umbrella of vigilance, with the aim of evaluating their success and ensuring transparency. Using specific and demonstrable indicators for this control and explanation is essential, as is actively involving all stakeholders. The process must also be communicated publicly, whether through the annual report, the company’s website or through specialized platforms.

How much does it cost to implement human rights due diligence in the supply chain ?

The cost associated with integrating human rights due diligence into the supply chain varies according to several elements, including the size of the company, the sector in which it operates, the level of risk involved, the extent of the value chain and the resources deployed for this initiative. There is not one fixed cost or one-size-fits-all method of valuation, as each business faces unique circumstances.

However, two categories of costs associated with duty of care can be identified : direct costs and indirect costs. Direct costs include immediate expenses related to the application of due diligence measures, including risk mapping studies, supplier assessment, prevention and mitigation actions, compensation for harm caused, and monitoring and reporting. These expenses can be assessed on the basis of allocated budgets, time invested, travel expenses, or fees paid to consultants.

Indirect costs, on the other hand, result from changes made in response to the implementation of due diligence measures, such as changes to internal processes, contract reviews, employee training, or partner awareness. These types of costs are more difficult to estimate because they depend closely on the internal organization of the company, its culture, as well as the reaction of its stakeholders.

It is necessary to understand that the implementation of the duty of care should not be seen as a simple expense, but rather as an investment. Duty of care can lead to significant benefits for the company, including reduced risk, improved performance and added value. These benefits can, in many cases, offset or even exceed initial costs, thus contributing to the competitiveness and sustainability of the company. Studies have shown that companies' respect for human and environmental rights positively influences their profitability, reputation, innovation capacity, customer loyalty and other key indicators.

How long does it take to implement human rights due diligence in the supply chain ?

The time required to implement the human rights due diligence within the supply chain varies from company to company due to multiple factors. These include the complexity of the value chain, the readiness of the company, the resources available, as well as legal obligations, among others. In fact, there is no fixed period or universal method for this implementation, which must be adjusted according to the specific context.

However, it is feasible to determine some indicative milestones, resulting from feedback from companies that have already integrated due diligence practices. An EY study reports that the average time to create and disclose a due diligence plan is 9 months, ranging from 3 to 18 months. This time includes the critical phases of the process, namely the establishment of the vigilance policy, risk mapping, stakeholder analysis, prevention and reduction of negative impacts, repair of damage, and monitoring and reporting of results.

It is important to note that the duty of care is an ongoing process and not an isolated effort. It requires regular updating and optimization, consistent with the changes made by the company, the expectations of stakeholders and industry best practices. Therefore, the temporal investment in the duty of care is not only limited to the start-up phase, but extends over the entire period of activity of the entity.

The duty of vigilance therefore requires a permanent commitment and the active participation of all strata of the organization.

Is there a renewal to be done regarding the duty of vigilance of human rights in the supply chain ?

The duty of human rights vigilance within the supply chain is a continuous and constantly evolving process, which requires regular updates. These updates primarily take into account the changes affecting the company’s activities, the expectations of stakeholders, as well as the transformations of international standards and legislative frameworks, whether national or regional.

To update this duty of care, it is essential to review and renew the fundamental components of the process, including the vigilance policy, the identification and analysis of risks, the assessment of partners, prevention and mitigation measures, correction of negative impacts, as well as monitoring and communication activities. This exercise also requires a dialogue with all the parties involved, allowing to collect their perspectives, recommendations and needs.

This renewal process must be adapted to the specificities of each company, considering its sector of activity, its level of risk, its size and its geographical location. For example, French legislation requires annual renewal of the due diligence plan for parent companies and principals.

In addition, some legislative frameworks, such as the European Sustainability Due Diligence Directive, recommend that the due diligence report be renewed every three years.

Making these updates is a real opportunity for companies to improve their performance and market positioning, aligning their strategy and operations with contemporary and future challenges, while strengthening their credibility, their legitimacy and by generating shared value.