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How to Take the First HRDD Step in Your Supply Chain

Download our eBook on Strategies for Effective HRDD in Your Supply Chain to learn more about this topic.

While there are many human rights-related laws and regulations you may have to comply with, most HRDD laws are based on the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, the OECD Due Diligence Guidance for Responsible Business Conduct, and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. As a result, there are several common requirements and principles that your business can put into place to ensure compliance across regimes and to help protect your businesses when practices are questioned.

Here are the first steps you can take to implement HRDD in Your Supply Chain;

The scope is vast, and the scale is huge - you can’t do this alone

Conducting due diligence alone at scale is impossible. Companies must engage suppliers. To meet regulations global companies will need to leverage their relationships with suppliers to ensure on-going active identification and prevention throughout the value chain. Successfully identifying risks from afar will be challenging, if not impossible, and could leave organizations exposed. Incentivizing and supporting suppliers to conduct their own due diligence and human rights management will allow for scalability and efficacy.

Suppliers must be charged with conducting identification efforts, operating their own grievance management system, implementing prevention methods, and remediating complaints.

A buyer’s responsibility is not to conduct these efforts themselves, but to ensure these activities take place—the objective is not micromanagement but building trust and that suppliers get support when needed. Successful implementation will allow buyers to have oversight and pinpoint suppliers who need additional support. To ensure suppliers ask for help when they need it, take care not to incentivize suppliers to hide issues or set up a dual reporting system. By aligning incentives and ensuring that suppliers will not be penalized for human rights issues that occur at their facilities, you can build trust with your value chain partners that ensure business changes for the better.

Get key stakeholders engaged

Prior to these new regulations, corporate human rights teams often struggled to get the right stakeholders engaged to create systemic, long-term change. The goal of HRDD is to integrate the changes into business practices long term and to level the playing field so that responsible businesses do not incur significantly higher costs.

With these new regulations, subject matter experts and internal human rights champions should now have the tools necessary to get the attention, buy-in, engagement and resources from top leadership, supply chain managers and others needed to ensure success. To maintain buy-in and support, new policies, active stakeholder engagement and continuous education and improvement will be required.

Now outline your risks

Most companies do not know their entire value chain much less the human rights risks within their value chain, but that does not preclude the legal responsibility to act on known and inherent risks.

  1. Inherent/Core Risks: Simply sourcing from outside your company has inherent risks that must be understood, prevented, and mitigated. This includes general human resource risks, like health and safety, gender and other non-discrimination in the workplace, and fair wages. Political instability and conflict, supply chain interruption, as well as extreme weather events and natural disasters are also part of the core risks of doing business globally and particularly in sourcing from countries with lower costs and lower protections.

  2. Known Risks: Many specific geographies, commodities or industries also have widely known risks. For example, it is common knowledge there is a high risk of forced labor in Malaysia and globally in the fisheries industry (particularly in offshore work), and cacao has problems with child labor. Therefore, governments assume multinational companies sourcing from these locations or in these commodities know these risks and therefore companies are required to actively identify existing issues and prevent future issues.

  3. Unknown Risks: Risks not yet identified, understood, or accounted for. These risks are most commonly specific to a business and unknown due to an opaque or obscure supply chain. Since unknown risks are a continuing and evolving issue, conducting an ongoing assessment, and monitoring of your entire value chain must be done in tandem with other due diligence. However, the assessment process cannot be done in isolation and the incompleteness of the assessment will not be an excuse for not complying with other components of the regulations.

These first steps would inform you what are the next immediate actions that you can take. You can start addressing those risks through prevention and identification efforts to improve and remediate the issues within your supply chain. It is very important to remember you can start practicing due diligence even if you don’t know how to do everything yet.


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