This article was originally published in German in Beschaffung Aktuell under the title Nachhaltigkeit und Sorgfaltspflicht "Mehrwerte erzielen"
Ms. Grabmayr, you work in an international context and follow regulatory developments on sustainability aspects worldwide for EcoVadis – what developments do you currently see?
For several years now, the number and scope of CSR and ESG laws have been growing worldwide. In countries such as France, the U.K. and the Netherlands, laws on human rights due diligence and specifically on the avoidance of modern slavery and child labor are already in force. In addition to the development of an EU directive, the Taxonomy Regulation was adopted in 2020 and the new EU Conflict Minerals Regulation entered into force in January 2021. Also, in the context of the European Green Deal, a European Climate Change Act has already been proposed and more new initiatives are expected. Of course, this is not yet a holistic picture, but it shows that the goal of creating a sustainable and responsible economy is increasingly being reflected in legal obligations.
In Europe, discussions continue on a supply chain law on human rights due diligence. What does the implementation of human rights due diligence mean for companies?
The human rights due diligence obligations of companies are a central component of the UN Guiding Principles and relate to the impact of corporate activities on human rights and, thus, on society more broadly. In more concrete terms, this means that companies acknowledge their responsibility and incorporate issues in a structured manner, analyze both positive and negative impacts, take countermeasures to reduce any negative impacts and, ultimately, create communication structures that enable transparent complaints procedures. In this context, human rights due diligence falls within the scope of a company's holistic sustainability management, meaning that human rights impacts often cannot be considered in isolation. The management of greenhouse gas emissions, waste and water (among other areas) can have just as much impact on human rights as wages, workplace safety, etc. In addition, human rights due diligence can present risks and opportunities regardless of laws in place – particularly in consumer-facing industries like retail, fashion, electronics and more. If done effectively, the implementation of human rights due diligence legislation is likely to create value for companies through the avoidance of reputational damage from human rights breaches.
Read more about these upcoming supply chain due diligence laws and how companies can prepare.
What is the legal situation on this in other countries?
The U.K. Modern Slavery Act in the U.K. is a reporting requirement for companies to disclose how they are addressing human trafficking and forced labor in their supply chains. The French Devoir de Vigilance requires companies to implement concrete measures to comply with due diligence. These measures include risk analysis, supplier assessment and whistleblowing systems. The latest Dutch law against child labor obliges companies that sell products and consumer goods to domestic consumers to check for child labor risks – if there are any identified, an action plan with countermeasures must be submitted. In addition to the debate in Germany and Switzerland last year, there are also different legislative initiatives and evaluation campaigns on human rights due diligence in other European countries such as Luxembourg, Denmark, Austria, Italy and Spain.
What can we learn from the developments in other countries? Have the laws proven to be an opportunity or a disadvantage for companies?
One counter-argument in France before 2017 was that the law would put French companies at a competitive disadvantage. However, a significant proportion of companies are now claiming the opposite because, for example, they can already meet consumer expectations for greater transparency. Regardless of regulations, we are seeing that companies around the world that commit to, and invest, in sustainability are achieving measurable added value and competitive advantages. Financial markets are also currently driving the issue at a tremendous pace, demonstrating that ongoing sustainability efforts and positive sustainability performance can create real financial benefits.
Regarding the German supply chain due diligence law, at this stage, companies are unsure of what such a law would mean in concrete terms – what would you tell these companies?
There are already concrete recommendations on how companies can meet the potential requirements and which measures are necessary and proven. We must not forget that the NAP monitoring only reflects a partial picture of the whole market and that many German companies have already implemented sustainability and sustainable procurement programs. This also applies to industry initiatives that have been actively promoting sustainable procurement for years, such as "Together for Sustainability" in the chemical industry, which has grown from 6 to currently 29 member companies since its founding in 2011 – with global sales of €349 billion and a global spending volume of €227 billion. These figures not only illustrate the leverage for sustainability through procurement but also show that many companies and industries already have sound experience, robust processes, effective tools, and best practices on sustainability and standards related to human rights due diligence. Companies and industries that are still in the early stages of this process can and should prepare now: learn from best practices and analyze risks and impacts so you can set up effective measures based on them. Implementing sustainability and due diligence in the supply chain is a continuous process – a long-distance run rather than a short sprint to success. At the same time, protecting the environment and human rights are not only closely linked but also the most pressing issues of our time. It is not only the regulatory requirements that will increase but also the demands of stakeholders, such as employees, customers and investors, who increasingly expect companies to act responsibly. Starting now instead of waiting is key.
How does EcoVadis support the implementation of human rights due diligence?
Human rights are a fundamental theme in the EcoVadis methodology. EcoVadis IQ and Ratings from the Sustainability Intelligence Suite provide companies with holistic and collaborative solutions for risk mapping, sustainability assessment and improving sustainability performance in global supply chains. EcoVadis' solutions, along with years of experience in implementing regulatory due diligence requirements, such as the Devoir de Vigilance in France, provide companies with a holistic set of tools and expertise to proactively address and successfully implement the requirements of a human rights due diligence law in supply chains.
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