Value chain mapping and traceability are common buzzwords in sustainability circles. But few companies are looking beyond a limited number of commodities or deliberately applying an explicit human rights lens to these processes. From my experience at Shift, working with dozens of companies, human rights value chain mapping is one of the most effective ways to fully understand the expectations of the UN Guiding Principles on Business and Human Rights, and to drive action on the most severe human rights challenges a company faces.
Why should a company map its value chain?
Companies are expected to meet their responsibility to respect human rights. Value chain mapping helps companies realize that expectation, by building an understanding of the full scope of impacts, prioritizing the most severe human rights issues, and identifying other actors that have a role to play in exercising leverage to address these issues.
Value chain mapping can help explain a fundamental shift that the UNGPs reflect: the expectation that a company proactively identifies and addresses potential human rights impacts across its entire value chain, rather than just in its own operations and immediate contractual relationships. HEINEKEN, one of the companies we work with, calls this approach to identifying impacts “from barley to bar.” In the work we do with them at the country level, the first step is to draw a full map of the risks to people across the local operating company’s operations and value chain. This includes the human rights risks to smallholder farmers (often several steps removed from HEINEKEN’s operations), as well as those relating to the brand promoters in outlets serving its beers.
But what is human rights value chain mapping?
Value chain mapping is the process to create a visual representation of the different entities in the value chain to which the company is connected through its products and services. The process maps each step in the chain (including the type and number of entities in a particular step, and often their geography), and identifies where people’s human rights can be impacted. This helps visualize how the company can be involved with particular human rights risks.
Value chain mapping should also identify existing internal processes and external mechanisms to address human rights risks. These mappings help uncover blind spots in both areas of human rights risks and management systems to address them and identify areas where further information gathering is needed, making it a valuable risk management tool.
How can companies use value chain mapping?
It’s all about action! The objective of value chain mapping is very practical — to take action on the most severe human risks a company is involved with. While the UNGPs expand the scope of where companies should look for human rights risks, value chain mapping makes it easier to focus on the most severe issues, even if they are farther away and less well-understood than the more immediate issues the company may already know about. The mapping also shows how the company is connected to an impact, and who needs to be involved in addressing it—whether that is a particular supplier or contractor, or a specific company function or business unit.
Once the map is sufficiently detailed, it enables brainstorming and informed discussion about where leverage exists or can be built, and how it can be most effectively applied to address impacts (e.g., the pinch point in the graph above).
As part of the Dutch Banking Sector Agreement, we helped map palm and cocoa at the sector level with a multistakeholder group of participants. The value chain mapping — detailing how Dutch banks are connected to various parties within these value chains — aimed to form the basis for developing further individual and joint actions by banks, in collaboration with stakeholders. For cocoa, these actions include: “strengthening due diligence by banks that finance the cocoa sector…improving access to finance for cocoa reinvestment by smallholders,” and “advancing a multi-stakeholder approach towards sustainable cocoa.“
Key Elements of Effective Value Chain Mapping:
- Use it as a tool to get to (or accelerate) action: value chain mapping is not just helpful in driving technical analysis; it also creates an understanding of the company’s responsibility under the UNGPs, facilitates brainstorming on action areas and builds consensus around priorities.
- Apply it iteratively: it is most effective to build step by step, without trying to perfect it. Regular updates should be made as more information is added.
- Avoid paralysis by analysis: it is easy to get bogged down in the details. At every step, ask yourself the question: how does this piece of information lead us to more understanding, consensus, and action?
- Consider how it informs your current due diligence: often, value chain mapping demonstrates how the company’s current approach differs from what the UNGPs expect. Insights from the mapping exercise provide valuable lessons for how to update the company’s overall approach to social sustainability to incorporate respect for human rights (see the experience of ABN AMRO below).
ABN AMRO: An Example of Effective Mapping
One of the first companies we worked on value chain mapping with was ABN AMRO, with an initial focus on the diamond value chain. We followed six steps in the mapping:
- Identified the different steps of the diamond value chain and main countries of activity.
- Identified the entities, their nature and size.
- Mapped how ABN AMRO serviced clients in different parts of the value chain.
- Investigated in which parts of the value chain the most severe impacts could be found.
- Overlaid the map with existing due diligence efforts by the bank as well as relevant external mechanisms (e.g., Kimberley Process).
- Identified the residual risks, and where ABN AMRO could best apply leverage to address them.
The analysis formed the basis for engagement with account managers, desk heads, sustainability experts, the bank’s leaders, clients, other companies and external stakeholders. This led to the following actions by ABN AMRO:
- ABN AMRO issued a Sustainable Diamond Jewelry Guide to educate and engage its trading clients;
- They issued a client briefing on responsible jewelry, offering additional value for clients by providing information and analysis.
- They commissioned and published a study on the “true price” of diamonds.
- They enhanced due diligence to add a focus on client subcontractors, which was identified as an additional area of risk.
- They started to explore the wider application of leverage in the sector beyond their immediate clients by engaging other parties with leverage (e.g., major mining companies) and sector initiatives, such as the Responsible Jewelry Council.
- It spurred the commitment of banks, the Dutch government, unions, and NGOs to jointly conduct sector-level value chain mappings under the umbrella of the Dutch Banking Sector Agreement on Human Rights.
In addition to these specific actions, the diamond mapping (as well as subsequent mappings of other commodities) have contributed to a more fundamental reflection on ABN AMRO’s approach to human rights due diligence, and an explicit recognition that addressing human rights issues must focus on continuous improvement and the creative use of leverage, not a tick-box, compliance approach.