Change Agents: Business Enterprises

Respecting Trade Union Rights in Global Value Chains: Practical Approaches for Business

Often, companies struggle to identify and implement meaningful action to address risks to trade union rights in their global value chains. This is due to a range of factors:

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January 2020 |

Realizing Trade Union Rights: Diagnosing Barriers and Moving to Action

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  • External factors arise from the contexts in which global companies operate, and into which their global value chains extend. This includes relevant laws and regulations and their implementation, the social practices that shape perceptions of trade unions, and the local capacity of trade unions and business partners to claim or respect these rights in practice.
  • Business models, which can create heightened risks to trade union rights if not properly managed. These include sourcing from high-risk (and lower cost) markets, extensive use of contract or temporary labor, and a company’s own purchasing practices.
  • Corporate culture and business practices, which can include assumptions and attitudes towards trade unions at headquarters, and weaknesses or common pitfalls in due diligence processes. 

Included in this resource is a diagnostic tool in Part 2.2 to help companies assess where and why they might face heightened risks to trade union rights.

The resource also highlights a range of practical steps companies can take depending on the risk factors that are present. Additionally, it showcases eight examples of how real companies have approached trade union rights in practice.

SMEs and the Responsibility to Respect Human Rights

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September 2019 |

SMEs and the Corporate Responsibility to Respect Human Rights

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In April 2019, Shift and the International Organisation of Employers (IOE) co-convened a workshop to explore the challenges, experiences and leading practices of small and medium enterprises (SMEs) in fulfilling their responsibility to respect human rights. This summary note, published by IOE, provides an overview of the key takeaways.

Also read: SMEs and the Corporate Responsibility to Respect Human Rights: Busting the Myth that Bigger is Always Better

Human Rights Due Diligence in High Risk Circumstances

This guidance is relevant for companies of all sectors but may be particularly helpful for public and private sector financial institutions. It draws on Shift’s work with the International Finance Corporation to explore the relationship between human rights due diligence and the IFC’s Performance Standards.

Summary

High risk circumstances are situations in which the likelihood of severe human rights impacts is greatest. Human rights due diligence (HRDD) consists of the processes that help businesses become aware of the actual and potential human rights impacts on people associated with their business and take appropriate action to prevent and address those impacts.

From the perspective of the United Nations Guiding Principles on Business and Human Rights (UNGPs), high risk circumstances should be the highest priority for company action since they present the greatest risks to individuals. In such situations, it is therefore especially critical for companies to conduct effective HRDD. Moreover, high risk circumstances for human rights often present high risk to the business as well, including commercial, reputational, investor related and legal risks. This convergence creates a constructive opportunity for human rights leaders within companies to gain the necessary buy in for identifying and addressing human rights risks and impacts.

While it is particularly critical for HRDD to be effective in high risk circumstances, those circumstances can also pose unique challenges for a business’ HRDD processes. High risk circumstances are more complex and fluid. There may be practical difficulties in engaging directly with some affected individuals and groups. The capacity to manage identified risks and impacts may be beyond the sole control of the business enterprise.

Key lessons and insights from business practitioners, further elaborated in this resource, include:

  • To understand the source of risk, and determine where there are high risk circumstances, companies can ask themselves a set of targeted questions, looking at the operating context, the nature of the company’s business relationships, the nature of the company’s business activities, and the types of people who could be affected by the company’s activities (or activities of its business relationships). A listing of these diagnostic questions is an annex in this resource.
  • Engage internal stakeholders in ways that: (a) raise awareness of high risk circumstances, (b) create expectations about identifying and escalating these types of risks, (c) ensure that due diligence is ongoing and responsive to changes in circumstances.
  • Engage external stakeholders in ways that: (a) are integrated into more robust strategies, (b) involve independent third parties in support of company efforts, (c) enable the business to push information to stakeholders and empower stakeholders to push information to the company.

Across these insights and examples, one crosscutting message becomes clear: while the tendency within many companies is to seek greater control over and protection of information as risks increase, in reality, enhanced transparency is critical for success.

Embedding Respect for Human Rights in Key Company Functions

In 2014, Shift provided expert support to CSR Europe – the leading European business network for corporate social responsibility – to help its member companies understand how to effectively embed respect for human rights across their operations, and particularly in the key functions in human resources, procurement and risk. | See all our resources about embedding

Embedding can be thought of as the macro-level process of ensuring that a company’s responsibility to respect human rights is driven across the organization, into its business, values and culture. The Guiding Principles do not prescribe a single approach for how companies should embed their responsibility to respect; what is most effective will depend on an individual company’s context, including its corporate culture, types of business activities, and the positioning of different functions internally.

Shift has identified a number of critical elements for successful embedding, including:

  • Two-way communication between management and operational staff, including about challenges and how they can be addressed;
  • Setting appropriate performance goals for all staff to align incentives;
  • Cross-functional coordination and leadership;
  • Shared responsibility for outcomes, including those with responsibility for the activities or business relationships that may give rise to human rights risks;
  • Tailored operational guidance and continuous training;
  • Regular analysis of the company’s performance.

Shift’s support to CSR Europe involved research and webinars exploring these various elements of embedding, including identifying examples of how different companies have sought to embed the responsibility to respect in each of the three functions identified above. Shift also led a workshop for CSR Europe member companies on these issues in Brussels, hosted by Microsoft. The research and workshop discussions formed the basis of a public report by CSR Europe released in 2015. CSR Europe also drew on this collaboration in the production of their 2016 report Blueprint for Embedding Human Rights in Key Company Functions.

Remediation, Grievance Mechanisms and the Corporate Responsibility to Respect Human Rights

Summary

In the Guiding Principles, the term remediation is used to refer to the process or act of providing remedy. It should not be confused with “remediation” in the context of social audits, where the concept includes (and typically focuses on) forward-looking actions to prevent a non-compliance from recurring. 

At its core, the concept of remedy aims to restore individuals or groups that have been harmed – in this case by a business’s activities – to the situation they would have been in had the impact not occurred. Where this is not possible, it can involve compensation or other forms of remedy.

As the Guiding Principles set out, “remedy” in the judicial context is understood to include: “apologies, restitution, rehabilitation, financial or non-financial compensation, and punitive sanctions (whether criminal or administrative, such as fines), as well the prevention of harm through, for example, injunctions or guarantees of non-repetition.” These forms of remedy are relevant – or have equivalents in the case of punitive actions – also in the context of non-judicial mechanisms, with the exception of criminal sanctions. 

Understanding the Business Responsibility for Remedy

The Guiding Principles make clear that a company’s responsibility to provide for remedy depends upon its connection to the human rights impact that has occurred: “Where business enterprises identify that they have caused or contributed to adverse impacts, they should provide for or cooperate in their remediation through legitimate processes,” (Guiding Principle 22).

Where the company has neither caused nor contributed to an impact, but the impact is nevertheless linked directly to its operations, products or services, there is no responsibility under the Guiding Principles to provide for or contribute to a remedy. A company may choose to contribute to remedy in these situations for other reasons – humanitarian, commercial, reputational or other – but this is not grounded in their responsibility to respect human rights.

Understanding and assessing the nature of a company’s responsibility with respect to a specific impact can therefore be an important step in determining a company’s responsibility to provide remedy. Few companies have systematic approaches for analyzing the nature of their responsibility. One company representative observed that, “Our incident management systems are primarily designed to see if an impact occurred, but we have no systematic way of analyzing what our role with the impact may have been.”

Mapping the Place of a Grievance Mechanism

Where companies have caused or contributed to an impact, they have a responsibility to provide or contribute to remedy for those who have been harmed. Primarily, the way companies have understood this responsibility is the need to establish grievance mechanisms, through which affected stakeholders can raise and seek redress for impacts that have occurred. 

The internal “ecosystem” for remediation

Internal policies and processes that may already exist and provide a channel for receiving complaints and/or for addressing them include:

  • Whistle-blower / ethics hotlines
  • Employee ombudsman / human resources complaints processes
  • Open Door / Speak up policies
  • Trade Unions / Industrial Relations processes
  • Consumer complaints mechanisms
  • Community facing grievance mechanisms
  • Business-to-Business contract clauses with dispute resolution provisions
  • Code of Conduct requirements for supplier mechanisms
  • Audit processes (and worker interviews)
  • Supply chain hotlines
  • Stakeholder engagement (at the site level and the policy level)

Mapping the internal ecosystem for remediation serves a number of purposes:

  • Increasing internal comfort with the concept
  • Identifying gaps
  • Learning from existing processes
  • Ensuring connectivity: impacts and grievances are channeled to the right people to be addresses, and the business has full visibility into its human rights impacts.

The external “landscape” for remediation 

Just as companies can look at the internal ecosystem as they consider strengthening or augmenting existing remediation processes, they can likewise look at the “external landscape” for remediation in different operational contexts.

States have critical roles to play in ensuring that effective judicial and non-judicial processes are present. They do so through national court systems and statutory and regulatory bodies, such as national human rights institutions, labor dispute bodies, as well as through administrative mechanisms such the National Contact Points (NCPs) of the OECD Guidelines for Multinational Enterprises. Public financial institutions and multi-stakeholder initiatives may also provide accountability mechanisms and grievance processes to enable those affected by their clients’ or members’ business activities to raise concerns and seek redress for impacts. 

Operational-level grievance mechanisms administered or co-administered by companies sit within this landscape – as non-state-based, non-judicial mechanisms, which should be primarily dialogue based in nature. 

Operational-Level Grievance Mechanisms

Operational-level grievance mechanisms are a systematic means of providing remediation processes.

This resource does not seek to provide full treatment of how to make operational-level mechanisms effective. However, some key areas to keep in mind include:

  • Need for effective management system of the grievance mechanism
  • Determining scope for the grievance mechanism
  • Considering how to talk about the grievance mechanism
  • Designing the system with an holistic and integrated, rather than silo’ed, approach
  • Ensuring an escalation process
  • Using the effectiveness criteria (set out in the Guiding Principles)
  • Connecting grievance mechanisms with stakeholder engagement
  • Getting started by knowing where you currently are

Roles and Responsibilities for Remedy in the Value Chain

When impacts occur within a company’s value chain, businesses often find themselves in a “linkage” situation: that is, the company has not caused or contributed to the impact, but the impact is directly linked to the company’s operations products or services.

In such circumstances, businesses should first confirm that it is indeed a situation of linkage, and not contribution. For instance, in the supply chain context, companies can in some instances contribute to impacts that occur at the supplier level, for example, through their purchasing practices or payment terms.

In these circumstances, companies can play an important role in incentivizing those in their value chain to provide effective grievance mechanisms. This is likely to be easier in relation to suppliers than in downstream relationships.

Ways companies incentivize suppliers to establish grievance mechanisms may include:

  • Making expectations of grievance mechanisms clear in contracts or codes of conduct;
  • Including review of grievance mechanisms during assessments;
  • Offering capacity building for suppliers on grievance mechanisms;
  • Providing a recourse mechanism (like a hotline) if local grievance mechanisms are inadequate.

Supporting Effective Factory-Level Grievance Mechanisms With the Better Work Programme

Over the past several years, the International Labour Organization’s (ILO) Better Work Programme has been working with apparel factories in several developing economies to improve compliance with international labor standards and competitiveness in global supply chains. Better Work’s Enterprise Advisors engage with factory management and workers to improve industrial relations, strengthen systems and processes, and support sustainable improvements in working conditions at the factory level.

One important tool for achieving these objectives is effective grievance mechanisms, which can play an important role in identifying, preventing and remediating issues of concern on the factory floor. Factory-level grievance mechanisms can help support workers’ ability to raise concerns and seek remedy in the workplace, enable factory management to understand and address those issues before they escalate, and provide global brands and retailers with an important source of data about factory conditions in their supply chains and help build confidence that suppliers have the systems in place to prevent and address their human rights risks.

As the Guiding Principles make clear, such mechanisms should not undermine the role of legitimate trade unions; indeed, industrial relations processes involving management and those unions are themselves a form of grievance mechanism.

In collaboration with Better Work staff, Shift developed a manual for Enterprise Advisors to integrate guidance on effective factory-level grievance mechanisms into the support that Better Work provides to factories. The practical guidance is intended to enable Enterprise Advisors to facilitate and accompany factory management and workers through the process of understanding what effective grievance mechanisms are, how they can contribute to improved worker-management engagement, with an emphasis on supporting and involving trade unions, and key steps in designing and implementing such mechanisms.

Shift led a capacity-building workshop for a representative group of Enterprise Advisors from Indonesia, Vietnam, Cambodia and Lesotho in Jakarta in November 2013 provided continuing support to those Advisors as they worked with factories in the months following the workshop.

Also see: resources on remedy and grievance mechanisms

Using Leverage in Business Relationships to Reduce Human Rights Risks

Summary

What is leverage? It is a company’s ability to influence the behavior of others.

The concept of leverage plays a key role for companies in meeting the corporate responsibility to respect human rights. The Commentary to Guiding Principle 19 states that leverage is considered to exist where the company ha the ability to effect change in the wrongful practice of an entity that causes harm

Leverage gets to the heart of what companies can realistically be expected to do in practice when faced with human rights challenges. Even when companies have a dominant or influential commercial position in a business relationship, there are many questions about how to identify and exercise the most effective forms of leverage. At the same time, every company — regardless of size, industry or geography — faces situations in which it does not have, or does not perceive, sufficient leverage to influence the behavior or others. This raises questions about what steps can be taken to create or increase leverage; what steps could have been taken earlier in the relationship to have created leverage; and when and how to consider terminating a business relationship.

Leverage Over Whom, How and for What Purpose?

Companies can ask themselves three questions when they are seeking to build and exercise leverage over an entity:

  1. Over whom am I seeking to exercise leverage?
  2. How could I exercise leverage?
  3. What purpose could different forms of leverage achieve?

1. Over Whom?

What types of business relationships may a company have that would connect it to potential human rights harms? Very often, those types of relationships may be:

  • upstream suppliers;
  • joint venture or other “horizontal” business partners;
  • downstream business customers, clients or end-users;
  • goverments.

For specific examples of ways to exercise leverage over these groups, see page 17 of the resource.

 2. How?

Once a company identifies who it is trying to influence, it can try to systematize its approach for exercise leverage by examining five categories of leverage.

  1. Traditional commercial leverage: leverage that sits within the activities the company routinely undertakes in commercial relationships. Specific means may include:
    1. Contracts;
    2. Audits;
    3. Bidding criteria;
    4. Questionnaires
    5. Incentives (price, volume, long-term business)
  2. Broader business leverage: leverage that a company can exercise on its own but through activities that are not routine or typical in commercial relationships. Specific means may include:
    1. Capacity building;
    2. Presenting a unified voice from each business department;
    3. Referencing international or industry standards;
  3. Leverage together with business partners: leverage created through collective action with other companies in or beyond the same industry. Specific means may include:
    1. Driving shared requirements of suppliers;
    2. Bilateral engagement with peer companies.
  4. Leverage through bilateral engagement: leverage generated through engaging bilaterally and separately with one or more other actors, such as government, business peers, an international organization or a civil society organization. Specific means may include:
    1. Engaging civil society organizations with key information;
    2. Engaging multiple actors who hold different parts of a solution.
  5. Leverage through multistakeholder collaborations: leverage generated through collaborative action, collectively with business peers, governments, international organizations and/or civil society organizations. Specific means may include:
    1. Driving shared requirements of suppliers;
    2. Using convening power to address systemic issues.

For more detail on types of leverage with examples, see page 14 in the resource. The Annex contains multiple examples of how companies have used these different types of leverage with suppliers, governments, joint venture partners and others.

3. For What Purpose?

Leverage is about creating the opportunity to change how people think and behave. In the context of the Guiding Principles, it is about changing the thinking and behavior of key people within a supplier, contractor, business partner, customer, client or government, where their organization’s actions are increasing risks to human rights.

The purposes of using leverage may range from obliging another entity to address the issue, to engaging another entity to discuss the issue, to persuading another entity to address the issue.

Identifying Opportunities for Leverage

Companies may find it helpful to identify moments of traction, where there is a particular opportunity to exercise leverage. These moments may include:

  • Contract negotiation;
  • Licensing agreements/renewal;
  • Setting qualification criteria for bidding processes;
  • Periodic reports on implementation of a service or plan of action;
  • Renewal of service agreements;
  • Points when services or products require maintenance;
  • Disbursement of funds;
  • Monitoring/audit engagements;
  • Provision of technical or advisory assistance;
  • Processes/investigations for addressing complaints.

Building the Skills of Persuasion

In practice, real behavioral change may happen more often through persuasion than through obligation.

The art of persuasion has been studied in the field of dispute resolution, including by Dr. Robert Cialdini, who developed six principles of persuasion based on basic human instincts. These are:

  1. Reciprocity: the tendency to want to return a favor;
  2. Commitment and consistency: the tendency to wish to honor commitments and be true to one’s self-image;
  3. Social proof: the tendency to do things one sees other people doing;
  4. Liking: the tendency to be persuaded by people one likes;
  5. Authority: the tendency to obey authority figures;
  6. Scarcity: the tendency to want something that is in short supply.

See this video to hear Dr. Cialdini explaining these six principles.

Bringing a Human Rights Lens to Stakeholder Engagement

Summary

Stakeholder engagement is foundational to effective implementation of the UN Guiding Principles. Meaningful stakeholder engagement is particularly essential in a business’ efforts to meet its corporate responsibility to respect human rights. An increasing number of companies have sophisticated systems and processes for conducting a wide range of stakeholder engagement activities, and there is a substantial body of guidance around effective stakeholder engagement. 

However, in practice, many human rights impacts can be linked back to challenges related to stakeholder engagement. It appears that more effective stakeholder engagement often could have prevented or mitigated them.

The Guiding Principles reference the importance of consulting with affected stakeholders at several key moments:

  • in identifying and assessing actual and potential human rights impacts;
  • in tracking and reporting on company efforts to prevent and manage those impacts;
  • in designing effective grievance mechanisms and remediation processes.

Affected stakeholders may include:

  • staff (employees and contract workers) and communities directly affected by a company’s operations;
  • more physically remote stakeholders affected through business operations in a company’s supply chain;
  • customers or end-users of a particular product or service who may be even more dispersed, such as in the ICT or financial services sectors.

Companies may also choose to engage at the broader policy level with issue expert stakeholders: individuals whose human rights are not themselves affected by a company’s activities, but who can provide insights into identifying and addressing human rights challenges, and with whom it may be important for companies to communicate about their overall performance on human rights issues. Engaging with issue experts may be helpful to companies, but it is not a replacement for engaging with affected stakeholders.

Key elements for companies to consider when engaging with stakeholders on human rights issues include:

  • Engaging the right stakeholders;
  • Engaging about the right issues;
  • Engaging the right way;
  • Engaging at the right time;
  • Engaging at the policy level;
  • Engaging internally;
  • Engaging neutral parties.

Respecting Human Rights Through Global Supply Chains

Summary

The UN Guiding Principles state that companies may be involved with adverse human rights impacts either through their own activities or as a result of their business relationships. ‘Business Relationships’ are understood to include relationships with “entities in [the company’s] value chain.” As part of their corporate responsibility to respect human rights, companies are expected not only to avoid causing or contributing to adverse human rights impacts, but also to address, “human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.”

Adverse human rights impacts can occur at any level of a supply chain – from the first tier of direct or strategic suppliers, all the way down via multiple layers of sub-suppliers and sub-contractors, to those providing the raw material inputs. For some companies, relationships with suppliers are held by their licensees, or may be intermediated by vendors or other agents, creating yet more complex structures. To meet their responsibility to respect human rights, companies need to understand human rights risks at all levels of their supply chain – not only in the first tier.

This resource examines how companies can work to implement the Guiding Principles across their business relationships through the following activity areas:

  • Identifying risks: mapping and prioritizing within the supply chain;
  • Leveraging and incentivizing sustainable change in suppliers;
  • Applying these approaches in sensitive, high-risk contexts;
  • Achieving internal alignment within and across the business;
  • Supporting grievance mechanisms with respect to supply chains.

Identifying Risks: Mapping and Prioritizing Within the Supply Chain

The corporate responsibility to respect human rights requires companies to conduct human rights due diligence to identify, address and mitigate adverse human rights impacts with which they may be involved through their business relationships. However, in most cases, it is simply not feasible for a company to conduct due diligence for the entirety of its supply chain – particularly where supply chain relationships may number into the thousands, tens of thousands, or more. Companies therefore often need to prioritize those business relationships for which it is most critical to conduct human rights due diligence. However, as a first step, they need to know who is in their supply chains.

Many companies have established, or are in the process of establishing, centralized systems for tracking the “moving target” of their supply chains. While these systems can be housed centrally, the inputs into that system must come from a variety of decentralized sources. Company leaders note the need for internal and external buy-in for a collaborative approach to mapping the supply chain. Internally, this means engaging across the different business functions that might interact directly with the supply chain. Externally, this requires the authentic engagement of one’s own suppliers in the mapping exercise. In developing that buy-in, company leaders emphasize the critical importance of spending as much time on the “why” as on the “how” – conveying an underlying rationale for the importance of mapping the supply chain that resonates for key audiences. Specifically, they have found that simply contractually obligating suppliers to disclose their supply chains, while necessary, has proven ineffective and inadequate.

Prioritizing Relationships for Due Diligence

Given the sheer scale of many companies’ supply chains, those with responsibility for managing human rights issues within supply chains can face a daunting task. The pressing question for many company leaders is simply: Where do I begin?

As a practical reality, most large companies will almost certainly need to prioritize the management of human rights risks within their supply chain. That prioritization may take place at several levels, including prioritizing which areas of the supply chain to map, which business relationships may need to be prioritized for a more detailed assessment of potential human rights risks, and which adverse human rights impacts may need to be prioritized for prevention and mitigation.

In prioritizing which business relationships and which adverse impacts to address, prevalent company practices focus first and foremost on risks to the business. Many companies define their supply chain due diligence priorities based on their “top spend” suppliers or their top tier, strategic suppliers, or other factors that suggest their leverage with the supplier is greatest. Others focus on relationships that pose greatest risk to their own reputation, such as suppliers of products carrying their own brand, or issues where public pressure and mobilization are greatest.

While this can make intuitive business sense, applying a human rights lens to due diligence requires a different set of calculations, instead of, or in addition to, approaches based on business risk. When assessing human rights risk, companies should start by assessing risk from the perspective of potentially affected stakeholders, based on the severity and likelihood of potential impacts. These adverse impacts – the most severe and most likely – may not be occurring among a company’s top tier suppliers, where a company has more leverage to compel mitigation measures, but may be deeper within the supply chain, even several steps removed from a direct relationship with the company, and where leverage is lacking. Learn more about how to identify the most severe potential impacts on people in this video about salient human rights issues.

Managing Human Rights Risks in Supply Chains: Leverage and Sustainable Change

Once potential human rights risks in the supply chain are identified, all companies face challenges in figuring out, simply put, “what works?”. An initial challenge may arise in generating sufficient leverage with suppliers to influence their practices.

Finding and Increasing Leverage

Where a company has identified that it may be linked to an adverse human rights impact through its supply chain and that it has leverage over the supplier in question, the Guiding Principles require a company to exercise that leverage to prevent or mitigate the adverse impact. Where it lacks the leverage, the company should look to increase its leverage in order to be in a position to prevent or mitigate the impact.

Read more on leverage on p.13 in the resource, or check out our dedicated resource on the topic of leverage.

Beyond Compliance Auditing and Towards Sustainable Improvement – What Works?

For many years, companies attempted to manage human rights performance in their supply chains through compliance auditing. However, research points to the clear conclusion that compliance auditing alone is insufficient to promote sustainable improvements on issues of social performance.

This is not to suggest that compliance audits do not have an appropriate role to play in managing human rights performance in supply chains. Audits can serve as a tool for identifying current shortfalls in standards. But they are only ever a snapshot in time. As one company representative summarized, his message to suppliers is: “It’s what happens after the audit that matters. If you improve, there will be continued and expanding commercial opportunities with us. If you don’t improve, then you will not continue to be our supplier.”

Other companies have shifted their emphasis away from a reliance on compliance auditing towards more collaborative approaches, working with suppliers to assess gaps, build capacity, and incentivize sustainable improvements. One company pointed to more extensive “systems gap analysis” audits conducted by some firms, in which the company and the supplier share the cost of the audit.

Read more about going beyond auditing in our dedicated resource on this topic.

Managing Supply Chains in High-Risk Contexts

Multinational companies frequently find that commercial interests make it desirable to initiate or expand operations in high-risk contexts. For extractive companies that have to locate themselves where the natural resources are, operating in such contexts is increasingly unavoidable. High-risk contexts typically include conflict-affected zones, where security issues are prevalent, the state is unable to fulfill its duty to protect, and the rule of law is weak. They also include other contexts with clear and severe risks to the fulfillment of human rights, which may be denied either in law or in practice.

While the same principles for managing human rights risks in supply chains more generally apply also in these contexts, the costs of not getting it right can be much higher – not only in terms of the reputational risk to the company, but also in terms of the potential severity (scale, scope and irremediability) of adverse human rights impacts on individuals.

Learn more about human rights due diligence in high-risk circumstances in our dedicated resource on this topic.

Internal Alignment Within and Across a Business Enterprise

While discussions of human rights challenges in supply chains often focus on the suppliers themselves, there are important dimensions internal to the buying company that can increase or reduce human rights risks. Central to these are the company’s own purchasing practices. There may in some instances be inherent tensions between the commercial interests that guide buying decisions and the avoidance of human rights harms. If left unreconciled, these can place the company in a situation of actively contributing to human rights impacts by its suppliers.

Examples may include making late changes to the design of a product or to the volume or an order without taking into account the consequences for the supplier in terms of time and costs, which may mean the company could contribute to any resulting adverse impacts such as excess hours, unpaid overtime or illegal sub-contracting. Or, for an extractive company sourcing security services, poor decisions or misleading messages with regard to the treatment of local communities that it expects from the external security providers may leave the company in the position of contributing to any adverse human rights impacts that result.

Embedding the Responsibility with Those Who Make Purchasing Decisions

In the experience of many companies, reconciling the internal tensions that can exist between commercial drivers for procurement decisions and the company’s responsibility to respect human rights can only occur if that responsibility to respect is embedded with those who make procurement decisions.

Some consumer goods companies – in which purchasing departments play a central role in creating value for the company – have chosen to locate the human rights function within those departments, or have allocated specific human resources to those departments to address these issues from within. In another such company, the human rights function reviews all purchase orders after they have been submitted and compares them against a rating system. If it determines that the order might be inconsistent with the company’s human rights commitments it has the authority to cancel or reroute the order.

Ultimately, however, the successful integration of human rights considerations comes down to individual buyers making individual decisions that need to incorporate this added human rights dimension into the business formula.

Read more about strategies to embed respect for human rights in procurement functions on page 20 of this resource.

The Role for Grievance Mechanisms with Respect to Supply Chains

A basic requirement of the Guiding Principles is that companies engage actively in ensuring access to effective remedy for adverse human rights impacts they cause or to which they contribute. Many companies, industry- and multistakeholder initiatives require that grievance processes are available at the level of suppliers as well. However, by their own admission, these efforts have not generally included practical guidance to suppliers; nor conveyed the value of effective complaints processes; nor ensured that their quality is sufficient.

Read more about the business case for suppliers to have effective grievance mechanisms, as the case for companies to support supplier-level grievance mechanisms, on page 25 of the resource, or our dedicated resource on grievance mechanisms.