Top Five Tips for Conducting Due Diligence

As global compliance regulations continue to evolve, including expectations for businesses to develop human rights compliance programmes, businesses of all sizes need to understand what constitutes human rights due diligence. However, for many organisations, the process can feel intimidating and many often don’t know where to start. To make the process easier, we are collaborating with global law firm Norton Rose Fulbright to share our top five human rights due diligence tips and how to apply them throughout your operations.

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Not only are current due diligence protocols not going away any time soon, but they are ramping up around the world. Over the last few years, human rights due diligence regulations have proliferated, including the UK’s Modern Slavery Act in 2015, France’s Duty of Vigilance in 2017, Australia’s Modern Slavery Act in 2018, the Netherlands Child Labour Due Diligence Law in 2020, and more recently Germany’s Due Diligence Act in 2021.

Transparent due diligence best practices

The general sentiment from a global perspective is that business has ignored human rights for too long and investors, consumers, governments, and other stakeholders are demanding meaningful action. Now more than ever, businesses are under pressure to be transparent in relation to the risks of human rights impacts in their operations and supply chains, and how they are managing those risks. It is no longer enough to simply refer to a policy commitment to managing human rights impacts, stakeholders expect businesses to explain how they implement those commitments and assess the effectiveness of their actions. Much of this pressure comes from a new generation of leadership in organisations; today’s and tomorrow’s business leaders care much more about the ethics behind the businesses they affiliate themselves with than those before them.

Supply chain due diligence

When it comes to performing human rights due diligence, the “it’s not me, it’s you” attitude simply does not apply to your supply chain. Adopting human rights due diligence best practices to identify and remediate human rights or modern slavery risks throughout your supply chain is as important as doing so within your own organisation.

Map your supply chain

In order to effectively and accurately evaluate your supply chain, your business will need to map it. What goods or services are being supplied, where does the supply originate from, what controls does the supplier have in place to protect human rights, how vulnerable are the supplier’s workforce? This mapping will make it much easier to identify supplier risks and adopt due diligence best practices to manage those risks, focusing first on the suppliers with the risk of greatest impact on human rights. Information gathered directly from suppliers during human rights due diligence combined with data collected through audits and assessments will provide the tools you need to identify and mitigate risks.

Effective process management

Human rights due diligence is not a set-it-and-forget-it exercise; it’s an ongoing process that requires frequent and consistent evaluation as companies and the regulations that govern them develop.

Corporate integration

Although regulation is driving some human rights due diligence, tackling this issue now is a commercial imperative. Customers, financiers, investors and other stakeholders are driving the response of businesses. Human rights programmes adopted by businesses are being scored by pressure groups, hoping to drive them to adopt increasingly robust strategies for managing, assessing and reporting on these risks. Rather than scrambling to meet compliance requirements annually or, worse yet, waiting until a risk or problem arises to perform due diligence, human rights due diligence should be embedded into each area of an organisation’s operations. Engaging key team members from each department will enable businesses to better recognise and understand its risks – both in respect of its operations and its supply chain.

Due diligence technology

Implementing a human rights due diligence programme into daily operations can be challenging, particularly in entities that are new to managing this risk and are resource constrained. Utilise your company’s budget effectively with the right due diligence technology. Finding an easy-to-understand software will help to automate this process and allow key stakeholders to analyse reliable data to adopt swift and informed strategies to manage identified risks.

Set realistic and scalable goals

Every enterprise and its supply chain is unique, which is why there is no definitive set of key performance indicators (KPIs) to tackle human rights impacts. Each organisation’s approach will be unique. To make progress towards your due diligence goals, you must identify realistic and meaningful KPIs that are specific to your risks. That’s why every human rights due diligence programme should be underpinned by a risk assessment.

Know your regulations

Although human rights due diligence is jurisdiction agnostic, it is still important to understand the human rights regulations that bind your entity and those on the horizon. This includes regulations related to your industry and the countries in which you engage in business, as well as the industries and locations of your supply chain.

Understand your timelines

Establishing a comprehensive due diligence programme may take some trial and error, and one of the factors that will require fine-tuning is your timeline for implementing due diligence best practices. From year-to-year, you should review your risk, the actions that you have taken to manage those risks, and whether those actions have been effective.

Don’t wait, start now

Getting started right away is the best way to ensure your business is prepared for new due diligence regulations that will inevitably impact your business. That impact may be direct, or it may drive the attitude of your customers, financiers and shareholders. Either way, human rights due diligence is now part of doing business. Start-ups need to implement due diligence best practices from the outset to showcase to clients and stakeholders that they are ahead of the curve. Whilst well-established organisations need to highlight their ability to adapt to global change by hitting the ground running with due diligence protocols right away.

Work with experts

One of the best ways to get started with due diligence within your organisation is to work with experts in third-party supplier risk assessment. At ethiXbase, we specialise in integrated solutions for supply chain risk management, risk-based screening, and enhanced due diligence. Using the most intuitive, robust, and configurable platform, we help to assess, build, and continuously monitor sustainability throughout your third-party network. To get started with your due diligence solution, request a demo with ethiXbase.

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