Responsible Supply Chain Management

The German Act on Due Diligence in Supply Chains (LkSG) came into force on January 1, 2023, establishing new obligations to strengthen respect for human rights and environmental standards in global supply chains.

In parallel, the European Parliament approved the Supply Chain Due Diligence Directive (CSDDD) in June 2023, sending a clear message about the importance of companies exercising greater control over their suppliers.

Germany's LkSG and the European Union's CSDDD are notable examples of the growing global trend toward corporate responsibility legal requirements, requiring companies to conduct human rights and environmental due diligence to identify real risks. or potentials for people and the environment.

Responsible supply chain management has become a norm in the field of business sustainability. Companies see this management with suppliers as an opportunity to improve their business relationships, increase the efficiency of their processes and prepare for current and future crises. However, despite the obvious benefits, there are also numerous challenges. In many cases, companies have limited influence over their suppliers, limited resources, or lack the appropriate technologies for complete tracking.

The Ten Principles of the Global Compact, the 2030 Agenda and the IFC Environmental and Social Performance Standards provide internationally recognized frameworks that serve as a basis for designing business strategies related to supplier management, regardless of their country of origin or sector and company activities.

The management of human rights through the business management model is made up of three specific steps: 1) the creation of a declaration of respect for human rights, 2) the identification, mitigation and prevention of the company's possible impacts on human rights through a due diligence process and 3) the establishment of grievance mechanisms at the operational level to address impacts and provide reparation to victims.

Due Diligence Process

Due diligence consists of identifying, preventing, mitigating and communicating the company's impacts in the field of human rights. This process will be carried out not only considering the company's own activities, but also the supply chain operations; The integration of due diligence into the supplier network will allow us to achieve a more resilient and sustainable supply chain. To develop this process it is necessary to carry out the following actions:

  1. Supply chain mapping: Supply chain mapping begins with identifying first-tier suppliers. However, for a correct mapping it is necessary to go further, progressively extending the number of suppliers, identifying those of later levels.
  2. Impact assessment: Although this may vary depending on the company, the scope defined must especially include those suppliers with a high risk of human rights violations, considering aspects such as the regions in which it operates, its sector of activity, previous evaluations carried out. .
  3. Integration of conclusions and taking action: Once the supplier evaluation has been carried out, the identified results will be integrated into the relevant internal functions and processes of the organization, determining who must address these impacts, defining objectives and measures will be carried out to manage them.
  4. Monitoring and communication: This step involves measuring and monitoring the action plan, establishing different performance indicators, both quantitative and qualitative. The indicators can come from international standards, different directives or regulations or be the company's own.
  5. Establish repair mechanisms: If companies determine that they have caused or contributed to negative consequences in the field of human rights, effective remediation processes must be carried out. To do this, there must be a channel that responds to complaints and claims from all interest groups. In addition, it will be necessary to study what type of solution to provide, with reparations to the victims. Reparation may include apology, restitution, rehabilitation, financial or non-economic compensation, as well as measures to prevent further harm. Redress procedures must be impartial and protected against all forms of corruption.

If you are interested in us accompanying your organization to understand and apply due diligence processes in its value chain, do not hesitate to contact us. Our workshops are designed so that your collaborators acquire tools that allow them to identify and analyze social and environmental risks, thus strengthening their ability to effectively manage all the links in their supply chain. We are here to support you in strengthening sustainable practices in your organization.

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