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Due Diligence Guidelines

Due diligence is an ongoing process that helps businesses identify and stop, prevent or mitigate risks related to human rights, labour rights and the environment. Due diligence is an essential part of international corporate social responsibility (CSR) and is central to the internationally recognised OECD Guidelines for Multinational Enterprises (2011) and the United Nations Guiding Principles (UNGPs). The Organisation for Economic Co-operation and Development (OECD) published a guideline for CSR in 2019, which provides businesses with practical tools to apply corporate responsibility in practice by means of six steps. The six steps are carefully spaced out within the published OECD report, sources of which are provided at the bottom of this article.

The six steps including a short explanation:

Embed responsible business conduct into policies & management systems

Draw up, explicitly endorse and publish CSR policy, based on the OECD guidelines. If you already have a CSR policy, check and update this policy periodically. Integrating CSR policy into a company’s management structure and controlling bodies is crucial in this regard, so that it becomes part of regular business processes. In addition, provide training for employees and include CSR expectations in contacts with suppliers and other business relations.

Identify and assess adverse impacts in operations, supply chains & business relationships

Carry out a CSR risk analysis and map the business activities and business relationships with regard to (possible) negative consequences. The focus here is not on the risks for the company, but for the (possibly) affected stakeholders, such as employees or local communities. Based on the risk analysis, identify the most serious adverse impacts and prioritize them in order of importance. Small companies that have a less complex value chain can sometimes immediately identify the most important negative consequences. Then examine how the company is involved in these possible and actual negative consequences. A company may cause, contribute to, or be directly associated with an adverse impact through a business relationship. Based on the risk prioritisation, determine the form of involvement and determine which negative consequences should be addressed first. Then come the less serious negative consequences.

Cease, prevent or mitigate adverse impacts

Cease business activities that cause or contribute to negative consequences. In addition, develop plans to prevent and reduce (possible) future negative consequences. Do this on the basis of the previously made risk prioritisation. If your company is directly linked to a negative consequence through a business relationship, a number of reactions are possible. Your business can continue the relationship, temporarily stop it, or end it completely after unsuccessful attempts to reduce the negative impact. However, it is essential that your company does its utmost to improve the situation before choosing to end the relationship. Consider the possible negative social and economic consequences of termination in this decision. Clearly define the CSR expectations for suppliers, customers and other business relations.

Track implementation and results

Periodically monitor the application and effectiveness of the due diligence measures taken. These measures include identifying, preventing and mitigating adverse impacts and providing access to recovery. Also assess the business relationships to see if the measures are being implemented to mitigate the negative risks. Use the conclusions of the monitoring to improve the due diligence process.

Communicate how impacts are addressed

Publish the CSR policy publicly and be transparent about the measures taken to tackle negative consequences whilst explaining their effectiveness. Do this, for example, via the annual report or via other public messages about sustainability or responsible entrepreneurship. Publish the information above in an accessible manner.

Provide for or cooperate in remediation when appropriate

Provide access to, or assist in, recovery if the company has caused or contributed to adverse impacts. Ensue that those affected can submit complaints to the company via a complaints mechanism. It may be useful to refer differences of opinion about the application of the OECD Guidelines to an official recovery mechanism, such as the National Contact Point (NCPs) for the OECD Guidelines. This is especially helpful if both parties are in disagreement as to whether the venture has caused an adverse effect, or about a necessary remedy.

To learn more about the due diligence guidelines or to read the full text as published by the OECD, see the following resource:


February 17, 2022
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