Procurement Alchemy: Turning Compliance into Human Rights Gold

Human rights due diligence in procurement is not just a moral imperative but a legal necessity. Companies are increasingly held accountable for ensuring their supply chains are free from human rights abuses. This growing awareness is driven by international standards and local laws that mandate businesses to take proactive steps in identifying, preventing, and mitigating human rights risks within their supply chains. The importance of human rights due diligence cannot be overstated, as it safeguards the dignity and rights of individuals while protecting companies from reputational and legal risks.

The United Nation Guiding Principles (UNGPs) on Business and Human Rights are a cornerstone in shaping procurement practices. These principles outline the responsibilities of businesses to respect human rights and provide a framework for implementing human rights due diligence. Companies are expected to identify and assess actual and potential human rights impacts, integrate and act upon the findings, track responses, and communicate how impacts are addressed. In addition to international standards, companies must comply with their relevant local laws and regulations that mandate human rights due diligence. For instance, the UK Modern Slavery Act requires businesses with a turnover of £36 million or more to publish an annual Slavery and Human Trafficking Statement to report on the steps they have taken to ensure their supply chains are free from slavery and human trafficking. Similarly, the French Duty of Vigilance Law obliges large companies to establish and implement vigilance plans to prevent human rights violations in their operations and supply chains.

Golden Rules for Ethical Procurement

Developing robust policies that reflect a commitment to human rights due diligence is a critical first step for any organization aiming to ensure ethical procurement practices. These policies should clearly articulate the company’s stance on human rights, outlining the expectations for suppliers and including specific commitments to uphold human rights standards. Examples of policy statements might include zero tolerance for forced labor, child labor, and discrimination. By setting a strong ethical tone at the top, such policies not only set the tone for the company’s ethical standards but also serve as a foundation for building a responsible supply chain and help ensure that human rights are respected throughout the organization’s operations and partnerships.

Implementing these policies effectively requires a comprehensive approach that integrates these policies into every facet of procurement practices. This entails several key components to ensure that the commitment to human rights is not just a statement but a practical reality within the organization:

1. 1. Embedding human rights criteria into supplier selection processes: When evaluating potential suppliers, companies should prioritize human rights standards by requiring evidence of suppliers’ human rights policies, , conducting background checks on their practices, and ensuring that they have no history of human rights violations. Integrating these criteria ensures partnerships with suppliers committed to ethical practices.
   2. Integrating human rights commitments into contract terms: Contracts with suppliers should mandate compliance with human rights standards through specific clauses. These clauses should outline the expectations for suppliers, such as prohibiting forced labor, child labor, and discrimination, and can specify the consequences of non-compliance. By embedding these commitments into contracts, companies create a legal obligation for suppliers to uphold human rights standards, providing a clear framework for accountability.
   3. Performance evaluations should incorporate human rights criteria: This involves regularly assessing suppliers’ adherence to human rights standards as part of their overall performance evaluation. Companies can use tools and reports like Avamark™ and Radarview™ to benchmark supplier performance against industry standards and identify areas for improvement. These evaluations should be conducted periodically and should include both quantitative and qualitative assessments of suppliers’ human rights practices. By making human rights a key component of performance evaluations, companies can ensure continuous monitoring and improvement of their suppliers’ practices.
   4. Training procurement teams on human rights issues: Procurement professionals must be well-versed in human rights standards and equipped with the tools to enforce these policies effectively. This requires regular training sessions, workshops, and access to resources that provide up-to-date information on human rights issues. Additionally, it is essential to test the understanding of the trainees to ensure they have grasped the key concepts. This can be done through assessments or practical exercises. Upon successful completion of the training, participants should receive a certificate to acknowledge their achievement and readiness to implement human rights policies in their daily operations. By investing in the education and training of procurement teams, companies can ensure that their staff can uphold human rights standards in their daily operations.
   5. Leveraging technology and data analytics: Tools like Avamark™ and Radarview™ provide valuable insights into supplier performance and help companies assess risks and ensure compliance with human rights standards. These tools enable companies to make informed decisions based on data-driven insights, enhancing the effectiveness of their due diligence processes. By integrating technology into their human rights due diligence efforts, companies can streamline their processes, improve accuracy, and ensure that they are consistently upholding their commitment to human rights.

This holistic approach protects the rights of individuals within the supply chain and strengthens the company’s reputation and legal standing.

Risk Assessment in Human Rights Due Diligence

Assessing risks related to human rights violations within the supply chain is essential for effective due diligence. Companies can use various tools and frameworks, such as the Human Rights Impact Assessment (HRIA) and the Human Rights Risk Assessment (HRRA), to identify potential risks. These assessments should consider factors such as the nature of the industry, geographic location, and the specific activities of suppliers. By thoroughly evaluating these elements, companies can uncover hidden vulnerabilities and address them proactively.

Once risks are identified, they should be prioritized based on their severity and likelihood. High-risk areas, such as regions with weak labor laws or industries with a history of human rights abuses, should receive focused attention. Prioritizing risks allows companies to allocate resources effectively and address the most pressing issues first.

Engaging Suppliers in Human Rights Efforts

Engaging suppliers in human rights due diligence efforts is crucial for ensuring compliance and fostering collaboration. Effective communication strategies include regular dialogue with suppliers, sharing expectations and requirements, and providing clear guidelines on human rights standards. Building strong relationships with suppliers can facilitate cooperation and improve compliance. Avasant’s research highlights the importance of transparent and consistent communication in achieving these goals.

Training suppliers on human rights standards and providing support to help them comply is essential. This can involve conducting workshops, offering resources and tools, and providing ongoing assistance to address challenges. By investing in supplier training, companies can enhance their suppliers’ capacity to uphold human rights standards. Continuous engagement and support can lead to significant improvements in supplier performance and compliance. This collaborative approach not only strengthens the supply chain but also fosters a culture of ethical procurement that benefits all stakeholders.

Monitoring and Reporting on Human Rights Compliance

Monitoring supplier compliance with human rights standards involves conducting audits and assessments through on-site visits, third-party audits, and self-assessment questionnaires. Regular monitoring ensures that suppliers adhere to the company’s human rights policies and identifies areas of non-compliance.

Reporting on human rights due diligence efforts is vital for maintaining transparency and accountability. Companies should provide detailed reports on their human rights policies, risk assessments, supplier engagements, and remediation efforts. These reports should be communicated to stakeholders, including employees, investors, and the public, to demonstrate the company’s commitment to human rights. Transparent reporting can enhance stakeholder trust and reinforce the company’s reputation as an ethical and responsible organization. By maintaining rigorous monitoring and reporting practices, companies can ensure continuous improvement and uphold their commitment to human rights.

Remediation of Human Rights Violations

When human rights violations are identified within the supply chain, companies must take prompt and effective action to address them. This involves investigating the issue, engaging with the affected parties, and implementing corrective actions. Remediation efforts should aim to restore the rights of the affected individuals and prevent future violations.

Continuous improvement in human rights due diligence practices is essential for long-term success. Companies should learn from past experiences, review their policies and procedures regularly, and seek feedback from stakeholders. By continuously enhancing their due diligence efforts, companies can better protect human rights and mitigate risks. A proactive and iterative approach to improvement strengthens ethical procurement practices, safeguards human rights and enhances the company’s resilience and reputation.

The Future of Human Rights Due Diligence in Procurement

Companies are encouraged to take proactive steps in integrating human rights due diligence into their procurement processes. By doing so, they can ensure their supply chains are free from human rights abuses and contribute to the global effort to protect human rights. The future of human rights due diligence in procurement is likely to see evolving legal landscapes and increased expectations from stakeholders. Companies must stay informed about new regulations and best practices to remain compliant and uphold their commitment to human rights.

A commitment to ethical procurement is crucial for long-term business success, as it not only safeguards human rights but also enhances the company’s reputation, resilience, and sustainability. Investing in ethical practices helps companies navigate evolving legal landscapes and meet stakeholder expectations, ensuring sustained growth and prosperity.

By Tracell Frederick, IT Procurement Manager