ENABLING RESPONSIBLE SUPPLY CHAINS OECD Guidelines for Multinational Enterprises and Risk-based Due Diligence November 2015 APBF Cristina Tebar Less
OECD focus on Responsible Business Conduct • Integrating RBC in investment policy : providing enabling policy environment to ensure that investment contributes to sustainable development • Guidelines for business setting out society’s expectations of RBC and providing tools to business to meet these expectations (due diligence guidance) • Monitor national contract points to support implementation of business responsibility standards (ca 350 cases, 90 countries)
OECD Guidelines for Multinational Enterprises • Government-backed international instrument for promoting responsible business conduct • Recommendations from governments to businesses operating in or from adhering countries • Cover all major areas of business ethics – human rights environment, labour, bribery, disclosure, • Implementation- complaints mechanism to address adverse business impacts • Endorsed by business, trade unions and civil society organizations • Open to OECD and non-OECD countries
Responsibility throughout business relations Business responsibility includes o Avoid causing or contributing to adverse impacts through their own activities , and addressing them o Seek to prevent or mitigate adverse impacts directly linked to their operations, products or services by a business relationship – including via supply chain Recommended tool: risk-based due diligence as part of risk management system to identify, prevent and mitigate actual and potential risks
Managing risk through due diligence • Rationale: Integrate risk-based due diligence in company’s risk management system to identify, prevent and mitigate actual and potential risks (e.g., human rights, labour, environment, bribery) • Methodology : multi-stakeholder approach; all actors involved in developing the standard • Promotion: make due diligence standard known • Implementation : help companies apply due diligence standards; advise on policies needed to provide enabling policies.
Key steps of due diligence • Step 1 – Establish strong management systems: Policy, internal capacity, supplier engagement, internal controls over supply chain • Step 2 – Identify, assess and prioritise risks in the enterprise supply chain: map supply chain, prioritize based on severity of harm (sector, counterparty, and site for high-risk issues) • Step 3 – Manage risks in the supply chain : inform senior management, fix internal systems, build leverage, use existing supply chain networks, workers reps, non-traditional partnerships, build capacity • Step 4 – Verify supply chain due diligence : where relevance, monitor, audit assurance, etc. • Step 5 – Communicate and report on supply chain due diligence: with due regard for commercial confidentiality and competitive concerns
OECD Due Diligence Guidance for Responsible Supply Chains
OECD Due Diligence Guidance for Responsible Mineral Supply Chains Objective To provide clear, practical guidance for companies to ensure they do not contribute to conflict or human rights abuses through their mineral and metal production and procurement practices Method and scope 5-step risk-based due diligence process , applies to all companies throughout the mineral supply chain that produce or potentially use minerals from conflict-affected or high-risk areas Applicable to all minerals, on a global scope Role of stakeholders Companies: Implement due diligence and the 5-step framework, possibly through industry associations or initiatives Governments : Create the enabling environment for responsible mineral supply chains Civil society: Monitor mining sector governance and company activities throughout the global mineral supply chain 10
Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractives Sector Process Objective Approach Offer practical guidance for • Mandate by governments • Framework for managing risks the extractive sector in line Developed via Multi- with regard to stakeholder with the OECD MNE engagement to ensure they stakeholder advisory group play a role in avoiding and Guidelines on due diligence • Public consultation addressing adverse impacts. for stakeholder engagement . • Recommendations at the site level, and for management • Endorsement by • Specific guidance: engaging stakeholders, approval by with women, indigenous governments in 2015 peoples, workers and artisanal miners.
Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractives Sector OECD Guidelines expect companies to engage with stakeholders to provide meaningful opportunities for their views to be taken into account in relation to planning and decision making for projects or other activities that may significantly impact local communities’. Characteristics of the Extractives Sector: • Long project life cycle • Immobile production • Significant investment and infrastructure • Potentially significant social and environmental footprint About 20% of all specific instances brought to the NCP mechanism involve the extractive sector.
Promoting responsible agricultural supply chains A FAO-OECD guidance 14
The FAO-OECD Guidance Help enterprises observe the OECD Guidelines and other major responsibility standards (e.g. Principles for Responsible Investment in Agriculture and Food Systems) Developed through a multi-stakeholder advisory group involving large agro-food industry, investors, governments, civil society Endorsed by stakeholders, approved by governments end 2015 15
Responsible Supply Chains in the Textile & Garment Sector Due Diligence Guidance Implementation Platform Outreach • Principle-based due • Small & Medium Sized • Training & engagement diligence Guidance Enterprises (Research & with adherent and non- around 5-step framework Capacity Building) adhering import and export countries on due diligence • Due Diligence Guidance • Effective monitoring & in the textile and garment for salient risks in the mitigation methods sector sector (Research) • Pilot in 2016 • Access to remedy (Research)
Textile & Garment Sector Supply Chain Example salient risks Forced & bonded labour Fast fashion & low prices Sumangli scheme Child labour Short-term contracts Purchasing Small holder Occupational health & safety practices Business farmers; models Use of temporary Excessive working hours workers Illegal sub- Freedom of Association & contracting Inflexible delivery Use of temporary Collective bargaining dates workers, Business models Wages homeworkers, migrant workers Chemical use & water contamination Aggravating factors
OECD PROJECT ON RESPONSIBLE BUSINESS CONDUCT IN THE FINANCIAL SECTOR Objective: Outline practical approaches and provide guidance for financial service providers to meet expectations of the OECD MNE Guidelines through their due diligence, across a range of financial services. Challenges: extensive and complex business relationships, rapidity of transactions, and operations which do not fit neatly into the model of suppliers and buyers in a supply chain Demand: Growing attention to responsible business conduct in the financial sector. Ca 10% of cases filed before NCPs concern the financial sector; since 2000, 36 cases have been filed, 19 of them since 2011
Responsible supply chains in legislation • US and EU (forthcoming): mandatory reporting on minerals sources from conflict • UK: anti-slavery legislation • France: mandatory due diligence for large companies, mandatory reporting of investors’ carbon footprint • EU: RBC in new Trade and Investment Strategy, partnership agreements (e.g. Singapore) 20
Outreach to ASIA • Members of OECD: Japan and South Korea • Policy reviews and analysis of RBC policies: Myanmar, Malaysia, Philippines, Cambodia, Lao, Vietnam • PoW on RBC with China, conference on responsible minerals supply chains Dec. 2015 • Conference on responsible supply chains with India Nov 2015 21
Contact: Cristina Tebar Less, Head of Responsible Business Conduct Unit (OECD Investment Division) Cristina.tebar-less@oecd.org OECD Website: http://mneguidelines.oecd.org http://mneguidelines.oecd.org/implement ation
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