According to the OECD, due diligence is a process that enterprises should implement to identify, prevent, and mitigate the actual and potential negative consequences (risks) of their activities on the areas covered by the Guidelines. This process also gives an insight into how these effects are handled by an enterprise. This applies to both its own activities and those of its (direct) business relations along its supply chain.
According to the OECD, a “business relationship” includes “relationships with business partners, entities in the supply chain and any other non-State or State entities directly linked to its business operations, products or services”. The areas covered by the Guidelines for Responsible Business Conduct are
- human rights,
- employment and labour relations,
- the environment,
- the fight against corruption,
- consumer protection,
- science and technology,
- competition and
- agriculture.
What are the Characteristics of Due Diligence?
The due diligence process has the following key features:
- It is preventive: its purpose is first and foremost to avoid causing or contributing to adverse impacts on people, the environment and society. It also seeks to prevent adverse impacts directly linked to operations, products or services through business relationships.
- It is commensurate with risk: the measures that an enterprise takes to conduct due diligence should be commensurate with the severity and likelihood of the adverse impact.
- It can involve prioritisation: where it is not feasible to address all identified impacts at once, an enterprise should prioritise the order in which it takes action based on the severity and likelihood of the adverse impact.
- It is dynamic: the process is not static, but ongoing, responsive and changing.
- It is inclusive: it involves the timely sharing of the relevant information needed for stakeholders to make informed decisions in a format that they can understand and access.
- It is open: an enterprise should account for how it identifies and addresses actual or potential adverse impacts and should communicate accordingly to its intended audiences.
- It is collaborative: the enterprise can collaborate with its peers in the same sector of activity via multi-stakeholder platforms in order to pool knowledge, increase leverage and scaleup effective measures.
What Is the Process for Implementing Due Diligence?
The overall process includes steps to consider in order to engage in responsible business conduct (RBC) and assist in implementing due diligence. These measures apply to both the enterprise's strategy and its management (see point 1 in the diagram below).
To achieve this, the enterprise must:
- Identify its actual or potential adverse impacts in the areas covered by the Guidelines (point 2)
- Cease, prevent and mitigate the identified impacts (point 3)
- Track the implementation and results of the corrective measures it has taken (point 4)
- Communicate on the measures taken (point 5)
- Remediate the adverse impacts it may have caused as a result of its activity (point 6).
The implementation of due diligence is commensurate with risks and must be appropriate to a specific enterprise’s context. The practical actions presented must therefore be integrated into the enterprise's strategy and regularly checked. They are not meant to represent a “tick box” list. Not every practical action will be appropriate for every situation. There may, for instance, be additional actions or measures to those described here.
Depending on whether you are an SME or a larger enterprise, the process can be adapted, also taking into account your resources and capabilities.
