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Working conference on Due diligence: “Stay and improve the local situation”

Due diligence
Respecting human rights and the environment in international business
Thursday 6 March 2014, Social and Economic Council, The Hague

On 6 March, the Social and Economic Council of the Netherlands, in cooperation with
the Dutch Ministry of Foreign Affairs, Global Compact Network Netherlands and the Netherlands National Contact Point for the OECD Guidelines organised a working conference on due diligence. Council President Wiebe Draijer presented the Council’s thematic report on due diligence to Ms Lilianne Ploumen, Dutch Minister for Foreign Trade and Development Cooperation. Ms Ploumen also launched the online Due diligence guidance tool.

The updated OECD Guidelines and the United Nations’ Guiding Principles on Business and Human Rights outline what is expected of companies in terms of respecting human rights and the environment in international business. “The guidelines are there. Now we just have to implement them,” said Wiebe Draijer, Council President and chairman of the CSR Committee, in his opening address to the more than two hundred conference participants.

Mr Draijer then presented a thematic report on due diligence to the Minister, Ms Ploumen. Due diligence is a process whereby companies identify, prevent and address the actual and potential negative impact of their actions, and communicate on how they deal with identified risks. A company that is internationally active may, for example, become involved – directly or indirectly – in child labour, life-threatening working conditions, extremely long working hours, or negative impacts on indigenous populations or other communities.

Government expects companies to identify and address potential negative impacts as a result of their own operations and activities in their supply chains, to take human rights into account in the production process, and to take action when something goes wrong. Ms Ploumen said she was optimistic; in her view, CSR is becoming second nature to both the CEOs of multinationals and the executives of smaller firms. KPMG Sustainability is currently undertaking a CSR Risk Analysis, as requested by the Dutch government. Investing in CSR is not only important to society, it is also advantageous for the companies involved, emphasised Ms Ploumen, citing Harvard Business School’s research that companies that work on CSR are more financially sound than those that do not. Following her address, Ms Ploumen launched the online Due diligence guidance tool.

Rachel Davis, managing director of Shift - an independent, non-profit center for business and human rights practice – unpacked the various aspects of due diligence and their interconnectedness. She emphasised that due diligence involves more than considering the impacts caused by a company’s own actions; it also concerns adverse human rights impacts that it contributes to and/or is directly linked to through its operations, products or services by its business relationships. Other important requirements include communication of a human rights policy and its effective implementation, both internally and externally, and taking specific steps to remedy any harm done when a company finds that it has caused or contributed to a negative impact.

After the opening plenary session, the conference proceeded with seven parallel interactive workshops. Participants heard how HEINEKEN International, ABN AMRO, Akzo Nobel, Philips, ABP/APG and H2Onsite had experienced due diligence, shared their own insights, and discussed dilemmas. There was also a workshop about integrating due diligence into existing risk management systems such as the Netherlands’ NEN standards, with a contribution by KLM.

In the plenary session following the workshops, Roel Nieuwenkamp, chairman of the OECD Working Party on Responsible Business Conduct, told the participants that a best-practice due diligence approach requires flexibility. Companies will face CSR risks in international business and therefore they’d better be prepared for them. He also commented on the international trend from soft law to hard law in the field of CSR due diligence – such as in the areas of CSR reporting and conflict minerals. Companies have to work to improve the situation, and seek to cooperate with others where necessary in order to exert more influence on the local situation. Pulling out should only be a last-resort option for companies, he said, because only too often that just makes the situation worse. For example, if a company were to cease doing business with another firm because it employed child labourers, the children could lose their jobs and whole families would be affected. Without a structural approach which focuses on providing education and improving the situation locally, chances are that these children will have to look for work under even worse conditions when companies pull out. “Stay and improve the situation,” was his urgent advice.