Staying on the Right Side of the Sustainability Curve

Whether they want to or not, companies are increasingly coming under pressure from all angles to take their social and environmental duties seriously. 

Until now, it has been easy for most organisations to turn a blind eye, with many opting to hide behind their complex supply chains to avoid taking proper accountability, however, there will be nowhere to hide if the European Commission gets its way. 

Considering the immense scale of the world’s environmental challenges and the need to continue driving improved and more consistent societal standards across all nations, the European Commission proposed a new Directive last year, entitled Corporate Responsibility Due Diligence. The Directive aims to foster radically improved sustainable and responsible corporate behaviour by requiring organisations to identify, prevent, mitigate, and account for negative human rights and environmental impacts throughout their supply chains; top to bottom. Zero hiding places. 

As it stands, these new measures would affect companies that fall into two groupings; the first of these is any organisation with more than 500 employees and more than €150 million turnover. The second is companies that operate in high-impact sectors with more than 250 employees and a turnover of €40 million. The Directive will require these organisations to re-examine and potentially restructure their supply chains and take accountability for their social and environmental impact.  

Compliance with the proposed Directive will require companies to take the following steps: 

1. Integrate supplier due diligence into company policies.  

2. Identify actual or potential adverse human rights and environmental impacts across supply chains.  

3. Prevent or mitigate potential impacts.  

4. Establish and maintain a mechanism for stakeholder engagement and feedback.  

5. Monitor the effectiveness of the due diligence policies and measures.  

6. Publicly communicate steps taken on due diligence. 

This policy has the potential to be one of the most profound disruptors in a generation as it sets accountability beyond an organisation’s own operations, deep into their supply chain.  

Shining a torch so far down into such an unknown quantity will not be without its challenges for many organisations, and reputations will be impacted. However, staying ahead of the regulatory curve, being mindful of the ever-evolving expectations of stakeholders and starting the journey now will help mitigate against profound challenges where independent monitoring and enforcement becomes a factor.  

Reputation Inc’s framework for managing sustainability throughout supply chains is grounded in proactive, transparent, and mutually beneficial stakeholder engagement. Through our offering, we propose that there several key steps to take.  

These include: 

1. Supplier mapping and ranking to determine suppliers who present the greatest risk and key exposure points.  

2. External stakeholder engagement to understand perceptions around key risks, current and future expectations, and potential opportunities.  

3. Supplier engagement to assess supply chains and exposure points, current/planned activity to reduce impact, and opportunities to collaborate with suppliers for positive change. 

4. Development of supplier charter outlining the key criteria that suppliers will be held to throughout the supply chain, taking into account social, economic and environmental impact. 

5. Implementation of behavioural change process that creates a culture of sustainability governance across organisations.  

6. Transparent communications with external stakeholders to showcase efforts and to socialise expectations with partners and suppliers.  

7. Establishment of supplier screening mechanism to ensure new suppliers/renewing suppliers meet strict criteria set out in supplier charter.  

8. Where required, implementation of added layer of compliance monitoring through engagement with third party referees within suppliers’ own supply chains as validation. 

While the finalisation and implementation of the Corporate Responsibility Due Diligence Directive may take some time, there’s no doubt in my mind that the organisations that begin the process of looking deep into their supply chains, sooner than later, will reap the rewards over those that sit still.