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22 June 2020

Managing the way we supply our resources: a sustainable and increasingly regulated issue

By Frédéric Bardy

Will companies' duty of care vis-à-vis their supply chain become the norm in the near future? This is what suggest the various initiatives at the sectoral, national and international levels having appeared in the recent years. 
On February 24 Antonio Guterres, United Nations’ Secretary General, warned the international community declaring that "human rights are under attack from everywhere"(1) and this, especially with the rise of a climate crisis, identified as the most pressing threat. Companies bear a great share of responsibility in this catastrophic situation, but they also possess the power to play a key role in resolving these crises. The duty of care is a key element to resolve the current situation with regard to human rights and the environment, worldwide. 
 
Now is the time for companies of all sizes and all sectors to take control of their supply chain by strengthening ties with their suppliers in order to build solid foundations for the future while limiting the reputational risks linked to possible scandals in the supply chain. So, what has been done? What are the most notable advances when it comes to the duty of care in Europe? 
 
A sectoral approach to supply chain management for high-risk raw materials 
 
There exist sectoral initiatives to regulate the purchase of so-called "high-risk" products and raw materials when it comes to human rights and the environment’s preservation. These initiatives are mainly voluntary initiatives. Here are some examples among others:

 In 2010, the European Parliament published a regulation, effective from March 3, 2013, on wood and derived products’ supply chain. It imposes sanctions on offenders, provides a framework for supply and ensures a more transparent and sustainable sector. Indeed, such a strategic resource is coveted by many sectors, such as the construction industry. The wood supply chain is subject to numerous risks, such as the one of primary forests’ deforestation, coming with great consequences, both environmental  (loss of biodiversity, soil erosion, reduction of atmospheric carbon capture, etc.) and social ( indigenous cultures’ disappearance, neighboring populations’ impoverishment, etc.).

In 2017, the European Parliament established obligations in relation to the supply of minerals from conflict zones, such as tin, gold, tantalum and tungsten. In effect from January 1, 2021, the regulations aim to strengthen the traceability and duty of care of importers from the European Union. It intends to prevent the financing of armed groups and security forces operating in areas rich in mineral resources to limit disastrous human casualties, such as child labor in mines or sexual violence resulting from conflict.

In 2018, following the 2013 Rana Plaza accident in Bangladesh, which claimed the lives of nearly 1,200 people, the OECD published a “Guide to due diligence for responsible supply chains in the clothing and footwear industries ” presenting good practices for a more sustainable management of the supply chain in the sector.


National initiatives put in place to reinforce companies' duty of care 
 
At the national level, France is a pioneer. It is the first country in the world to have established a constraining law, making multinationals accountable for their own supply chain and punishing any human rights or environment-related negligence. Since then, two French companies, Total and Téléperformance, have been put on notice following their negligence of human rights and the environment within their supply chain. 
 
Also, the United Kingdom voted in 2015 the Modern Slavery Act, effective from May 26, 2020, aiming to combat modern slavery, especially at the corporate level(2). More recently, in 2019, the Netherlands adopted a law rendering the duty of care vis-à-vis child labor compulsory for all Dutch or foreign companies selling or supplying goods/services in the country(3).

International bodies under pressure to adopt laws on the duty of care at the corporate level


With repeated scandals and a growing public awareness about sustainable development, there is increasing pressure from civil society, including investors, over national and international bodies. They provide a legal framework for businesses’ activities, therefore increasing self-awareness when it comes to one’s own responsibilities in regards to supply chain issues. These pressures will most certainly result in the adoption of new legislations on the subject. A new round of negotiations will, for instance, take place at the UN in October 2020. It will touch on the adoption of an international treaty making multinationals responsible for their negligence of human rights, especially within their chain of supply. The European Union, through the European Commission, has commissioned the BIICL (British Institute of International and Comparative Law) in collaboration with LSE Consulting and Civic Consulting to conduct a study on the duty of care within supply chains(4). This study, published in January 2020, presents 4 regulatory scenarios on the duty of care: 
 
    1. There is no change in European regulations. Study predicts that if this scenario is applied, national laws will be put in place to make up for this lack of unified regulations at the EU-level; 
 
    2. Implementation of new guidelines for companies with a voluntary application process; 
 
    3. Implementation of new constraining reporting regulations to strengthen companies' transparency; 
 
    4. Introduction of a constraining law on companies’ duty of care throughout their supply chain. 
 
Thus, numerous factors tend to indicate that the European Union will soon legislate on a new piece of legislation to regulate companies in regards to their duty of care. 
 
Pioneer companies committed to improving their suppliers’ sourcing  
 
Some companies already stand out in the duty of care’s realm and affirm their supply chain management as one of their USP (Unique Selling Proposition). The Dutch company Fairphone(5) has a totally transparent supply chain and sets up mechanisms to limit or even avoid buying minerals from mines that do not respect the most basic human rights, mainly in conflict zones. They stand out from the competition and particularly from High Tech big players who graciously avoid communicating on the subject to limit reputational risks. To a lesser extent, some construction companies invest in better supply chain management. For instance, Bouygues Construction(6) aims to audit, through an independent company, all of its ‘high-risk’ suppliers, in order to ensure the respect of human rights. Also, The British Land Company plc, an English real estate investment company, has adopted a code of conduct for its suppliers(7) which integrates social and environmental dimensions. It offers particular consideration to the working conditions of its suppliers, the purchase of responsible minerals or community engagement.
 
As a result, companies operating in all sectors, from construction to retail, will increasingly be called upon to take responsibility for their supply chain management. Many NGOs are already positioning themselves to ensure that companies' commitments on the subject are respected. The vigilance-plan.org website, developed by Sherpa, Terre Solidaire and Business & Human Rights Resource Center, is an example of initiatives aimed at monitoring these commitments. 
 
Many approaches and tools remain available to help businesses be in line with a more sustainable dynamic. It is within this context that Longevity wishes to collaborate and offer its services to responsible companies placing sustainability as a priority in their business model and wishing

 

1. https://news.un.org/en/story/2020/02/1057961

2. http://www.legislation.gov.uk/ukpga/2015/30/contents

3. https://ohrh.law.ox.ac.uk/dutch-child-labour-due-diligence-law-a-step-towards-mandatory-human-rights-due-diligence/

4. https://op.europa.eu/en/publication-detail/-/publication/8ba0a8fd-4c83-11ea-b8b7-01aa75ed71a1/language-en

5. https://www.fairphone.com/en/impact/?ref=header

6. https://www.bouygues-construction.com/en/page-engagement/human-rights

7. https://www.britishland.com/~/media/Files/B/British-Land-V4/downloads/2018/BL%20Supplier%20Code%20of%20Conduct.pdf