Corporate due diligence and corporate accountability, ending an era of voluntary policing. A new EU mandate places liability on companies unable to assess and mitigate unethical third-party behaviour. New legislation requires companies operating in the EU to ‘identify, address and remedy their impact on human rights and the environment throughout their global value chains.’
- In 2017, nearly 25 million people categorised as victims of forced labour. International Labour Organization, 2017 report
- From 2000-2012, nearly 25% of all tropical deforestation was due to illegal agro-conversion for export markets. 2019 study
Global economies have significantly benefited from an increase in cross-border and international business partnerships, which has led to a substantial expansion of the global value chain. Subsequently, more and more companies are being exposed to potential liability by unscrupulous third-party providers in their supply chain pipeline with little respect for business ethics, human rights or the environment.
There is a growing concern worldwide of the many supply chain businesses linked to severe abuses, including exploitative working conditions, modern slavery and child labour, toxic pollution, rampant destruction of rainforests and a general disregard for corporate governance.
For decades, companies have voluntarily monitored supply chain partners for bad behaviour, but this self-policing has limited. But now, the European Union Parliament has presented mandates for EU businesses – under penalties of law – to carry out due diligence to identify, prevent, mitigate and account for actual or potential human rights violations and negative environmental impacts in their operations and supply chain.
“We live in a world where businesses with the wherewithal can still shift their adverse social and environmental impact to the most vulnerable people and places on the planet.” Lara Ianthe Wolters, Member, European Parliament
The Challenge: You are Liable for the Conduct of Your Partners; Lack of Due Diligence will Get you into Trouble
The legislation requires companies operating in the EU to identify, address and remedy their impact on human rights (including social, trade union and labour rights), the environment (contributing to climate change or deforestation) and good governance (such as corruption and bribery) throughout their value chain.
This is akin to saying that if a company fails to conduct due diligence on a third-party partner that engages in slave labour, pollutes the environment, manipulates the price or violates jurisdictional regulations, that company is essentially complicit in the partnering company’s illegal behaviour. It may be held liable in a court of law.
Aside from legal and monetary penalties, the company further risks a tarnished reputation in the market and a devaluation of its brand.
It’s crucial for businesses utilising global supply chain partners to conduct due diligence and assess the potential risks that a third party may pose to your organisation, particularly when addressing risks associated with environmental damage and human rights violations.
The Solution: Identify Unethical Behaviour and Protect Your Organisation with 3PRM, Corporate Due Diligence and Risk Management
CRI Group™ developed a highly specialised assessment solution for Corporate Due Diligence and Third-Party Risk Management to assist organisations in accurately identifying, preventing, mitigating and addressing actual and potential adverse impacts of affiliating with global partners and complies with all EU mandates.
From enhanced due diligence to identify non-compliance of the regulatory framework and damaging environmental allegations to investigating company (or stakeholder) human rights violations related to labour laws, child labour or human trafficking, CRI Group experts help determine the legal compliance, financial viability, and integrity levels of outside partners and suppliers affiliated with your company’s value chain.
Recent studies have demonstrated a positive correlation between the extent to which companies implement environmental, social and good governance policies, and their overall economic performance, all while contributing to a more stable global marketplace. Such responsible business conduct:
- Enhances protection for workers
- Improves access to justice for victims
- Safeguards the environment
- Ensures fair products for consumers
Further, apart from general compliance with EU mandates, such organisations enjoy a wealth of intangible benefits, including:
- Reduced overall liability risks
- Improved stakeholder protection
- Lower costs resulting from conflicts
- Improved company transparency
- More profound knowledge of the value chain
- Enhanced reputation in the market
- Improved social standards for workers
“The global pandemic has demonstrated that resilient global supply chains that protect both the people and planet will be crucial to companies and economic recovery in the future.” Transparency International EU
CRI Group’s corporate due diligence and accountability solutions can help your organisation comply with a growing list of global regulations and mandates related to human rights and the environment while acting as an integral part of your business decision-making and risk management systems.
Are you prepared to conduct a due diligence assessment on your global partners? Contact CRI Group to learn more about our Corporate Due Diligence and Accountability solutions and stay one step ahead of the pending EU mandates. We look forward to assisting you.
Zafar I. Anjum | MSc, MS, LLM CFE, CIS, MICA, Int. Dip. (Fin. Crime), Int. Dip. (GRC), MBCI, CII Int. Dip. (AML)
Group Chief Executive Officer, Corporate Research and Investigations Limited
Our enhanced Integrity Due Diligence services will ensure that working with an, i.e. potential trade partner will ultimately achieve your organisation’s strategic and financial goals. To find out more about each level of due diligence, contact CRI Group HERE!