Guidance for process requirement 2
Mapping supply chains
In order for suppliers to be able to identify, prevent, mitigate and account for how they address actual and potential adverse impacts in their supply chains, they have to map their supply chains. This is not the same as tracing their supply chains, which requires information most suppliers do not have. What is expected is a high-level assessment of the countries or regions of final assembly manufacturing, component manufacturing and raw materials.
The requirement is limited to significant suppliers, defined as:
Significant suppliers are first tier suppliers prioritised for further assessment on the basis of their whole supply chains’ risk profiles and not on the strength of their relationship with the supplier. The categorization shall hence be based on the supply chain’s operating context (e.g. presence of conflict or vulnerable groups, weak rule of law, high rates of corruption), the operations, products or services involved (e.g. high employment of informal work, use of hazardous chemicals, use of heavy machinery), or other relevant considerations.
This high-level assessment of countries and regions often requires assumptions, especially in relation to raw materials. One source to base these assumptions on, is the U.S. Geological Survey’s annual Mineral Commodity Summaries. These summaries estimate the world mine production and reserves for over 90 individual minerals and materials. Search engines such as Google are also useful when mapping component and raw material supply chains.
Here are two examples why this type of mapping is important:
If you are a supplier of solar panels containing polysilicon and you have not been able to trace your supply chains, you must assume that the polysilicon in your solar panels originate from Xinjiang in China, where 40 % of the world’s polysilicon for solar cells is produced. There have been numerous reports about the risk of forced labour in the production of polysilicon in Xinjiang. Hence, forced labour is most likely your most significant supply chain risk. This means that the risk of forced labour should be given prominence in your selection of supplier and in your monitoring.
If you are a supplier of electronics containing cobalt and you haven’t been able to trace your supply chains or perhaps haven’t realized that you should, you have to assume that the cobalt in your electronics originate from the Democratic Republic of the Congo. The DRC produced 70 % of the world’s cobalt in 2021. The DRC also ranked 5 out of 179 countries in the Fragile States Index in 2021. This means that you have to take into account the risks that are associated with conflict minerals.
Supply chain mappings in the form of Excel spreadsheets, Word documents etc., for sample products
Print-outs of digital supply chain mappings, for sample products
Examinations of risks of adverse impacts
Suppliers shall regularly examine the risks of adverse impacts in their own operations and in the supply chains of significant suppliers.
Remember the definition of significant suppliers:
Suppliers shall catalogue the risks of adverse impacts, benchmarked against the commitments in annex 1. Suppliers shall also catalogue potentially affected individuals or groups. It is not sufficient for this assessment to be based on an index such as the Global Rights Index. If the main labour risk is restrictions in the right to organise this shall be identified as such, linked to workers and workers’ representatives. Otherwise suppliers do not know which risks to focus on in the prevention and mitigation of adverse impact.
In many cases, suppliers are already cataloguing risks and potentially affected individuals or groups in and around its own operations, due to requirements in domestic law. In Sweden, this includes requirements in the Work Environment Act, the provisions of the Swedish Work Environment Authority on Systematic Work Environment Management (AFS 2001:1), the Discrimination Act, the Environmental Code and the Data Protection Regulation.
The persons in charge of the assessments often differ though. Regarding risks in and around a supplier’s own operations, it is primarily HR experts, environmental experts and lawyers who assess risks. Whereas responsible sourcing specialists assess risks in the supply chains.
Sources of information
Both regarding the risks of adverse impacts in suppliers’ own operations and in the supply chains, suppliers shall, where available, use information from the enterprise’s own – or third parties’ – factory audits, occupational health and safety inspections, environmental or social impact assessments, compliance management systems (such as KYC processes); and other assessments carried out by the enterprise or by industry and multi-stakeholder initiatives.
Where this type of information is not available, reports provided by for instance international organisations, civil society organisations, national human rights institutions, government agencies, trade unions, employer and business associations, as well as the media may provide valuable information. Examples of sources can be found here.
Geographical, sector and product risks, which shall be the focus of the assessment, are also often well known. Hazardous environmental and health effects of technical processes and products are for instance generally sufficiently understood within sectors. The same could be said about the risks associated with minerals from conflict-affected and high-risk areas.
Geographic risks are conditions in a particular country which may make sector risks more likely. Geographic risk factors can generally be classified as those related to the regulatory framework (e.g. alignment with international conventions), governance (e.g. strength of inspectorates, rule of law, level of corruption), socio-economic context (e.g. poverty and education rates, vulnerability and discrimination of specific populations) and political context (e.g. presence of conflict).
Sector risks are risks that are prevalent within a sector globally as a result of the characteristics of the sector, its activities, its products and production processes. For example, the extractive sector is often associated with risks related to a large environmental footprint and impacts on local communities. In the garment and footwear sector, risks associated with respect for trade union rights, occupational health and safety and low wages are prevalent, amongst others.
Product risks are risks related to inputs or production processes used in the development or use of specific products. For example, garment products with beading or embroidery hold a higher risk of informal employment and precarious work and phones and computers may contain components that are at risk of being mined from conflict areas.
The examination of risk shall in addition be supported by the information gathered through the grievance mechanism in clause 2.6. Raised concerns naturally needs to be taken into account in the identification and assessment of actual and potential adverse impacts.
Lastly, suppliers shall examine the risks of adverse impacts regularly. Due diligence is by nature an ongoing process. This means that suppliers shall examine risks prior to a new activity or relationship (e.g. mergers, acquisitions, new clients, countries and markets); prior to major decisions or changes in the operation; in response to or anticipation of changes in the operating environment (e.g. rising social tensions); and periodically, which in this case means at least every 12 months, throughout the life of an activity or relationship. The most effective is to try to assess impact as early as possible in the life of an activity or relationship.
Process document(s) which explains the risk assessment for supplier’s own operations and the supply chains, including the cataloguing of risks and potentially affected individuals or groups, sources of information typically used (covering geographic, sector and product risks), and the circumstances under which risks are assessed as well as the time intervals of risk assessments
Examples of risk assessments for sample products, including the cataloguing of risks and potentially affected individuals or groups, and information about sources used
Consultations with rights-holders
Suppliers need to understand the concerns of those who may be affected by their operations. Hence, suppliers shall consult with rights-holders, or their representatives, in their own operations and in their supply chains. Consultations can take place through social dialogue, worker voice programs, surveys, meetings, hearings or other proceedings. The purpose is to understand the specific impacts on specific people, given a specific context.
Consultations with rights-holders, or their representatives, enables a supplier to identify whether rights-holders have the same or different perspectives (than the enterprise and each other) on what constitutes an adverse impact and its significance. Changes to factory shift hours that seem to make sense to the management of an enterprise may have a particular impact on parents with childcare responsibilities or individuals with whose religious practices the new hours would interfere. Consultations with rights-holders also help demonstrate that the supplier takes rights-holders’ views and their dignity, welfare and human rights seriously. This can help to build trust and make it easier to find ways to address impact in an agreed and sustainable way, avoiding grievances and disputes.
Consultations with rights-holders can require particular sensitivity, depending on for instance linguistic, cultural, gender or other barriers that rights-holders may face in speaking openly to the supplier’s representatives. Some individuals or groups may also be at risk of exclusion unless targeted efforts are made to reach out to them. One way of doing this could be by sharing information orally in a community where literacy is low. There may also be competing views among rights-holders about the significance of certain impacts.
Rights-holders and their representatives
Rights-holders are individuals or groups that have particular entitlements in relation to specific duty-bearers, in this case suppliers. All human beings are rights-holders under the Universal Declaration of Human Rights. All human beings shall also be considered as active agents in the realisation of their rights – both directly and through their representatives.
Workers, including outsourced and informal workers, workers’ representatives and trade unions
Communities at local, regional or national level including people living close to or downstream from the operations, landowners, farmers and indigenous peoples
Community-based organisations including religious and community leaders
Environmental and human rights defenders
Civil society groups and non-governmental organisations
In situations where there are a vast number of rights-holders, a supplier may instead engage with credible rights-holder representatives. For example, when deciding to restructure or close a factory, a supplier may engage with trade unions rather than individual workers.
For adverse impacts that result in collective harms (such as corruption which collectively harms the population of a jurisdiction or greenhouse gas emissions which contribute to collective, transboundary harms), broad engagement with rights-holders may not be possible. In these cases, engagement with credible representatives or proxy organisations (e.g. civil society groups or non-governmental organisations) may be useful.
The main goal of social dialogue is to promote consensus building and democratic involvement among the main stakeholders in the world of work. Social dialogue can exist as a tripartite process, with the government as an official party to the dialogue, or it may consist of bipartite relations only between labour and management (or trade unions and employers' organizations). Social dialogue processes can be informal or institutionalised, and often it is a combination of the two. It can take place at the national, regional or at enterprise level. It can be inter-professional, sectoral or a combination of these.
In order for social dialogue to take place, the following must exist:
Strong, independent workers' and employers' organizations with the technical capacity and the access to relevant information to participate in social dialogue;
Political will and commitment to engage in social dialogue on the part of all parties;
Respect for the fundamental rights of freedom of association and collective bargaining;
Appropriate institutional support.
There are more than 100 parties – trade unions and employers' organizations – in the Swedish labour market. Together, they have about 650 different collective agreements. In an international perspective, Sweden has high coverage of collective agreements, but the coverage rate is falling. However, the decline is not as great as the decrease in the degree of trade union organization. At the same time, there are large variations in the labour market:
The coverage rate is higher for blue-collar workers than for white-collar workers.
There are great differences between sectors. In the manufacturing industry, the coverage rate is high, while it is much lower in restaurants and in the cleaning sector.
In large companies, the coverage of collective agreements is greater than in small ones.
About 19 % of the companies are affiliated with employers' organizations, which largely corresponds to the employers' degree of organization. If you exclude the companies where the owner himself is assumed to be the only employee, about 29 % are affiliated with employers' organizations.
Most small companies do not have a collective agreement, which tends to push down the coverage ratio in sectors with a high proportion of small companies.
There are regional differences. In Stockholm, for example, the coverage of collective agreements is lower than in the country as a whole.
Just over half a million employees in the private sector work in companies without a collective agreement.
Because of the high coverage of collective agreements in Sweden, the presence of social dialogue is also high. The situation is, however, often very different in supply chains. Unless suppliers are specific about the right to freedom of association and collective bargaining, as well as the requirement to consult with rights-holders, there is a risk that subcontractors either deliberately or through ignorance do not use social dialogue with trade unions to facilitate consultations with workers. Instead employers will use their own management, a for-profit third party, non-governmental organisations or internal worker/management committees to facilitate discussions with rights-holders. There is also a risk that they will consult with rights-holders through a ‘yellow’ union (a union which is established by and/or under the influence and control of an employer) rather than a genuine union. Hence, suppliers must look into the specific structures in the factory and country from which they source, and engage with factory management to ensure that social dialogue takes place. [TK1]
Worker voice programs
Besides efforts to strengthen freedom of association and collective bargaining, suppliers may use technology, primarily mobile phones, to harness information from workers. Here are some pointers to suppliers who want to use worker voice programs in supply chains:
Use technology that is being used by the majority of workers in their daily lives. Note that in many parts of the world this is changing rapidly, so conduct user studies.
Strive for inclusivity with equal access to worker voice channels across the full diversity of the workforce. Nationality, ethnicity, language, gender, and age are all important insofar as these subgroups may do different types of work, face different kinds of discrimination, and have different levels of digital literacy. Understand existing power structures and discriminatory attitudes between employers and workers, and among workers, to understand possible barriers to access to worker voice that may create biases in the data, as well as barriers in access to remediation.
Ask yourself how well positioned you are to be monitoring and responding to risks and what the desired trade-off is between data quality and quantity. Aspirations of scale have to be balanced with the on-the-ground effectiveness in responding to workers’ concerns. Getting their hopes up for little to nothing poses ethical risks.
Don’t fall victim to technology for technology’s sake. It’s only worth it if the benefits outweigh the risks. The quality and reliability of the data will also likely decline over time if workers do not see results from sharing their data and perspectives. Creating fatigue and scepticism among workers may negatively impact their willingness to participate in future interventions, which may be better positioned to help them.
There are risks to workers from collecting their digital data, depending on how that data is treated, stored, shared, and actioned, which raises a range of ethical issues.
Alternatives to consulting with rights-holders
Suppliers shall always be able to consult with rights-holders, or their representatives, in and around their own operations. However, directly consulting with rightsholders, or their representatives, in supply chains—for instance through worker voice programs or human rights impact assessments—may not be possible for many SMEs. As an alternative, suppliers may gather information from credible and independent sources. Many sources from government, academia, civil society and non-governmental organisations are publicly available. We have listed several here. It is also important, though, to try to find insights from rights-holders in specific sectors or contexts through Google searches etc.
Consultations required according to Swedish legislation
In the Swedish context, many consultations are required by law. In the Work Environment Act, the cooperation between employers and employees can be found in Chapter 6. The obligations are further explained in the provisions of the Swedish Work Environment Authority on Systematic Work Environment Management (AFS 2001:1). The corresponding requirements in the Discrimination Act can be found in Chapter 3 Section 11-12. According to the Environmental Code, persons who intend to pursue an activity or take a measure for which a permit or decision concerning permissibility is required, shall consult the individuals who are likely to be affected by the activity or measure. In the Data Protection Regulation, rights-holders are given rights that extend beyond consultation. Including the right to erasure of personal data and to object to processing of personal data, in certain circumstances.
Best practice – “meaningful” stakeholder engagement
The section below is from the OECD Due Diligence Guidance for Responsible Business Conduct, pp. 49-50. It is based on the stakeholder concept, which includes rights-holders, industry peers, host governments, business partners, investors/shareholders, customers, clients and others. “Meaningful” stakeholder engagement is not a requirement of the contract terms, but best practice.
Stakeholder engagement involves interactive processes of engagement with
relevant stakeholders. Stakeholder engagement can take place through, for example, meetings, hearings or consultation proceedings. Meaningful stakeholder engagement is characterised by and depends on the on both sides. It is also and, and includes in many cases engaging with relevant stakeholders before decisions have been made.
Two-way engagement means that the enterprise and stakeholders freely express opinions, share perspectives and listen to alternative viewpoints to reach a mutual understanding. It also means that relevant stakeholders have the opportunity to help design and carry out engagement activities themselves.
Both the enterprise and the stakeholder are expected to act in good faith in engagement activities. This means that the enterprise engages with the genuine intention to understand how relevant stakeholder interests are affected by its activities. It means that the enterprise is prepared to address adverse impacts it causes or contributes to and that stakeholders honestly represent their interests, intentions and concerns.
Responsive engagement means that the enterprise seeks to inform its decision by eliciting the views of those likely to be affected by the decision. It is important to engage potentially impacted stakeholders and rights-holders prior to taking any decisions that may impact them. This involves the timely provision of all information needed by the potentially impacted stakeholders and rights-holders to be able to make an informed decision as to how the decision of the enterprise could affect their interests. It also means there is follow-through on implementation of agreed commitments, ensuring that adverse impacts to impacted and potentially impacted stakeholders and rights-holders are addressed including through provision of remedies when enterprises have caused or contributed to the impact(s).
Ongoing engagement means that stakeholder engagement activities continue throughout the lifecycle of an operation or activity and are not a one-off endeavour.
Meaningful stakeholder engagement is a key component of the due diligence process.
Process document(s) which explains the consultation with rights-holders in and around supplier’s own operations and in the supply chains, as well as how these consultations inform the risk assessment
Meeting minutes from social dialogues, hearings and other proceedings, for sample products
Results from worker voice programs and/or surveys, for sample products
Particularly vulnerable groups
Suppliers shall pay special attention to adverse impact on individuals from groups and populations that are at heightened risk of vulnerability or marginalisation. The aim is to ensure that they do not contribute to, or exacerbate, such vulnerability or marginalisation.
UN instruments have elaborated on the rights of indigenous peoples; women; national or ethnic, religious and linguistic minorities; children; persons with disabilities; and migrant workers and their families. Moreover, in situations of armed conflict, suppliers shall respect the standards of international humanitarian law. You can find the relevant UN instruments here and the International Committee of the Red Cross’ guidance on the rights and obligations of business enterprises under international humanitarian law here.
Vulnerability depends on context. For example, while women are more vulnerable to abuse than men in some contexts, they are not necessarily vulnerable in all contexts. Conversely, in some situations women from marginalized groups may be doubly vulnerable: because they are marginalized and because they are women. In many contexts it is also useful to take into account other groups than the ones elaborated in the UN instruments, such as people with low social or economic status, street children or homeless youth, LGBTQIA+ people, refugees or asylum seekers and people affected by climate change. The Human Rights Measurement Initiative annually tracks 39 at risk groups in their Rights Tracker.
Here are more sources to help you decide which particularly vulnerable groups to pay special attention to in each context.
Suppliers shall also pay special attention to adverse impact on environmental and human rights defenders. These defenders are at the forefront of protecting our rights and shared planet. Many defenders, including labour union leaders, land and environmental defenders, affected community members, anti-corruption activists, journalists, and others, raise the alarm about irresponsible business practices. In many contexts, they do so at the risk of their lives. The Business & Human Rights Resource Centre’s Human Rights Defender Database tracks the attacks on environmental and human rights defenders globally.
The gender perspective
The children’s perspective
The text box below is a consolidation of the Danish Institute for Human Rights’s and UNICEF’s guide Children’s Rights in Impact Assessments.
Process document(s) which explains how the supplier pays special attention to adverse impact on individuals from groups and populations that are at heightened risk of vulnerability or marginalisation and adverse impacts on environmental and human rights defenders, and how this informs the risk assessment
Examples of risk assessments for sample products, which includes information about identified particularly vulnerable groups
The most significant risks based on likelihood and severity
There is no hierarchy in international human rights law. Human rights are treated as interrelated, interdependent and indivisible. It is nevertheless often impossible for a supplier to address all adverse impacts immediately or simultaneously. Therefore, suppliers shall prioritise the most significant risks based on likelihood and severity.
Standard approaches to risk assessment suggest that the likelihood of an adverse impact is as important as its severity. However, if a potential human rights impact has low likelihood but high severity, the severity of the impact becomes paramount. The focus must be on those adverse impacts that would cause the greatest harm to people. For example, if an adverse impact can result in loss of life, it may be prioritised even if it is less likely.
Suppliers shall judge the severity of impacts by their scale, scope and irremediable character.
Scale refers to the gravity of the adverse impact.
Scope concerns the reach of the impact, for example the number of individuals that are or will be affected or the extent of environmental damage.
Irremediable character means any limits on the ability to restore the individuals or environment affected to a situation equivalent to their situation before the adverse impact.
The text box below, which includes examples of scale, scope and irremediability, is based on pp. 43-44 of the OECD Due Diligence Guidance for Responsible Business Conduct.
Severity is not an absolute concept – it is relative to the other adverse impacts the supplier has identified in the specific case. Often the most severe adverse impacts are however faced by persons belonging to groups that are at higher risk of vulnerability or marginalization, which means the identification of particularly vulnerable groups comes in handy.
It is also important to remember that as soon as the most significant adverse impacts have been addressed, suppliers shall turn to those with the next greatest severity and so on.
Process document(s) which explains the prioritization based on likelihood and severity, and how this informs the prevention and mitigation of adverse impacts
Examples of risk assessments for sample products, which include prioritizations based on likelihood and severity