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Steps to Due Diligence Implementation: From Initial Assessment to Results

By: QIMA Feb 22, 2024

Embarking on the journey of implementing due diligence in your supply chain is a strategic move that demands precision and a comprehensive understanding of the steps involved. Supply chain managers, whether driven by compliance requirements or a voluntary commitment to ethical sourcing, often find themselves eager to fortify their operations against potential risks but unsure where to start.

In this article, we discuss the key steps of due diligence, ensuring a thorough exploration from the initial assessment phase to the tangible results that fortify the resilience of your supply chain.

What Is Supply Chain Due Diligence?

Supply chain due diligence refers to the systematic process of investigating, assessing, and managing potential risks and impacts associated with a company's supply chain activities. It involves the proactive identification, evaluation, and mitigation of social, environmental, and ethical concerns to ensure compliance with regulations, uphold responsible business practices, and enhance overall supply chain sustainability.

Most due diligence regulations are influenced by the OECD Due Diligence Guidance for Responsible Business Conduct, which covers human rights, employment and industrial relations, environment, and more.

Read more: What Is Supply Chain Due Diligence? A Guide to Navigating Ethical Manufacturing

Steps to Implementing Due Diligence

While a company must always check the specific requirements of due diligence legislation that applies to its business, operations, and supply chain, the OECD due diligence guidance outlines six basic steps for due diligence implementation. These steps represent a minimum of due diligence and serve as a foundational framework for supply chain managers looking to initiate the due diligence process.

1. Embed responsible business conduct into policies and management systems

Step 1 involves the foundational process of embedding responsible business conduct into the very fabric of a company's policies and management. This starts with the development of explicit policies addressing responsible business conduct and due diligence, meticulously tailored to align with the company's operations, supply chain dynamics, and other business relationships. Crucially, these policies are not static documents but are actively woven into the decision-making processes, procedures, and training programs of the company, ensuring a seamless integration into daily practices.

Additionally, clear communication of these expectations extends beyond internal stakeholders, reaching out to business partners and suppliers. Collaborative partnerships are identified, fostering a collective commitment to responsible conduct and due diligence.

2. Identify and assess adverse impacts in operations, supply chains, and business relations

In this pivotal step, businesses undertake a comprehensive examination to identify and assess adverse impacts within their operations, supply chains, and business relations, laying the groundwork for informed decision-making and proactive risk mitigation. The activities listed below should be carried out and should involve relevant internal and external stakeholders.

3. Cease, prevent or mitigate adverse impacts

In Step 3, companies address the identified adverse impacts by employing strategic measures to cease, prevent, or mitigate these challenges within their operations, supply chains, and business relations.

For impacts caused directly by your business:

For impacts your business indirectly contributed to:

For impacts your business is linked to through products or services of a business relationship:

While undertaking risk mitigation, companies must embrace continuous improvement. Collaboration with peers, suppliers, and local stakeholders is encouraged. Disengage from a supplier or business relationship if it becomes necessary, applying responsible exit principles when such decisions become unavoidable.

4. Track implementation and results

Consistent progress is key in due diligence implementation, and Step 4 emphasizes the importance of ongoing evaluation. Periodically reviewing all activities initiated in Step 2, companies are prompted to adapt, repeat, update, or enhance processes when necessary.

Monitoring the effectiveness of the due diligence process, measuring the impact of risk assessments and mitigation activities, and actively seeking stakeholder input contribute to a dynamic and responsive approach. This step fosters a culture of continuous improvement, ensuring that the due diligence framework evolves in tandem with ever-changing legislation.

5. Communicate how impacts are addressed

Step 5 focuses on communicating the outcomes of due diligence efforts. Companies are encouraged (and in the case of some regulations, required) to disclose their due diligence process and activities, providing a comprehensive account that encompasses both progress and ongoing challenges.

Disclosure is required by all due diligence legislation, but the specific requirements may range from highly specific or prescriptive, as in the case of timber legality and conflict minerals, to more generalized, as seen in broader human rights and environmental due diligence laws.

6. Provide for, or cooperate in, remediation when appropriate

Step 6 is the remediation phase. Companies are encouraged to collaborate on providing remedies when necessary. This involves reaching out to affected parties to gauge satisfaction levels with the process and outcomes.

Establishing an effective grievance mechanism becomes paramount in this step, ensuring that companies not only address adverse impacts but also actively participate in the resolution process. Some due diligence legislation, such as the German Supply Chain Law, mandates businesses to establish grievance mechanisms. Through cooperative remediation efforts, businesses contribute to a more responsible and ethical business environment.

Due Diligence Implementation: How QIMA Can Help

QIMA assists companies in implementing due diligence in their supply chains by offering comprehensive solutions that address each step described above.

Leveraging advanced technology and a global network of skilled auditors, we conduct thorough risk assessments, evaluate compliance with regulations, and ensure adherence to ethical sourcing standards. With tailored programs, we assist you in tracking implementation, communicating transparently about your impacts, and facilitating remediation efforts when needed.

We offer:

Learn more about our due diligence services or read our whitepaper Mandatory Human Rights & Environmental Due Diligence: How to Get Prepared for more information on due diligence compliance.


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