When talking about due diligence, companies primarily think about risks to their business, like financial risk, market risk, etc. The OECD Due Diligence Guidance for Responsible Business Conduct (RBC) however refer to the likelihood of adverse impacts on people, the environment and society that enterprises cause, contribute to, or to which they are directly linked. In other words, it is an outward-facing approach to risk and more than just responding to negative impacts. It involves bundles of interrelated processes and pro-active behaviour.
The due diligence guidance for Responsible Business Conduct (RBC) can be seen as a way to help all supply chain actors to understand, identify, assess, and address prioritised risks of harm associated with their suppliers or raw materials. There are guidelines for several sectors available which outlines common principles and the approach that can be applied to each actor in an individual way, while simultaneously highlighting the need of meaningful multi-stakeholder engagements.
Adopting an effective due diligence management system that extends throughout the entire supply chain is the best way to ensure proper due diligence. The implementation of such a system and its integration into existing company processes may produce additional operational benefits and will help to reduce risks and lower the negative impact of a company’s business activities.
Furthermore, there is an increasing likelihood of legal regulations relating to due diligence for RBC. In order to comply with these requirements, it is important for companies to recognise at an early stage where possible risks of their own actions could be located (e.g. risk analysis) and that all stakeholders are considered (e.g. stakeholder engagement).