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Process requirements 3

Here we explain what is meant by preventing and mitigating adverse impacts that the supplier causes or contributes to. We describe the responsibility and the need to cease activities that cause or contribute to adverse impacts, establish action plans and take into account purchasing practices.

Excerpt from the contract terms

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Supplier shall prevent and mitigate actual and potential adverse impacts that Supplier causes or contributes to, by

a) ceasing activities that cause or contribute to adverse impact in its own operations or in the supply chains,

b) establishing action plans in meaningful consultation with affected rights-holders or their representatives, with a particular focus on the most significant risks identified and

c) promoting purchasing practices that do not make it more difficult for sub-suppliers to comply with the commitments in the Code of Conduct for suppliers.

A supplier “causes” an adverse impact if their activities on their own are sufficient to result in the adverse impact. A supplier “contributes to” an adverse impact if the supplier’s activities cause, facilitate or incentivise another entity to cause the adverse impact, or if the supplier’s activities, in combination with the activities of other entities, cause the impact.

 

Generally, a supplier causes adverse impact in and around its own operations, while contributions can take place both in and around the supplier's own operations and in its supply chains.

Processkrav 3 Cause ENG_4x_edited.png

Example of causation​

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  • A company exposes its factory workers to hazardous working conditions without adequate safety equipment.

  • A company discriminates against women or ethnic minorities in employment.

  • A company is the sole or main source of pollution in a community's drinking water, due to chemical emissions from production processes.

  • A supplier pays a bribe to a foreign public official.

Examples of contribution

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  • A company lends vehicles to security forces who use them to travel to local villages and commit atrocities.

  • A company sets a very short lead time for the delivery of a product or changes requirements at the eleventh hour without adjusting deadlines and prices, which pushes suppliers to violate workers' rights (e.g. through excessive overtime).

  • A supplier emits large amounts of carbon dioxide from its factory, but even if the company causes its own emissions, it is not solely responsible for climate change.

The contribution must be substantial, which means that minor or trivial contributions do not count. Multiple factors must be taken into account in this assessment:

  • the extent to which a supplier may encourage an adverse impact by another entity, i.e. the degree to which the supplier’s activity increase the risk of the impact occurring

  • the extent to which a supplier can or should know about the adverse impact or potential for adverse impact, i.e. the degree of foreseeability

  • the degree to which any of the supplier’s activities actually mitigate the adverse impact or decreases the risk of the impact occurring.

a) Cease activities

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You must cease activities that cause or contribute to an adverse impact in your own business or in the supply chains. "Activities" includes both actions and omissions, such as your failure to provide safety equipment.

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This means that the companies in the examples of "causation" and "contribution" above shall:  

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  • stop exposing their factory workers to hazardous working conditions

  • stop discriminating in its hiring processes

  • stop emitting chemicals into the coummunity's drinking water

  • stop paying bribes

  • stop lending vehicles to security forces

  • stop setting short lead times or changing requirements at the eleventh hour without adjusting production deadlines and prices

  • stop emitting large amounts of carbon dioxide from the factory, or at least reduce them.

 

If it is a question of contribution, you shall to the greatest extent possible also use its leverage to mitigate any remaining impact.

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Guidance process requirements 4 

Suggested verifications​

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  • Process document(s) which describe(s) how the supplier determines whether it is causing, contributing to or linked to adverse impacts.

  • Risk assessments for sample products, where the responsibility has been defined.

  • Process document(s) which describe(s) the steps the supplier takes if it realizes that it causes or contributes to adverse impacts.

  • Meeting minutes where the decision to cease activities that cause or contribute to adverse impact has been recorded.

  • Incident reports and investigations.

  • Communication with sub-suppliers in which the supplier is using its leverage to mitigate any remaining impact.

b) Establish action plans

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You shall establish action plans in meaningful consultation with affected rights holders or their representatives, with particular focus on the most significant risks identified. This is to prevent and mitigate future adverse impact. Which measures are needed depends on the adverse impact. However, it is important that the measures target the root cause of the problem.

 

The action plans shall be clearly documented, communicated with the affected party and contain the following:

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  • Proposed measures, i.e. descriptions of how the supplier intends to prevent and mitigate the adverse impact, including the identified root cause.

  • Timeframes, i.e. dates for when the measures must have been implemented at the latest.

  • Responsible persons, i.e. persons responsible for the implementation of the measures.

 

In a Swedish context, the requirement for measures is part of legislation such as the Work Environment Act and the Discrimination Act, including the requirement that they will be planned and implemented as soon as possible.

  • How to carry out a risk analysis
    Step 1: Mapping the supply chain The first step in a risk analysis consists of mapping the supply chain to find out its structure. This includes identifying in which countries the work is carried out, and if possible also in which regions. This is particularly relevant if the work is carried out in any region known to have high risks. Within certain industries such as food, textiles and IT there is a lot of information. For other industries such as pharmaceuticals, however, transparency is low. To obtain this information, you can ask the category manager, the category councils, ask questions of suppliers, find out import data, read audit reports and market analyzes for specific industries. It is also important to identify what type of work is carried out and what type of actors in the supply chain that performs it. Is it, for example, an industry characterized by low wages and health-hazardous processes? Does the workforce consist of migrant workers or seasonal workers? Is the supply chain complex with many subcontractors and a lack of transparency? This type of information is important as both geographical risks, industry risks and product risks need to be taken into account. Step 2: Gather information from credible and independent sources Once you have mapped the origin and the supply chain, the next step is to gather information about the situation of human rights, workers' rights, the environment and business ethics in the relevant countries where the work is carried out, that is, both for final manufacturing, component manufacturing and raw materials. For this you need to turn to credible and independent sources such as international organizations, authorities, voluntary and civil society organizations and global trade unions. Sources Step 3: Identify and assess negative impacts The last step involves assessing the actual and potential negative impact the supply chain is associated with, based on the information that has been compiled in steps 1 and 2. This is to be able to determine which concrete measures need to be taken to manage the risks. Often several risks have been identified and to prioritize them you need to make a seriousness assessment. The most significant risks are prioritized based on probability and seriousness ( read more under point d in process requirement 2 )

Suggested verifications​

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  • Action plans for sample products, drawn up in consultation with suppliers and/or rights holders or their representatives.

  • Meeting minutes from consultations with rights holders, for sample products.

c) Promote sustainable purchasing practices

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You must promote purchasing practices that do not make it difficult for subcontractors to comply with commitments.

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Your purchasing practices can play a key role in both protecting and harming workers. In this case, you are the buyer and it is important for buyers to understand that purchasing practices can either improve conditions in supply chains or exacerbate and compound adverse impacts.

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This requirement is closely linked to process requirement 1, in which suppliers shall integrate the commitments into policies and management systems. The integration into management systems is divided into three levels. Suppliers shall:

  1. ensure that the board of directors takes the policies into account when making decisions;

  2. appoint one or more persons in management positions as responsible for the due diligence process;

  3. assign responsibility for the implementation of the policies to employees whose decisions are most likely to increase or decrease the risks of adverse impacts.

An integral part of a functioning management system is to understand the role of purchasing practices. Here are a few examples of purchasing practices and risks of adverse impacts:

Purchase method

Risk of negative impact

Timing demands

Price pressure

Last minute order modifications, such as quantity increases or design alterations

Changes to payment terms during the contract period

Take-it-or-leave-it contracts without negotiations that enable suppliers to fulfill commitments

Inadequate weight to sustainability in evaluation criteria, including supplier’s financial, managerial and legal capacity to meet the obligations

Lack of responsibility for remediation if contribution

Disengagements without responsible exits

Excessive overtime

Insufficient wages

Unreasonable overtime, insecure employment

Insufficient wages

Occupational health and safety, unfair remuneration, indecent working hours, precarious employment

All commitments

All commitments

All commitments

An important way to promote procurement practices that do not make it difficult for subcontractors to comply with the commitments is to train and encourage the sourcing team to understand the links between purchasing practices and sustainable supply chains.

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For guidelines on sustainable purchasing practices, we recommend the Responsible Contracting Project's templates for due diligence-aligned contracting. While most codes of conduct are aimed at suppliers, this code sets out principles and standards for buyers to protect workers' rights.  

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We also recommend the Ethical Trading Initiative's Guide to Buying Responsibly.  Here is also a video for their guidance. 

Proposal for verification​

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  • Guidelines for sustainable purchasing.

  • Codes of conduct for buyers.

  • PowerPoint presentations from training courses on sustainable purchasing methods.

  • Minutes of meetings where decisions on longer lead times, adjusted price models, changed payment terms, etc. have been recorded, for sample products.

Template for process requirements 3​

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