Process requirement 2
Excerpt from the contract clause
Supplier shall identify and assess actual and potential adverse impacts, by
a) identifying risk suppliers,
b) mapping the supply chains of risk suppliers,
c) regularly examining the risks of adverse impacts in its own operations and in the supply chains of risk suppliers,
d) engaging in meaningful consultations with rights-holders or their representatives and obtaining information from credible and independent sources if consultations are not possible in the supply chains of risk suppliers,
e) paying attention to adverse impact on individuals from groups and populations that are at heightened risk of vulnerability or marginalisation, including environmental and human rights defenders and
f) prioritising the most significant risks based on likelihood and severity.
Identifying risk suppliers
You shall identify risk suppliers.
Below you will find our definition of risk suppliers, which takes into account risks to people, the environment and society across the supply chain. As you can see, this definition is similar to definitions of prioritised purchasing categories, which usually also takes into account spend.
"Risk suppliers are first tier suppliers prioritised for further assessment on the basis of their supply chains’ risk profiles and not on the strength of their relationship with the supplier. The categorization shall be based on the entire 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."
If you can show that you identify prioritised purchasing categories based on a definition that is similar to our definition of risk suppliers, as well as spend, this is sufficient to meet the requirement.
The relevant considerations for identifying risk suppliers vary across industries. We have developed a template, which can be found below under Templates process requirement 2. Using this template is not mandatory. You may demonstrate compliance with the requirement in other ways.
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Instructions describing the identification of risk suppliers or prioritised purchasing categories.
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Identification of risk suppliers for sample products
Mapping the supply chains
You shall map the supply chains for risk suppliers.
Mapping supply chains differs from tracing them, as tracing requires information that many suppliers lack. However, you should be aware of the countries where final manufacturing takes place and be able to make a broad assessment of where component manufacturing occurs, where smelters and refiners are located (if relevant to the supply chain), and where raw material extraction takes place.
This assessment is often based on assumptions, especially for raw materials. A useful source is the U.S. Geological Survey’s Mineral Commodity Summaries, which estimates global mining production and reserves for over 90 minerals. You can also use the European Commission’s Raw Materials Information System. Search engines, as well as AI tools, can also assist in mapping efforts.
We have developed a mapping template, available below under Templates process requirement 2. Using this template is not mandatory. You can demonstrate compliance in other ways. Aso remember to update your mappings when you get more information about your supply chains over time.
A free tool for increasing transparency in your supply chains is Open Supply Hub. There, you can upload your suppliers and sub-suppliers. You can also embed the map on your website.
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Supply chain mappings (Excel spreadsheets, Word documents, etc.), where the sample products are included.
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Printouts of digital supply chain trackings, where the sample products are included.
Examining the risks of adverse impacts
You shall regularly investigate the risks of adverse impacts in your own operations and in the supply chains of risk suppliers.
Many risk assessments for your own operations are already conducted in accordance with national legislation, such as the Work Environment Act, the Discrimination Act, and the Environmental Code. However, the responsibilities differ—HR and environmental experts primarily manage risks within your operations, while sustainability and purchasing specialists often focus on supply chain risks.
One approach to investigating risks in the supply chains of risk suppliers is to list the commitments in the Supplier Code of Conduct and supplement them with information from consultations and credible and independent sources, while you pay attention to individuals from groups and populations that are at heightened risk of vulnerability or marginalisation. You then prioritise the risks based on likelihood and severity. The supply chain tiers that you have mapped (final manufacturing, component manufacturing, smelters and refiners, and raw material extraction) should be included. You can either conduct a combined assessment of the supply chain or assess each tier of the supply chain separately. It is also crucial that the assessment is not solely based on indexes. If forced labour is identified as the greatest risk, this must be stated so that appropriate actions can be taken.
Also make sure to consider both geographic risks, sector risks, and product risks.
Geographic risks
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
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
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.
We have developed a risk assessment template, which can be found below under Templates process requirement 2. Using this template is not mandatory. You can demonstrate compliance in other ways.
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Instructions describing how you examine risks of adverse impacts in your operations and supply chains, including how you assess likelihood and severity and how you identify particularly vulnerable groups, as well as which sources you use. The document should also specify time intervals and circumstances for risk assessments.
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Risk assessments for sample products, including a compilation of identified risks (prioritised based on likelihood and severity), affected rights-holders, vulnerable groups, and sources used.
Engaging in meaningful consultations
You shall engage in meaningful consultations with rights-holders or their representatives and obtain information from credible and independent sources if consultations are not possible in the supply chains of risk suppliers.
Consultations can take place through social dialogue, surveys, meetings, hearings, or other methods. The purpose is to understand how a specific impact affects individuals in a given context.
Engaging in meaningful consultations with rights-holders or their representatives helps you determine whether their perceptions of adverse impacts differ from each other or from your own. For example, changes in shift schedules may affect parents with childcare responsibilities or religious people. Through consultation, you demonstrate respect for their perspectives and rights, which builds trust and promotes sustainable solutions.
Consultations require special consideration of linguistic, cultural, and gender-related barriers to ensure that no one is excluded. Additionally, rights-holders may have conflicting opinions, making certain issues sensitive.
In the risk assessment template we have developed, available below under Templates process requirement 2, you shall note down your consultations and the sources you have used.
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Instructions describing consultations with rights-holders in your own operations, how these fulfill the requirement for meaningful consultations, and how they are used as a basis for risk assessments.
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Instructions describing consultations with rights-holders in the supply chain.
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Meeting minutes from social dialogue, hearings, and other consultation procedures for sample products.
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Results from worker voice programs and/or surveys related to sample products.
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Risk assessments of sample products, including information on any consultations and sources used.
Paying attention to particularly vulnerable groups
You shall pay attention to adverse impact on individuals from groups and populations at heightened risk of vulnerability or marginalisation, including environmental and human rights defenders. The purpose is to ensure that you do not contribute to or exacerbate such vulnerability or marginalisation.
The UN has developed rights for the following groups:
Indigenous peoples
Children
Women
Persons with disabilities
National or ethnic, religious and linguistic minorities
Migrant workers and their families
In situations of armed conflict, you shall also respect the norms of international humanitarian law.
What does "pay attention to" mean? When identifying risks, consider whether they affect groups with increased vulnerability or marginalisation. If there is a risk of land grabbing and indigenous peoples live on the land, this should be acknowledged. If there is a risk of debt bondage, a form of forced labour, migrant workers are a particularly vulnerable group. If there is a risk freedom of expression may be restricted, environmental and human rights defenders could be particularly exposed.
By identifying vulnerable groups, you will be better prepared for dialogue with risk suppliers and for managing adverse impacts in the supply chain. The analysis also makes it easier to prioritise the most significant risks based on likelihood and severity, as vulnerable groups are often the most affected.
In the risk assessment template we have developed, available below under Templates process requirement 2, you will find guidance on paying attention to particularly vulnerable groups.
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Instructions describing how you identify particularly vulnerable groups.
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Risk assessment for sample products, including information on particularly vulnerable groups.
Prioritise risks based on likelihood and severity
You shall prioritise the most significant risks based on likelihood and severity.
There is no hierarchy within international human rights law—human rights are interrelated, interdependent, and indivisible. However, it is often impossible to address all adverse impacts at the same time, which requires prioritisation based on likelihood and severity.
Standard risk assessment methods weigh likelihood and severity equally. However, if an impact has low likelihood but high severity, severity becomes the determining factor. The focus should be on the impact that causes the greatest harm, such as the risk of loss of life, even if the likelihood is low.
Severity shall be assessed based on the adverse impact’s:
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Scale, which refers to the gravity of the adverse impact.
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Scope, which concerns the reach of the impact, for example the number of individuals that are or will be affected or the extent of environmental damage.
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Irremediable character, which means any limits on the ability to restore the individuals or environment affected to a situation equivalent to their situation before the adverse impact.
Severity is not an absolute concept but must be assessed in relation to other adverse impacts in each individual case. Particularly vulnerable groups are often severely affected, making it important to consider them when prioritising the most significant risks. Once these have been addressed, work should continue with the next most severe risks and then progressively with the others.
In the risk assessment template we have developed, available below under Templates process requirement 2, you will find guidance on prioritising risks based on likelihood and severity.
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Instructions describing the prioritisation based on likelihood and severity.
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Risk assessments for sample products, including prioritisations based on likelihood and severity.
