International Responsible Business Conduct
Companies in the Netherlands purchase products and raw materials from all over the world. Think, for example, of crops like cotton and cocoa or mining products like mica. Through trade with companies on the other side of the world, companies can have a positive but also a negative impact on people and the environment far away.
Please note! This training is specially designed for SMEs, but the steps are also relevant for large organisations!"
Know your supply chain
How does this apply to your company? To understand the effects of your company elsewhere, you need to know exactly where your products come from and under which conditions they are produced.
What are the production countries? Which producers are involved? Who makes the products, and under which conditions? With that knowledge, you gain more control over risks such as child labour or (very) low wages for workers or farmers.
Next, you will need to search for solutions to stop, prevent, or mitigate adverse impacts. Your company can cause, contributed to, or be directly linked to negative impacts. The action you must take depends on the extent to which your company is involved.
The actions described above can be defined as International Responsible Business Conduct (IRBC). In IRBC, a company considers the impacts of (international) business activities on people, animals, and the environment. This means that companies act with due diligence. The concept of due diligence is at the core of IRBC.
Due Diligence
The process of due diligence consists of six steps. By implementing these steps, a company takes responsibility for (potential) negative impacts of its actions in the supply chain. The six steps logically follow each other. Once all steps are taken, the process starts again.
Future legislation will make due diligence mandatory for the largest companies, but it is also important for SMEs. Stakeholders increasingly expect companies to be aware of and address sustainability risks in their supply chains. It is important to realise that the chain does not stop at direct suppliers (Tier 1). The suppliers of your suppliers (Tier 2) and the suppliers of those suppliers (Tier 3) are also part of the chain. This means that collaboration with direct suppliers (Tier 1) is essential to learn more about the companies upstream (Tier 2, 3, and so on).
The six due diligence steps
The image illustrates the six steps. Below is a brief description of them.
It is important to create an action plan for implementing due diligence. It is also crucial to ensure that everyone in the company knows what is expected of them. This can be achieved by making clear agreements and defining tasks and responsibilities. Each role contributes to due diligence in its own way.
Before you can discover negative impacts, you need to know where your products come from. Who are the suppliers? Where does the cotton for the T-shirts come from? Where and by whom are hazelnuts and cocoa produced and harvested for chocolate spread? Conduct research by asking detailed questions to suppliers.
Most companies are part of various complex supply chains. It may not be possible to map them all at once. In that case, start with the biggest purchased volumes and highest purchase value. Once you have fully mapped out the (selected) chains, investigate the sustainability risks. There are many tools available to help you with this.
Companies can directly cause, contribute to, or be directly linked to negative impacts. The knowledge obtained in the previous steps, help you implement impactful measures to address the identified risks. It is important to involve local stakeholders in this process. Examples of measures you can take are social audits, sustainability certifications, a detailed supplier code of conduct and collaboration in a supply chain initiative. As an SME, you may not always be able to make a difference on your own, consider working together with other companies.
It is important to closely monitor whether the implemented measures are effective. This can be done by conducting your own research, talking with suppliers, or engaging with other stakeholders such as trade unions, civil organisations, government representatives, employees, or local researchers. This helps you adjust your approach in case the measures do not have sufficient impact.
Clear communication about the risks and the measures taken is important. Increasingly, customers, financiers, and governments are requesting this information. By sharing what is going well and what is still challenging, you demonstrate that your company is taking responsibility.
When your company or partners in the supply chain have caused harm to people or the environment, the victims may be entitled to compensation or remedial measures. It is important to take complaints seriously and address them appropriately. A company can itself cause, contribute to, or be directly linked to negative impacts. Depending on the link to the negative impact, appropriate measures should be taken, as outlined in module 9.
Figure 1: Due Diligence Steps (source: https://www.oecdguidelines.nl/oecd-guidelines/due-diligence).
Please note in that it is important to incorporate a gender perspective into every step of due diligence. Human rights risks are different for different genders. For example, women often do not have the same access to resources such as land, finances or knowledge. Women are often paid less than men. Therefore, it is necessary to include a gender perspective in identifying and mitigating risks as part of due diligence.
Useful tools
- In the Netherlands, various companies in the food sector collaborated on International Responsible Business Conduct in the Food Covenant. The Covenant ran until June 2023, and everything about the Covenant can be found on the website
- Dutch companies in the metal sector commit to due diligence and joined forces under another Covenant. Everything about the Covenant, which ran until 2024, can be found on the website
- Several companies committed to a responsible gold chain. They joined forces under the Responsible Gold Covenant, which ran until 2022. The covenant page is still live and regularly updated.
- This animation by RVO demonstrates how due diligence helps to combat child labour.
- This guidance for Responsible Agricultural Supply Chains by the OECD and FAO helps companies in the food sector apply the steps of due diligence.
- The platform for gender-responsive due diligencesupports companies in applying a gender perspective to the steps of due diligence.
Homework Assignment
After this assignment, you will have a clear understanding of the extent to which IRBC (International Responsible Business Conduct) plays a role in your company.
Determine if there is an IRBC vision for your company.
Is the highest decision maker (e.g., the director) involved in IRBC?
Check which policy documents reference IRBC.
Identify which of the 6 steps in due diligence play a role in your company's business processes.
OECD Guidelines and the due diligence process
In 2018, the OECD Due Diligence Guidance for International Responsible Business Conduct was published. This extensive document provides companies with practical tools to implement IRBC.
Download the Guidance (PDF 2,1MB)