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Due diligence

What can the companies do to avoid breaching OECD Guidelines and avoid complaints? Due diligence is a key concept in the OECD Guidelines.

According to the OECD Guidelines, companies should carry out risk-based due diligence to identify, prevent, mitigate actual and potential adverse impacts and account for how these impacts are addressed.

Due diligence is a process and not a specific standard that companies have to live up to. It requires companies to know and describe the risk of adverse impacts covered by the Guidelines on that basis take steps to address the risk. The fundamentals of the concept are familiar to companies working on a daily basis with risk management and management systems. For such companies, due diligence mainly involves implementing the routines in additional areas. The Guidelines acknowledges that due diligence can be included within broader enterprise risk management systems, provided that it goes beyond simply identifying and managing material risks to the enterprise itself, to include the risks of adverse impacts related to matters covered by the Guidelines.

Companies working with due diligence processes are much better equipped to handle actual and potential adverse impacts. They also minimise the risk of becoming the subject of a complaint. Companies, organisations as well as authorities are expected to exercise due diligence. It is recognised, however, that the nature and extent of due diligence will be affected by factors such as the size of the company, context of its operations, the severity of its adverse impacts etc.

The due diligence concept as described in the OECD Guidelines appeared for the first time in the UN’s Guidelines on Business and Human Rights as adopted in 2011. The concept has since been incorporated into the OECD Guidelines.

The recommendations about the exercise of due diligence do not apply to the chapters Science and Technology, Competition and Taxation, cf. the OECD Guidelines.

More information on this subject is available in the chapters General Policies and Human Rights in the OECD Guidelines.

Dialogue is the way forward

The Mediation and Complaints-Handling Institution endeavours to create a framework for mediation, dialogue and conflict resolution. The ongoing dialogue with stakeholders can also be viewed as part of the company’s risk management. A pro-active dialogue helps the company identify and handle issues before they become more serious and difficult to handle.

Partnerships make a difference

Partnerships play an increasing role in relation to CSR in general. The reason is that many of the challenges companies and society face in terms of sustainable development are often complex and difficult to handle, especially in a global context. The OECD Guidelines therefore encourage companies to participate in private or multi-stakeholder initiatives and the social dialogue on responsible supply chain management.