Business and Human Rights

Human rights must also be the business of businesses. In addition, the Covid-19 pandemic highlights the necessity of systematic risk management that ensures health and workplace protections and makes the danger of infection manageable. Thus, there is an increasing demand for German companies to take responsibility for the state of human rights and environmental standards in their supply chains as well. Collaboration at the industry level offers a lot of potential for increased compliance. A new study analyses which human rights risks warrant attention, what German businesses are already doing to address human rights violations and what challenges they need to overcome.

Germany is connected worldwide. The German economy is heavily involved in international trade structures and capital transactions, as well as the globalised production processes and markets that come with these developments. This makes it all the more important that German companies help ensure respect for human rights in global value chains and strengthen social and ecological sustainability.

In the resolution “Guiding Principles on Business and Human Rights” from 2011, the United Nations stated that companies are responsible for ensuring that their business does not violate human rights. In Germany, the Federal Government formulated a “National Action Plan on Business and Human Rights” (NAP) to implement these guiding principles in 2016. The plan calls on companies to introduce a process of corporate due diligence to respect human rights.

Challenges and opportunities for German companies 

The German economy faces several specific challenges: it must create transparency in supply chains, prioritise human rights risks, take appropriate steps to minimise risks, and work actively against abuses in supplier countries. Even if companies do not have direct influence on all stages of their supply chains, they still have the option of taking measures at their own locations and in the supply chain to ensure that human rights risks are recognised and addressed. This applies to both multinational corporations and medium-sized companies.

Experience has shown, however, that it is not easy for companies to design a sustainable supply chain. For this reason, the NAP plans to provide support to companies. A number of measures are intended to provide references on how companies can implement and expand their human rights due diligence. The study “Respect for human rights along global value chains – risks and opportunities for sectors of the German economy” was recently published for this purpose.

Industry study “Respect for human rights along global value chains – risks and opportunities for sectors of the German economy”

This study, commissioned by the Federal Ministry of Labour and Social Affairs (BMAS) and carried out by adelphi (lead) in cooperation with Ernst & Young GmbH (EY), aims to provide the Federal Government with a basis for deciding which sectors should receive support in the context of industry dialogues. In turn, collaboration at the industry level is to make a critical contribution to companies combining their ideas and skills – in this way, they can work together to promote respect for human rights and meet the expectations of the German government and society.

The study analyses around 100 branches of the German economy from a human rights perspective. First, it determines which human rights risks can occur along the value chains. Based on this, the study gradually narrows its focus to eleven industries (called “focus industries” in the study). These focus sectors have similar characteristics in terms of human rights and structure. For example, they have a comparatively large number of human rights risks with a substantial connection to fundamental, legally protected rights. The sectors are also heavily intertwined internationally. Through interviews and background discussions with industry representatives, trade unions and civil society actors, the study then examines the focus industries in greater detail. The goal: to identify existing national and international industry activities for human rights due diligence as well as potential starting points for additional activities.

The study results demonstrate that, in many of the examined sectors, human rights risks arise in the upstream stages of the value chain. For example, focus industries that need a lot of raw materials are strongly intertwined internationally and, in some cases, procure materials from countries in which the rule of law is not or insufficiently enforced. As a result, the raw materials are extracted under precarious conditions. This leads to human rights violations, for instance by impacting the health of workers and residents, expanding mining areas through land grabbing, or violently suppressing indigenous peoples. When looking at raw materials from a human rights perspective, it also becomes clear that they require special attention, as they often cannot be explicitly assigned to a single industry from a specific value chain level, but form a cross-cutting issue.

The extraction of raw materials is not the only area in which human rights risks exist. Companies are also required to look at their own international production sites and carry out risk analyses there as well. Human rights risks at this stage of the chain range from precarious and sometimes health-threatening working conditions for employees, to exploitation and human trafficking. The study also shows that such risks are not an exclusive topic of international value chains – social risks can also occur in certain industries within Germany. In some sectors, human rights risks can also arise in the downstream value chain, i.e. when goods are exported. For example, products made in Germany can be used to violate human rights – such as the restriction of civil and political rights.

In light of these results, the project team has developed potential starting points for industry dialogues and other activities for the eleven focus industries and formulated cross-industry recommendations. These range from the deeper involvement of suppliers and civil society actors, to a more binding nature of initiatives, to greater consideration of the issue of human rights due diligence in ongoing political processes (national, European and international) by the Federal Government. 

Online tool for small and medium-sized enterprises: "KMU Kompass"

To understand and "manage" risks along the entire supply chain can be particularly challenging for small and medium-sized enterprises (SMEs): SMEs usually do not have the same leverage on their suppliers as large enterprises and therefore must communicate with them differently in order to ensure that sustainability criteria are met along their supply chains. These and other challenges are addressed in the "KMU Kompass" – an online tool for sustainable supply chain management that was developed specifically for SMEs. adelphi developed the KMU Kompass on behalf of the German Agency for International Cooperation (GIZ) to provide SMEs with a step-by-step guide on how to exercise sustainable supply chain management. The KMU Kompass is based on the five "core elements" of human rights due diligence, as anchored in the German National Action Plan, and identifies five central process steps for sustainable supply chain management: (1) Develop strategy; (2) Conduct risk analysis; (3) Take measures; (4) Monitor and report; (5) Manage complaints.

adelphi is part of the consortium for current NAP monitoring

adelphi is currently part of a consortium led by EY, which has been commissioned by the Federal Foreign Office to carry out the monitoring of compliance with human rights due diligence provided for in the NAP. The NAP specifies that, by 2020, at least 50 percent of all companies in Germany with over 500 employees will have integrated the core elements of human rights due diligence into their corporate processes. Starting in 2020, the results of the monitoring will form the basis for the Federal Government to take further steps in the area of business and human rights. These steps can include legal measures.

adelphi offers comprehensive consultation on sustainable supply chain management

For several years, adelphi has been actively promoting the issue of “sustainable supply chain management” in companies. The focus: how to provide practical and targeted support to companies so that they can fulfil their social responsibility in the supply chain.

In collaboration with Systain Consulting, adelphi created an Atlas on Environmental Impacts: Supply Chains, which shows the regions of the world where negative effects occur in the supply chains for selected branches with high environmental impact. This makes the “hot spots” visible for the relevant industry. 

The practical guide “Step by Step to Sustainable Supply Chain Management” is aimed especially at medium-sized companies that want to take initial steps in sustainable supply chain management.

Working with a number of small and medium-sized companies, adelphi and Sustainable AG have developed several tools for sustainable supply chain management. Based on a “toolification approach”, company representatives can use tools to directly research, analyse and evaluate sustainability issues in the supply chain and decide what measures to take.

Contact persons: garciaadelphi [dot] de (Bibiana Garcia) and weissadelphi [dot] de (Daniel Weiß)