OECD (2020), Women at the core of the fight agains the Covid-19 crisis, Paris, https://read.oecd-ilibrary.org/view/?ref=127_127000-awfnqj80me&title=Women-at-the-core-of-the-fight-against-COVID-19-crisis. Liaise with procurement and sustainability teams to understand supplier or business partner vulnerabilities and in particular, supplier performance on industrial relations and health and safety issues. ← 35. 42 Hiring and training to replace lost staff also has significant costs (which can be up to twice as high as their annual salary). See ITUC CSI IGB (24 March 2020) “ITUC Global COVID-19 Survey: Half of countries in lockdown as COVID-19 pandemic wreaks health and economic havoc on working people and their families”, International Trade Union Confederation, https://www.ituc-csi.org/ituc-global-covid-19-survey. National Contact Points for RBC, as the unique implementation mechanism of the OECD Guidelines, may be able to support policy coherence on RBC and help governments in integrating RBC into the design and implementation of national responses to the crisis, including long-term policies linked to the recovery. This in turn impacts workers, whose income and livelihood are at risk. OECD (2020), “Supporting people and companies to deal with the Covid-19 virus: Options for an immediate employment and social-policy response”, ELS Policy Brief on the Policy Response to the Covid-19 Crisis, OECD, Paris, https://oecd.dam-broadcast.com/pm_7379_119_119686-962r78x4do.pdf. The Responsible Business Alliance is a coalition of 380 large companies in various sectors including electronics, retail, auto and toy manufacturing, with combined annual revenues of greater than $7.7 trillion, directly employing over 21.5 million people, and with products manufactured in more than 120 countries. It also seeks to promote a When is gender relevant to human rights due diligence? global trade unions) on the contingency options, and communicate their respective impacts to governments. 2. This guidance provides practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain-language explanations of its due diligence … A. Tappe, A. Kurtz (9 April 2020), Änother 6.6 million Americans filed for unemployment benefits last week”, CNN Business, https://edition.cnn.com/2020/04/09/economy/unemployment-benefits-coronavirus/index.html, ← 12. Due Diligence. The OECD Guidelines for Multinational Enterprises require that National Contact Points meet the criteria of transparency, visibility, accessibility, and accountability, and handle grievances (known as ‘specific instances’) in a way that is impartial, predictable, equitable, and compatible with the OECD Guidelines. Each working group is made up of individual experts from the GGKP partner organizations, the GGKP Advisory Committee, and outside experts. N. Karim (19 March 2020), “Job cut fears as fashion brands slash orders in Bangladesh with Coronavirus”, Reuters https://www.reuters.com/article/us-health-coronavirus-bangladesh-jobs-tr/job-cut-fears-as-fashion-brands-slash-orders-in-bangladesh-with-coronavirus-idUSKBN2163QJ; Rachel Cernansky (19 March 2020), “As coronavirus spreads, supply chain workers face layoffs”, Vogue Business Sustainability, https://www.voguebusiness.com/sustainability/coronavirus-causes-closures-and-layoffs-for-workers-bangladesh-india; C. Nika (25 March 2020), “GMAC appeals to stakeholders to join hands to tackle manufacturing woes caused by coronavirus, Khmer Times https://www.khmertimeskh.com/50705603/gmac-appeals-to-stakeholders-to-join-hands-to-tackle-manufacturing-woes-caused-by-coronavirus/. Conditionality in emergency or relief funds: Around the world, governments are adopting aid and stimulus packages that will provide a number of benefits to companies and workers. In sectors with large shares of migrant workers, such as the manufacturing sector in Asia, work stoppages and order cancellations are reportedly having a range of knock-on effects, as housing for workers may be closed or constrained, and workers returning home are at risk of spreading the virus further.27, Bangladesh is particularly exposed to supply and demand shocks, as the garment sector accounts for more than 80% of the country’s annual exports and is highly dependent on brands orders from the US and the EU, country's biggest trading partners of textiles and apparels and current epicentre of the virus.1 To date 959 factories reported demand shocks linked to the COVID 19 crisis that represented 826.42 million pieces worth USD 2.67 billion of export orders that were cancelled and held up by global buyers.2 Buyers are halting new orders but also asking suppliers not to ship clothing that has already been made and deferring payments.3 In these cases, manufacturers have already incurred costs and may be in debt to their raw material suppliers. In this blog, we discuss some challenges with the OECD guidance. However, with lower metal prices and some customers suspending operations, many due diligence programmes are facing serious cash flow problems and may have to shut down. J. Warrington (22 March 2020), “Coronavirus: Primark to close all UK stores as pandemic hits high street”, City A.M, UK, https://www.cityam.com/coronavirus-primark-cancels-all-orders-in-blow-for-suppliers/, ← 4. The OECD intends that the Due Diligence Guidance will become the primary reference point for companies working to implement responsible business (including human rights) due diligence under the OECD Guidelines, the UNGPs and the International Labour Organization’s (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (the ILO Declaration). Investors and consumers will pay attention to business leaders that consider innovative ways of avoiding layoffs, for example through reductions in executive pay or cancelling dividend payments. For example, many governments have put in place ad hoc unemployment programmes, whereby, in case of a shortage of activity at their company, workers can receive benefits corresponding to part of their wages while remaining employed by the company.3 Other plans include a deferral of tax or social security payments.4 Likewise, commercial banks, particularly those benefitting from government loan guarantee programmes, may offer extensions on lines of credit or flexibility with regard to repayment terms.5 Companies should assess the availability of such fiscal support measures, and be prepared to communicate how impacts on workers would be mitigated (e.g. C. Foran, M. Raju, H. Byrd & T. Barrett (27 March 2020), “Trump signs historic 2$ trillion stimulus after Congress passess it Friday”, CNN Politics, https://edition.cnn.com/2020/03/27/politics/coronavirus-stimulus-house-vote/index.html, ← 31. Without targeted government intervention and support (see below), it may be challenging for business to stay afloat, let alone mitigate the impacts of its response on workers and society. ← 54. through the continuation of wage payments, future investments in skills and preparedness, etc.). Focusing on business continuity does not need to crowd out action on RBC. See e.g. Sandra J. Sucher and Shalene Gupta, (May-June 2018), “Layoffs That Don’t Break Your Company”, Harvard Business Review, https://hbr.org/2018/05/layoffs-that-dont-break-your-company, ← 44. See in particular, OECD Guidelines for MNEs, chapter V., paras. The OECD Due Diligence Guidance for Responsible Business Conduct, issued in May 2018 with the backing of 48 countries, offers practical help for all organisations, large and small.. On 31 May 2018, the OECD Council of Ministers adopted the “Due Diligence Guidance for Responsible Business Conduct” (Guidance).1 The Guidance elaborates on the due diligence responsibilities of companies under the OECD Guidelines for Multinational Enterprises (OECD Guidelines). The OECD Due Diligence Guidance was devel­oped to help compa­nies avoid contributing to conflict, serious human rights impacts and finan­cial crime through their oper­a­tions or mineral sourcing prac­tices. ← 38. The OECD Guidelines for Multinational Enterprises recommend that enterprises conduct due diligence in order to identify, prevent or mitigate and account for how actual and potential adverse impacts are addressed. Helping industries meet responsible sourcing expectations. The magnitude of the disruption in supply chains linked to Chinese enterprises is illustrated by the 14 percentage points plunge of China’s Manufacturing Purchasing Managers Index between January and February, see National Bureau of Statistics of China (2020) , “Purchasing Managers Index for February 2020” , Press Release, Department of Service Statistics of NBS, China Federation of Logistics and Purchasing (CFLP) http://www.stats.gov.cn/english/PressRelease/202003/t20200302_1729254.html. The COVID-19 crisis presents the global economy with its greatest danger since the financial crisis.1 It is severely disrupting economic activity and, as a recent UN report shows, is having impacts on practically all the Sustainable Development Goals.2 COVID-19 is also creating enormous challenges for small and large businesses worldwide. The Guidance includes additional explanations, tips and illustrative examples of due diligence. CBRE (27 March 2020), “China’s policy response to COVID-19”, CBRE https://www.cbre.fr/en/global/covid-19/chinas-policy-response-to-covid-19?article=6ccd4683-6666-43bf-aa79-8b94a92db9e8&feedid=fab9f8b5-57a6-4d15-b9e2-f5bd185db42e. Furloughs and layoffs are reported to have a negative impact on the productivity for the remaining workers. Some reports suggest that COVID-19 related restrictions on trade and export have driven field prices for artisanally-mined gold down, leaving individual miners and their communities unable to secure many essential goods and services.10 In addition, given gold’s use as a vehicle for money-laundering, there is a risk that criminal networks may be in a good position relative to others to bear the extra costs of bringing gold to the international market. Calls are already being heard to ensure that fiscal support will create value not only for company shareholders, but also for company stakeholders and the public more broadly. ← 8. https://news.bloomberglaw.com/daily-labor-report/disney-two-nba-teams-promise-ongoing-pay-for-workers, ← 9. But not for long.” National Geographic, https://www.nationalgeographic.com/science/2020/04/coronavirus-causing-carbon-emissions-to-fall-but-not-for-long/. On the other hand, there has also been a marked shift in concentrations of CO2 emissions across sectors and regions due to dramatic closure of supply chains or industries.17, Risks related to fraud and financial misconduct by companies in their operations and supply chains have also been reported. Mining (26 March 2020), “Worldwide mining disruptions”, Mining, https://www.mining.com/worldwide-mining-disruptions/, ← 8. The Recommendation was released at the OECD 2018 MCM. As more formal mining activities are suppressed as part of COVID-19 mitigation measures, and traditional albeit informal traders in producing regions face financing challenges,9 artisanally-mined gold supply chains may be vulnerable to criminal networks. What steps can companies take to embed RBC into their COVID-19 response? OECD Due Diligence Guidance for Responsible Business Conduct, Apply Information Communication and Technology filter, Apply Latin America & the Caribbean filter, Apply Sustainable, Green, and Social Bonds filter, Apply Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH filter, Apply Food and Agriculture Organization of the United Nations (FAO) filter, Apply Global Green Growth Institute (GGGI) filter, Apply International Institute for Environment and Development (IIED) filter, Apply International Labour Organization (ILO) filter, Apply Iskandar Regional Development Authority (IRDA) filter, Apply Natural Capital Coalition (NCC) filter, Apply Organisation for Economic Co-operation and Development (OECD) filter, Apply United Nations Development Programme (UNDP) filter, Apply United Nations Environment Programme (UNEP) filter, Apply World Resources Institute (WRI) filter, Apply World Wide Fund for Nature (WWF) filter, Apply the United Nations Environment Programme (UNEP) filter. K. Johnson (27 February 2020) “Cambodia says 200 factories face production halt from Coronavirus”, Reuters, Business news,https://uk.reuters.com/article/us-china-health-cambodia-factories/cambodia-says-200-factories-face-production-halt-from-coronavirus-idUKKCN20L1GJ. The OECD Guidelines for Multinational Enterprises are the most comprehensive international RBC instrument, covering business responsibility in a wide range of areas, including disclosure, human rights, workers’ rights and industrial relations, environment, bribery, consumer interests, science and technology, competition, and taxation. RBC standards can help governments in such efforts by providing a cross-cutting framework for identifying the environmental, social and governance risks and vulnerabilities in the supply chains of strategic industries. How-to Guide on Zero-Emission Zones - Don’t Wait to Start with Freight! French Government (2 April 2020), “FAQ Accompagnement des entreprises – Coronavirus” https://www.economie.gouv.fr/files/files/2020/coronavirus_faq_entreprises.pdf. This entails regulating, but also communicating clear expectations and providing guidance to businesses on how to meet RBC expectations, co-operating with various stakeholders to create synergies and establish coherence on RBC, and demonstrating support for best practices on RBC. T. Melo and J. Galan (2011) “Effects of corporate social responsibility on brand value” Journal of Brand Management, Vol. Government support and incentives for taking an RBC approach will therefore be important for ensuring policy coherence between policies in response to the crisis and the expectation that business observe RBC standards and contribute to sustainable development. Many steps can be taken with existing human resources and processes to reinforce a company’s response to the COVID-19 crisis that is aligned with RBC standards. OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas , https://mneguidelines.oecd.org/mining.htm, The COVID-19 crisis is galvanising unprecedented and urgent government action to both manage the health emergency while also ensuring continuity in the provision of basic goods and services. OECD (2020), Global Financial Markets Policy Responses to COVID-19, Paris, https://read.oecd-ilibrary.org/view/?ref=127_127003-tvl9kqbfy9&title=Global-Financial-Markets-Policy-Responses-to-COVID-19, p. 6. The Due Diligence Guidance and the Due Diligence Guidances per sector you can find here. Another difference between transaction due diligence and due diligence for RBC concerns stakeholders. These reactions could bring entire supply chains to a halt and place millions of companies and their workers at economic risk.26 Box 1 provides examples of supply chain disruptions in the garment and minerals sectors which may lead to adverse labour and human rights impacts. ← 27. International Organisation for Migration (26 March 2020), “Covid-19 places migrant workers in highly vulnerable situations”, https://crest.iom.int/news/covid-19-places-migrant-workers-highly-vulnerable-situations%C2%A0. DUE DILIGENCE PROCESS AND SUPPORTING MEASURES The framework helps companies “identify, prevent, mitigate and account for how they … OECD (2020), Coronavirus: The World Economy at Risk, OECD Interim Economic Assessment, OECD, Paris, https://doi.org/10.1787/7969896b-en, ← 2. Requiring compliance with health and safety standards as a condition for businesses to stay open. Base and specialty metals are facing depressed demand driven by high exposure to the crisis among end users, particularly manufacturers of consumer durables.6 With increased uncertainty and lower metal prices, more than 20 major mining projects have already come to a halt around the world.7 Simultaneous supply shocks make the crisis’ impact on mineral supply chains unique. At the same time, uncertainty, short time frames for decision-making and limited cash flow are key features of the crisis, and will continue to be major challenges for business seeking to implement such RBC-oriented long term approaches. FWF (2020) , “COVID-19 Impact and responses: Bangladesh”, COVID-19 Guidances for production countries, Fair Wear Foundation https://www.fairwear.org/covid-19-dossier/covid-19-guidance-for-production-countries/covid-19-impact-and-responses-bangladesh/, ← 3. 2.c (‘Provide information to workers and their representatives which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole.’); 3. The Government should consider promoting the implementation of the 2018 OECD Due Diligence Guidance for Responsible Business Conduct in this regard. Debates are also emerging as to how to ensure that the benefits of these plans will be fairly distributed among all those that have suffered from the crisis, including workers.54 In order to navigate numerous legal, ethical and political hazards associated with relief funds, governments can use RBC standards to condition support.55 Including commitments to internationally recognised RBC standards, such as the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Responsible Business Conduct, can help ensure that benefits of fiscal support measures are shared equitably, and that businesses receiving fiscal support are appropriately managing their broader environmental, social or governance risks.56 Specific conditions on RBC issues emerging from government fiscal support packages to date include prohibitions on laying off workers, guarantees to pay all or a portion of wages, commitments to invest in worker skills and training, as well as commitments to invest in disaster preparedness and supply chain security. Kevin Telmer (5 April 2020), “Impacts of COVID-19 on ASGM communities”, Artisanal Gold Council, https://www.artisanalgold.org/2020/03/possible-impacts-of-covid-19-on-asgm-communities/, ← 11. For example, the Danish government is providing aid to companies struggling with paying salaries, in exchange for the commitment not to lay off staff. reports regarding the increase in procurement needs for medical gloves in Sweden was creating risk regarding working conditions in Malaysia: S. Kjellström (31 March 2020), “Extrem efterfrÃ¥gan pÃ¥ vÃ¥rdhandskar under coronakrisen”, SVT Nyheter, https://www.svt.se/nyheter/lokalt/stockholm/extrem-efterfragan-pa-vardhandskar-under-coronakrisen-okad-risk-for-arbetarna For more information on the potential of public procurement to leverage RBC, see the OECD project on Public Procurement and Responsible Business Conduct: http://www.oecd.org/governance/public-procurement/procurement-and-rbc/. The OECD Guidelines for Multinational Enterprises … L. Abboud (19 March 2020), “Inside the factory: how LVMH met France’s call for hand sanitiser in 72 hours”, Financial Times, https://www.ft.com/content/e9c2bae4-6909-11ea-800d-da70cff6e4d3; N. Bashir (27 March 2020), “James Dyson designed a new ventilator in 10 days. ← 58. Ministry for Europe and Foreign Affairs (2020), “Coronavirus COVID-19: G7 Leader’s Statement (16 March 2020)”, Cornavirus – Statements, France Diplomatie, https://www.diplomatie.gouv.fr/en/coming-to-france/coronavirus-advice-for-visitors-to-france/coronavirus-statements/article/coronavirus-covid-19-g7-leaders-statement-16-mar-2020, ← 8. M. McGrath, (19 March 2020), “Coronavirus: Air pollution and CO2 fall rapidly as virus spreads”, BBC News, https://www.bbc.com/news/science-environment-51944780; M. Stone (3 April 2020), “Carbon emissions are falling sharply due to coronavirus. Many companies have also stepped up to contribute to the containment effort and to soften the economic blow on their workers and supply chains. Monitoring and responding to infringements such as sale of fake protective equipments. The OECD Due Diligence Guidance for Responsible Business Conduct provides practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain language explanations of its due diligence recommendations and associated provisions. According to research from Bloomberg Intelligence, “so far in 2020, 59% of U.S. ESG ETFs are doing better than the S&P 500 Index while 60% of European ESG ETFs have beat the MSCI Europe Index”. European Anti-Fraud Office, (20 March 2020) “OLAF launches enquiry into fake COVID-19 related products”, European Comission, Press release No 07/2020 https://ec.europa.eu/anti-fraud/media-corner/news/20-03-2020/olaf-launches-enquiry-fake-covid-19-related-products_en, ← 3. OECD (2020), Covid-19 and International trade: Issues and Actions, Paris, OECD, https://read.oecd-ilibrary.org/view/?ref=128_128542-3ijg8kfswh&title=COVID-19-and-international-trade-issues-and-actions, ← 22. 2-3, https://read.oecd-ilibrary.org/view/?ref=126_126496-evgsi2gmqj&title=Evaluating_the_initial_impact_of_COVID-19_containment_measures_on_economic_activity. Three main questions we raise are: Who risks impacting human rights? See Implementation Procedures of the OECD Guidelines for Multinational Enterprises, Procedural Guidance, Section I. ← 62. According to an RBA survey, 47% of companies worldwide receive funding assistance from the local government. The Green Forum is an online interactive community space for professionals to share and discuss insights in the pursuit of a sustainable economic transition. See also Walmart’s Supply chain financing program: Walmart ( 25 March 2020), “Some help for our small business partners”, https://corporate.walmart.com/newsroom/2020/03/25/some-help-for-our-small-business-partners, ← 39. 4. Edie (2020), “WBA: Companies with embedded sustainability best-placed to weather coronavirus storm”, Empowering Sustainable Business, https://www.edie.net/news/7/WBA--Companies-with-embedded-sustainability-are-best-placed-to-weather-the-coronavirus/, ← 21. Together, these responses are proving to be crucial in addressing the economic repercussions and the health risks of the crisis. as a result of school closures; Increased recourse to digital communication technologies creates new risks to privacy and (mis)use of personal or proprietary data;39. Likewise, failing to take sufficient health and safety measures – even if necessary extending beyond legal requirements – to shield workers and customers from contamination may also expose the company to legal challenges for breach of duty of care.48. See e.g. OECD (25 March 2020), “Financial consumer protection responses to COVID- 19”, https://read.oecd-ilibrary.org/view/?ref=124_124996-e6qk9dk3ta&title=Financial_consumer_protection_responses_to_COVID-19, Programmes aimed at supporting economically hit companies and at jumpstarting the economy post-crisis may struggle to find the right balance between a quick recovery, the continuity of certain enterprises and sectors, and the application of environmental, social or other regulatory safeguards and protections. OECD Due Diligence Guidance for Responsible Business Conduct supports businesses in translating internationally recognised due diligence recommendations into action. He's making 15,000 for the pandemic fight”, CNN Business, https://edition.cnn.com/2020/03/26/tech/dyson-ventilators-coronavirus/index.html. Explore these leading collaborative initiatives to advance an inclusive green economy transition. Second, due diligence for responsible business conduct (RBC) means more than “do no harm” As the Guidance shows, due diligence for RBC involves bundles of interrelated iterative processes, many of which must involve pro-active behavior. The OECD Guidelines for Multinational Enterprises are government-backed recommendations on responsible business conduct to encourage sustainable development and enduring social progress. Channel News Asia (24 March 2020), “Unilever to protect workers form sudden pay drop up to three months” Channel News Asia Business, https://www.channelnewsasia.com/news/business/unilever-to-protect-workers-from-sudden-pay-drop-for-up-to-three-months-12571602. 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