Guide
Identifying risk
A thorough understanding of risk is the basis for effective due diligence. In this section, you will learn about different risks for human rights and the environment, and about different tools to identify and assess these risks.
After this chapter:
- You are familiar with key risks for human rights and the environment;
- You understand possible root causes of risks;
- You understand the relationship between human rights and the environment;
- You have identified potential risks in your supply chains.
Risks for human rights
Human rights are basic rights and freedoms to which every human being is entitled. They are defined in a range of international conventions, notably in the Universal Declaration of Human Rights (1948), and in the European Convention on Human Rights (1950). A lot of risks in supply chains are related to workers' rights. Workers' rights are an integral part of human rights, and are defined in the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work (1988). In addition, notably in the resource extraction phase, community rights can also be compromised.
| Key risks | Examples of high-risk sectors/products |
|---|---|
| Child labour | Tropical agriculture (e.g. cocoa, coffee, tea, seeds and nuts, tropical fruits, rubber, spices, tobacco, oil palm, cane sugar), artisanal mining (e.g. rare metals, tin, precious stones, natural stones), cotton and textiles (e.g. garments, shoes, carpets, leather) |
| Forced labour | Electronics/ICT, renewable energy (e.g. solar panels, batteries), toys, textiles, tropical agriculture, horticulture, forestry, fisheries, cotton and textiles, medical products (e.g. surgical materials, latex gloves) |
| Occupational health and safety | Electronics/ICT, mining, heavy industry, agriculture, fishing, construction, transport (e.g. delivery companies), food industry (e.g. slaughterhouses) |
| Freedom of association | Electronics/ICT, plantation agriculture, mining, shipping, logistics sector (e.g. order pickers) |
| Living wages | Sectors that rely on low-skilled labour: horticulture, assembly, warehouse work, call centres, tropical agriculture, ... |
| Discrimination (based on gender, religion, etc. | All sectors. |
| Rights of local / indigenous communities | Large-scale agriculture (e.g. soy, palm oil, cattle), mining, forestry |
Risks for the environment
An environmental risk can be understood as a potential negative impact on the environment that is caused by activities and actors in your supply chain. Like human rights, environmental norms are enshrined in a range of conventions and treaties. Examples include the 1989 Basel Convention (transport and management of hazardous waste), the 1992 Rio Declaration (biodiversity), and the 2015 Paris Agreement (climate change).
| Key risks | Examples of high-risk sectors |
|---|---|
| Air quality | Transport, construction, energy, mining, animal husbandry, chemical industry, fossil fuel extraction |
| Water quality and availability | Agriculture, mining, chemical industry, fishing, textiles, fossil fuel extraction, construction sector |
| Soil quality | Transport, construction, energy, mining, animal husbandry, chemical industry, fossil fuel extraction, agriculture (food production) |
| Biodiversity | Agriculture, fisheries, forestry, mining, construction, wind turbines, farming |
| Waste | Waste management, technology sector (e-waste), chemical industry, metals (especially batteries), textiles, plastics |
| Emissions | All sectors, with particular risks in transport and agriculture |
The relationship between risks for human rights and the environment
Debates on due diligence have long focused exclusively on human rights. Yet human rights are inextricably linked to environment. Without access to clean air and water, the basis of human life is compromised. Vice versa, a clean environment can only be guaranteed if human rights are respected. For instance, the persistence of illegal logging and mining in countries like the DRC or Brazil can only be fully explained when considering the lack of alternative income sources for the local population.
This entanglement between human rights and the environment also implies that actions to protect the environment do not necessarily have a positive impact on human rights, and vice versa. In the short term, trade-offs are often inevitable. As a company, it is important to be aware of these trade-offs, to communicate about them in a transparent way, and to avoid negative 'trade-offs' as much as possible.
In 2021, the UN Human Rights Council voted a resolution recognizing the right to a clean, healthy, and sustainable environment as a human right. The proposed EU due diligence directive also covers human rights as well as environmental due diligence.
Root causes
To understand risks, it is importantto consider their root causes. These root causes may be related to characteristics of the production process, to the anatomy of the supply chain, and to geographical factors.
| Characteristics of production process and supply chain |
|---|
|
Involvement of vulnerable workers (e.g. unskilled, informal, seasonal, female, young workers); energy intensity; use of toxic substances; water consumption; use of raw materials associated with human rights risks (e.g. cobalt, leather, cotton) |
| Geographical context |
|
Governance: political (in)stability; risk of armed conflict; democratic governance; risks of corruption; adoption of international conventions, strength of labour laws; ... Economy: poverty; inequality; unemployment; ... Natural context: vulnerability to climate change and to extreme weather, fragile ecosystems, drought, ... |
| Company policies |
|
Length and complexity; existence of effective sustainability initiatives; degree of informality |
Basic analysis (MUST-HAVE)
In your excel document, on the sheet 'product analysis', you can find instructions to perform a risk analysis. Once you have completed this analysis, you have to describe the results of this exercise in your own words, in the word template that you have downloaded earlier (due diligence strategy). In addition to the instructions and sources included on the sheet product analysis, companies active in the food and technology industry can rely on the sector-specific complements that can be downloaded at the start of this section.
Advanced analysis (NICE-TO-HAVE)
To take more effective actions to mitigate risks, you could decide to carry out a more in-depth risk analysis of one or more supply chain(s) (e.g., the pilot supply chains that you will identify in a next step). Ideally, such an analysis combines 'desk research' with consultations with relevant stakeholders, such as other companies, but also NGOs, trade unions, government institutions, researchers, ... On the sheet 'Tools' of your excel-file, you can find a list containing various resources (websites, reports, etc.) that can help you gain a more fine-grained understanding of risks related to a particular sector or product. Companies active in the food and technology industry can also make use of the sector-specific complements to this toolbox.