Due Diligently towards the SDGs?
An investigation of whether due diligence (as outlined by the UNGPs and OECD Guidelines) functions as a process for business to deliver on the UN Sustainable Development Goals
Source: Sustainable Development Goals Fund (2017).
Author: G.J.F. van Oosterom Student number: 11234962 Supervisor: Prof. dr. Jasper Blom Second Reader: Prof. dr. Luc Fransen Date of Completion: June 23rd, 2017
Master Thesis Political Science: Political Economy of Financial Crises
Human Rights Due Diligence
The Dutch Social and Economic Council (SER)
This thesis was carried out as a research assignment for the SER, the advisory council to the Dutch Government and Dutch parliament on socio-economic policy. Thanks to the SER Program Directorate on International Responsible Business Conduct (IRBC), this thesis benefitted from extra information, networks and guidance on the research topic during the thesis period. And thank you dearly, Annemarth Idenburg, my supervisor at the IRBC Program Directorate, for pushing me as far as possible with your sharp insights, incredible patience, and calm character during my thesis period.
Abstract
This study is about business and human rights. Human rights risks represent one of the reasons for private governance, which is defined in this paper as mechanisms for non-governmental groups, such as companies, “aiming to improve the accountability and transparency of the actions of management” about the impact their core business has on society (Hirst 2000, p. 7). One example of private governance is human rights due diligence (HRDD). John Ruggie and sceptics (Harrison 2013; Melish and Meidinger 2012; Muchlinski 2012) differ on whether HRDD represents the obvious concept for companies to employ to contribute to sustainable development. The objective of this thesis is to empirically assess whether one side of the controversy might be right. To do this, the methodology of this study consists of a qualitative analysis of corporate reports with semi-structured follow-up interviews with four of the largest global sustainability-leading
companies. The findings are three-fold. First, not all the companies interacted with each of the elements of HRDD and employ it in practice. Second, all companies experienced similar and different salient HRDD risks in their global value-chains. Third, and most quintessentially, three of the four companies employed HRDD as a process to contribute to sustainable development. These insights mean that there is empirical evidence to support the claim that HRDD can promote
sustainable development. But whether HRDD provides the ‘obvious’ basis for companies to do so requires further research into the elements companies employed in this study to respond to their salient HRDD risks as well as a relatively larger data-study with more multinational companies.
Table of Contents
Page(s) Abstract
1. Introduction 1 - 3
2. Theory 4 - 15
a. Global Governance: An Entry-Point for Private Governance 4 - 5 b. Private Governance: A Conceptual Understanding for Human Rights Due 5 - 6
Diligence (HRDD)
c. Human Rights Due Diligence: Its Conceptualization 6 - 9 d. Human Rights Due Diligence: Proponents of Ruggie’s Conceptualization
9 - 10
e. Human Rights Due Diligence: Sceptics of Ruggie’s Conceptualization 10 - 12 f. The Theoretical Debate: HRDD as a Process for Business 13 g. HRDD as a Process for the Sustainable Development Goals: Sub-Questions 13 - 16
3. Methodology 17 - 23
4. Results and Discussion:
a. Heineken NV 24 - 32
i. How does Heineken employ this definition of due diligence; specifically for 24 - 26 decent work?
ii. What does Heineken do with the results/outcomes of this due diligence process? 26 - 29 iii. How does the company response to their due diligence procedure relate to the 30 - 31
SDGs?
iv. Does due diligence (as outlined by the UNGPs and OECD Guidelines) function 32 as a process for Heineken to deliver on the UN Sustainable Development Goals?
b. The Adidas Group 33 - 43
i. How does Adidas employ this definition of due diligence; specifically for 33 - 36 decent work?
ii. What does Adidas do with the results/outcomes of this due diligence process? 36 - 40 iii. How does the company response to their due diligence procedure relate to the 40 - 42
SDGs?
iv. Does due diligence (as outlined by the UNGPs and OECD Guidelines) function 43 as a process for Adidas to deliver on the UN Sustainable Development Goals?
c. The Coca-Cola Company 44-54
i. How does Coca-Cola employ this definition of due diligence; specifically for 44 - 47 decent work?
ii. What does Coca-Cola do with the results/outcomes of this due diligence process? 47 - 51 iii. How does the company response to their due diligence procedure relate to the 52 - 53
SDGs?
iv. Does due diligence (as outlined by the UNGPs and OECD Guidelines) function 54 as a process for Coca-Cola to deliver on the UN Sustainable Development Goals?
d. Unilever NV
i. How does Unilever employ this definition of due diligence; specifically for 55 - 58 decent work?
ii. What does Unilever do with the results/outcomes of this due diligence process? 58 - 64 iii. How does the company response to their due diligence procedure relate to the 65 - 68
SDGs?
iv. Does due diligence (as outlined by the UNGPs and OECD Guidelines) function 69 as a process for Unilever to deliver on the UN Sustainable Development Goals?
5. Conclusion 70 - 72
6. Works Referenced 73 - 80
Introduction
Business and Human Rights: Private Governance
The realm of business and human rights is complicated. There is no such thing as a silver bullet to counter human rights challenges along the vast supply- and value-chains of multinational companies. In the societies of today, excluding informal and non-standard work, approximately one out of every six workers are employed in a corporate value chain (Ruggie 2016, p. 5). Considering many of these workers have neighbours, friends, and families, which form part and parcel of countless communities, the adverse and positive ripple-effects multinationals have on their employees extends far beyond what meets the eye. This number exponentially rises to impact approximately “two billion people or more-out of the total world population of 7.4 billion,” presenting an unprecedented image of corporate scope (Ruggie 2016, p. 5). Human rights risks represent one of the reasons for private governance, which is defined in this investigation as mechanisms for non-governmental groups, such as companies, “aiming to improve the accountability and transparency of the actions of management” about the impact their core business has on society (Hirst 2000, p. 17). The private governance literature is relevant to this thesis because it provides a theoretical understanding of how companies might conceptually deviate their core business operations in such a way that shifts their overall impact on individual employees, groups, and communities. Private governance itself is relevant because it is a practical means of introducing organization structures, employing new processes, and making decisions capable of influencing corporate operations and business relationships.
An example of Private Governance: Human Rights Due Diligence
One example of private governance is human rights due diligence (HRDD). HRDD is a human rights risk management concept in John Ruggie’s United Nations Guiding Principles (UNGP) for Business and Human Rights framework. HRDD is a quintessential, if not ‘the’ most essential,
element for companies under the ‘Corporate Responsibility to Respect Human Rights’ pillar (Ruggie 2011, p. iii). This framework has been endorsed by countless parties, including the UN Human Rights Council. Ruggie depicts the five parameters of HRDD and claims that HRDD as a process is not just the right thing to do for companies. It also provides corporates with: empirical facts, the
opportunity to lower corporate risks, and provides company boards with a shield versus possible mismanagement claims by angry shareholders (Ruggie 2010a, p. 7). If companies embrace HRDD, then companies generate a large-scale positive impact on the lives of its employees and their communities in need of reaping the benefits of sustainable development. This view is also endorsed by Shift and the Business Commission on Sustainable Development (Shift and BCSD 2016).
But there are also sceptics of Ruggie’s claim that HRDD embodies a useful principle for integrating human rights concerns within enterprise risk management systems. They claim that the HRDD principle is conceptually not far-reaching enough and that Ruggie’s version of HRDD as a principle is far too vague to apply in practice. First, Harrison (2013) objects to Ruggie’s content to conceptualize HRDD. He argues that Ruggie’s HRDD principle does not incorporate specificity on transparency, external participation and verification mechanisms, and independent (external) monitoring and review (2013, p. 112). Harrison argues that Ruggie “fails to clearly specify (these) minimum standards that are prerequisites of the effective institutionalization of the HRDD
principle” to help companies prevent and mitigate risks and contribute to sustainable development (Harrison 2013, p. 112). Second, Melish and Meidinger (2012, p. 312) object to Ruggie’s principle of HRDD because it fails to sufficiently include civil society organisations and multi-stakeholder
initiatives in its conceptualization. As a result, on Melish and Meidingers’ account, the practical implications are also worrisome. Companies can legitimately claim they do not need civil society for carrying out HRDD, meaning the concept in practice might “serve to weaken, rather than enhance, corporate social accountability” and sustainable development (Melish and Meidinger 2012, p. 331). Third, Muchlinkski (2012) raises concern about the lack of legal backdrop of HRDD and the UNGPs. He reiterates that “legally binding State-based obligations to ‘harden’ the due diligence obligation” for companies would help establish a more compelling obligation for companies to respect and promote human rights and hereby contribute to sustainable development (Muchlinski 2012, cited in in Harrison 2013, p. 111).
Human Rights Due Diligence: A Process for Business to Contribute?
In the debate about HRDD Ruggie might not be alone with his proposition that HRDD provides the obvious basis for companies to contribute to sustainable development. But other
scholars signal profound objections to Ruggie’s conceptualization of HRDD as well as with how the subtle nuances of its conceptualization provide room for companies to undermine HRDD in
practice. The central point to the theoretical debate is about whether Ruggie provides a framework that enables companies to employ HRDD and hereby contribute to sustainable development. This is the research objective of this thesis: to empirically assess whether one side of the controversy might be right. The debate would significantly benefit from observing empirical evidence supporting Ruggie’s argument or not. Therefore, the research question of this thesis rings as follows: does due diligence (as outlined by the UNGPs and OECD Guidelines) function as a process for business to deliver on the UN Sustainable Development Goals (SDGs)?
In order to shed light on answers to this question the research investigates four multinational enterprises from the Dow Jones Sustainability Index ‘World’ (DJSI World)
classification to analyse the extent to which the highest sustainability performance of the largest global companies employ HRDD and if their responses to their HRDD risks promote elements of sustainable development.1 These answers are scientifically relevant firstly because this explorative
investigation centralizes empirics in the debate about HRDD. So far, the literature on HRDD contains a lot of theoretical propositions and concerns about the conceptualization and possible adverse applications of HRDD without any practical evidence. Second, this research investigates whether Ruggie or his sceptics of HRDD might be right, meaning the literature benefits from insights into some of the key mechanisms behind the actual application of HRDD by companies conform Ruggie’s conceptualization. In addition, the findings from this research are societally relevant. First, key stakeholders of multinational enterprises, including employees, labour unions, communities, non-governmental organisations (NGOs), civil-society organisations, other
companies, industry-associations, and public officials, also get access to the specific elements companies employ to prevent and mitigate the HRDD risks companies encounter in their value-chains. These insights help key stakeholders identify where they become relevant in the process. Second, individuals reading this thesis will increase their awareness of business and human rights and evaluate for themselves whether and how human rights risks provide opportunities for economic, social and environmental development.
1 Now collectively owned and operated by S&P Dow Jones Indices and Robeco Sustainable Asset Management
Theory
Global Governance: An Entry-Point for Private Governance
The literature on governance theory is immense. To comprehensively interpret private governance, this relatively short section will demonstrate that the concept of private governance is linked to and hereby a part of the ‘global governance’ system. Moreover, the patterns in the global governance literature suggest that the private sector is becoming a more important and more influential player in terms of regulating itself with respect to the overall impact multinational enterprises have on societies.
Global governance means a “system of rule, as the purposive activities of any collectivity, that sustain mechanisms designed to ensure its safety, prosperity, coherence, stability and continuance” (Rosenau 2000, cited in Van Kersbergen & Van Waarden 2004, p. 145). In other words, global governance is a system in which rules and behaviour cultivate self sustaining processes to promote the safety and security of the system. Any actor, including NGOs,
governments, and companies represents an entity in this system. Van Kersbergen and van Waarden (2004) have identified some of the key patterns in this system. These include horizontal patterns of distributed governance responsibilities from “the executive and legislative to the judiciary and semi-public organisations” as well as from “public to private organisations,” which has taken place even more (Van Kersbergen et al. 2004, p. 154). In other words, individual and groups of companies have received more responsibility, or a duty, to self-regulate in different ways (Schouten 2013). Second, the private sector not only received more delegated responsibility to self-regulate but it has become a more active and influential player in the global governance (Falkner 2011; Schouten 2013). Companies increasingly contribute to “rule-making, standard-setting, monitoring
compliance, and enforcement policies” across their organizations and industries, which reflects a significant shift in global governance considering the scope of the private sector (Fuchs et al 2011; Schouten 2013). Currently, we live in a world of “80,000 multinational corporates, ten times as many subsidiaries and countless national firms, many of which are small-and-medium-sized
enterprises (Ruggie 2010, p. 4-5). These trends are also captured by Brunnengraeber et al. (2006, p. 8), who draw on, amongst others, the rise of “transnational activity, privatisation, increase in complexity, cooperation, social responsibilities of companies, and demands for more participation”
to explain why companies have been granted more responsibility and are more influential to self-regulate on an unprecedented scale.
Private Governance: A Conceptual Understanding for Human Rights Due Diligence (HRDD)
The patterns of global governance indicate an increase of delegated responsibility to self-regulate from the public to the private sector and a growing activity and scope of influence of private players. To identify what exactly private governance entails and provide an example of this, this section briefly identifies the concept of private governance.
Private governance mechanisms in the theoretical literature are defined as elements for non-governmental groups, such as private organisations, “aiming to improve the accountability and transparency of the actions of management” about the impact their core business has on its
employees and communities (Hirst 2000, p. 17). In other words, the concept of private governance represents a theoretical way of working, governing, the code-of-conduct, or a principle to
implement to watch over corporate processes. Only if the concept of private governance is
employed will it become practical. This can be done, for examples, by companies promoting private norms, rules and regulations to stimulate corporate conduct.
Accountability and transparency are integral to any processes influencing the nature and level of private governance within an organization. Essentially, companies engage in private governance when they engage in and employ processes tied to improving the transparency and accountability of the “direction” and the “control of business operations” impacting societies (Blair & Roe 1999; Cohen & Boyd 2000; Demi rag 1998; Dine 2000; Hopt 1997; Keasey et al. 1999; Lannoo 1999; OECD 1999’ O’Sullivan 2000’ Sternberg 1998; William 1999; cited in van Kersbergen & van Waarden 2004, p. 147). In this sense, when companies engage in private governance by altering corporate structures, designing new processes, or stimulating internal behaviour via programs, they can effectively shift the overall contribution the company brings to its employees and local
communities. This can be in a social, environmental, or economic sense. There are two integral links here. First, the system of global governance can be impacted by fluctuations and changes in the way private organizations govern themselves. Second, there are various accountability and
transparency mechanisms companies can employ to influence the nature of their private governance. This is important because it provides an opening in the theoretical literature to specifically look at which principles not only represent useful concepts but also provide the highest chance of adding benefit to individual employees and communities along the value-chains of companies. An example of a process vehemently cited and referred to in the context of private governance is HRDD, which is explained in the next section.
Human Rights Due Diligence: Its Conceptualization
Before getting to the theoretical debate about HRDD, this section defines HRDD as described by the UNGPs and the OECD Guidelines. The UNGPs of May 2011 encourage the implementation of the United Nations’ “Protect, Respect, and Remedy” framework. The 31 principles in the UNGPs cover: states’ obligation to respect, protect, and fulfil human rights and freedoms, business’ duty to comply with “all applicable laws and respect human rights,” and the need for both governments and business to collectively provide “appropriate and effective remedy” in the case of negative adverse impacts (Ruggie 2011, p. 1). These principles proposed by John Ruggie, who was appointed as the United Secretary-General’s Special Representative for Business and Human Rights in 2005, conceptually encourage signatory states and companies to carry out the ‘Protect, Respect and Remedy’ framework by means of a human rights due diligence process.
The OECD Guidelines, accepted one month later than the UNGPs (June 2011), lay-out “non-binding principles and standards” proposed by governments to their respective multinational companies, representing the unique multilateral code for companies to facilitate “economic,
environmental, and social progress” across the world (OECD 2011, p. 3). The Guidelines of the OECD were revised in 2011 to incorporate changes in investment and the extent of supply-chain practices due to the current globalized climate in which companies operate. As a result, the updated
Guidelines include: a human rights chapter conform the UNGPs as well as a “new and
comprehensive approach to due diligence and responsible supply chain management” (OECD 2011, p. 3-4). The conceptualization of HRDD based on the UNGPs is illustrated in Figure 1 below.
Figure 1. The Conceptualization of Human Rights Due Diligence for Business.
Source: Ruggie, John (2010a).
The UNGP framework requires any participatory business to start operationalizing their human rights due diligence process by introducing “their commitment to meet” the responsibility to embed human rights “through a statement of policy”, encapsulated by step at the top of Figure 3 above (Ruggie 2011, p. 16). This step includes the approval of senior management, input from any relevant sources of expertise, an outline of the expectations from employees, partners and parties directly connected to the core business, and should be publicly accessible with a view to mirror these commitments in practical policy (Ruggie 2011, p. 16).
Step two in the process, moving right along the axis of Figure 1 above, leads to the ongoing assessment of the “actual and potential human rights impacts” the company “may cause or
contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships” (Ruggie 2011, p. 17). Particularly focusing on this
assessment process, companies should obtain their own and outside input from experts and hold meetings with individuals and collectives possibly experiencing negative adverse human rights impacts. Statement of policy Assessment of actual and potential impacts Integrating commitments and assessments Tracking and reporting performance Remediate adverse impacts
Next, step three signifies a step in which companies build on step 2 by “[integrating] the findings from their impact assessments across relevant internal functions and processes, and take appropriate action” (Ruggie 2011, p. 20-21). Essentially, effective integration means assigning a sufficient weight of responsibility to whomever is required to respond to the impacts, integrating these findings horizontally in the case of potential impacts, and designing this step of the process with sufficient budget and supervision. The follow-up (action) should be proportional to the companies’ responsibility - cause, contribute or involved in adverse impact via a third-party – and leverage capabilities, which any company can strengthen. Not exercising any leverage to eliminate or minimize adverse impact in such a case is myopic and pejoratively shunned down upon in Ruggie’s view. If a company lacks leverage and cannot sufficiently scale to remediate indirect adverse impacts, it should consider ending the corporate relationship, especially considering the preponderant future implications of not doing so (Ruggie 2011, p. 22).
Fourth, the ‘tracking and performance’ elements in the process of a companies’ response aims to check “whether adverse human rights impacts are being addressed” (Ruggie 2011, p. 22). This evaluation should be made based on “qualitative and quantitative indicators” (e.g. contracts, assessments, audits) and feedback from different sources, such as: the company itself, external parties, and the affected parties (Ruggie 2011, p. 22-23). Without a step to track the due diligence procedure, a company will not be able to effectively determine whether its human rights strategy and improvements are implemented. Moreover, companies should be willing and able to
communicate their human rights impacts externally to both “know and show” companies respect human rights (Ruggie 2011, p. 23-4). Showing entails externally communicating their observations to enhance transparency and accountability for possibly affected and relevant groups, including employees and investors. Knowing requires embedding human rights due diligence requires policy and processes to guide concrete behaviour and expected norms from employees.
Last, companies must ‘remediate adverse impacts’ where they occur. In the instances where companies can pin-point their responsibility in having caused or accentuating adverse impacts, they must help in the provision of appropriate remediation for the affected individual or group (Ruggie 2011, p. 24). Essential here is that any company should engage in remediation not only when identifying cases via human rights due diligence but also through other possible processes. In addition, if adverse impacts do not derive from a company causing or contributing to it but it is
linked to its operations via a third-party, “the responsibility to respect human rights does not require that the enterprise itself provide for remediation, though it may take a role in doing so” (Ruggie 2011, p. 24-5). This is fascinating because it mystifies the differentiation between causing, contributing and linking, ultimately creating theoretical scenarios in which affected groups might never be compensated if third-parties object and neglect their claims altogether.
The OECD Guidelines outline a system of human rights due diligence unequivocally similar, if not in the same vein and definition, as the UNGPs, namely: “the process through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts as an integral part of business decision-making and risk management systems” (OECD 2011, p. 23). Crucially, the OECD Guidelines mention the same steps as described in Figure 1 of the due diligence process, surfacing the notion that due diligence remains “an on-going exercise” for the long-run (OECD 2011, p. 34).
Human Rights Due Diligence: Proponents of Ruggie’s Conceptualization
HRDD is the human rights risk management principle conceptualized by John Ruggie in the UNGPs as well as the OECD Guidelines. This section posits the proponent point of view for HRDD as a useful means for companies to contribute to sustainable development.
Ruggie stresses that businesses must “put efforts to advance respect for human rights at the heart of the people part of sustainable development” to “maximize its contribution to sustainable development” (Ruggie 2016, p. 1). And advancing respect for human rights requires HRDD, as described in Ruggie’s UNGP framework. Ruggie emphasizes that when companies employ HRDD “to drive respect for human rights across their own operations and their global value chains, they generate an unprecedented large-scale positive impact on the lives of people who may be most in need of the benefits of sustainable development” (Ruggie 2016, p. 2). In other words, the
parameters of HRDD theoretically outline that human rights risk identification and management requires extending beyond material risks to the company itself. This is what HRDD entails. HRDD includes the risks the product and service operations of a company and the organizations’ rapport with others, including suppliers, employees, corporate partners, or local communities, may pose.
These are, in the short-run, not material but salient risks, which may become material over time (Ruggie 2010a, p. 4-5).
Ruggie defends the view that HRDD is not just the right thing to do but it provides key benefits to its users. These benefits include: the opportunity to “know and show” respect for human rights, lower corporate risks, such as “the risks of legal non-compliance”, and employing HRDD presents company boards with a profound shield versus potential “mismanagement claims by shareholders” (Ruggie 2010a, p. 7). The Protect, Respect, and Remedy framework by no means provides the answer to solving business and human rights but its central concept in the Guiding Principles, HRDD, provides guidance to manage the risks of adverse human rights impacts and therefore deliver the optimal contribution to sustainable development. Ruggie’s UNGPs and conceptualization of HRDD has been endorsed by countless parties, including the global United Nations Human Rights Council (HRC), member-states, industry associations, companies, NGOs, and individual reporting frameworks (Ruggie 2013, p. 169). In their paper on ‘Business, Human Rights and the Sustainable Development Goals’, Shift and the Business Commission on Sustainable
Development (BCSD) re-emphasize and conclude “there is no more pressing or more powerful way for business to accelerate social development than by driving respect for human rights across their value chains” (Shift and BCSD 2016, p. 8). And, crucially, HRDD in the UNGPs represents a principle for “reducing the negative impacts can unlock positive change in the lives of hundreds of millions of the people most in need of the benefits of sustainable development” (Shift and BCSD 2016, p. 33).
Human Rights Due Diligence: Sceptics of Ruggie’s Conceptualization
But there are also sceptics of Ruggie’s statement that HRDD represents a useful principle for embedding human rights concerns within enterprise risk management systems. Sceptics object to Ruggie’s conceptualization of HRDD for several reasons, including: it does not conceptually stretch far enough and it will be too precarious to translate into practice.
First, Harrison (2013) objects to Ruggie’s content to conceptualize HRDD. Harrison argues that “core essential issues, beyond those set out by Ruggie” must “be addressed if human rights due diligence” enables companies to contribute to sustainable development (Harrison 2013, p.
107-8). Further conceptualization of “requirements of transparency, external participation and verification, and independent monitoring and review” represent a sine qua non, on Harrison’s account, for HRDD to maximize its contribution to sustainable development (Harrison 2013, p. 107-8). Ruggie does incorporate a principle dealing with ‘external communication’ (Principle 21), requiring companies “to communicate with relevant stakeholders about how companies are
addressing their human rights impacts and a requirement for formal reporting where ‘operations or operating contexts pose risks of severe human rights impacts’” (Ruggie 2011, p. 6, cited in Harrison 2013, p. 112). Ruggie mentions that the verification of a company’s reaction here is that they must declare “’information that is sufficient to evaluate the adequacy of an enterprise’s response to the human rights impact involved’” (Ruggie 2011, p. 20, cited in Harrison 2013, p. 112). This is where Harrison objects, claiming companies could easily claim they are externally communicating without doing much. Essentially, this conceptualization does “not lead to the kind of routine transparency that is vital to creating widespread, robust and meaningful due diligence processes” (Harrison 2013, p. 112). Companies wanting to employ HRDD must “publish the full methodology and results of their assessments processes” regardless of their outcomes and “any nondisclosures must be fully justified” (Harrison 2013, p. 112).
Second, Harrison states that Ruggie has failed to provide conceptual obligations and
guidance for companies to integrate external participation and verification. Ruggie (Ruggie 2011, p. 17-18) stipulates that HRDD should incorporate “meaningful consultation with potentially affected groups and other relevant stakeholders” and, if this is not possible, companies should weigh approaching “credible, independent expert resources” as a back-up. Ruggie (Ruggie 2011, p. 20) also mentions the benefit of “independent verification of the process of reporting on human rights impacts, stating that it ‘can strengthen its content and credibility’” (Ruggie 2011, p. 20, cited in Harrison 2013, p. 113). Harrison reiterates that Ruggie should have gone further here because “the extent of engagement is still very much up to the company to determine and ‘meaningful
consultation’ is open to a broad spectrum of interpretations’ (Harrison 2013, p. 114). In the words of Harrison: “there is a clear need for much more detailed guidance to be developed on what constitutes effective consultation processes and for corporate performance to be assessed according to the standards set out in that guidance” (Harrison 2011, p. 114). The same issue with ‘meaningful consultation’ is raised about ‘verification’. If there are no principle obligations for companies to verify, companies have too much flexibility to apply in practice.
Third, Harrison claims more “overall monitoring and review of corporate performance in undertaking human rights due diligence” is required for HRDD to function as a concept (Harrison 2013, p. 114). Harrison refers to a “credible independent body” to track company performance in employing HRDD as a process over time, ultimately helping other companies learn from best practices and to “incentivize good performance and dis-incentivize bad” performance (Harrison 2013, p. 114).
Next, Melish and Meidinger (2012, p. 312) voice rebuttal to Ruggie’s principle of HRDD because it fails to sufficiently encapsulate civil society organisations and multi-stakeholder
initiatives in its conceptualization. They argue that the practical implications of failing to include a “Participation pillar” to include these groups in the HRDD process fundamentally undermines the entire concept of HRDD (Melish and Meidinger 2012, p. 305). HRDD goes beyond companies and other groups must participate in the execution of HRDD in practice. Companies might legitimately claim they do not need civil society for employing HRDD, implying that the concept of HRDD in practice might “serve to weaken, rather than enhance, corporate social accountability” and sustainable development (Melish & Meidinger 2012, p. 331). On Melish and Meidingers’ account, incorporating civil-society groups in the concept of HRDD would help “specify how due diligence and other requirements should be structured to be able to flexibly and responsible take account of varying contexts and the multiple voices that may be affected by corporate conduct in discrete circumstances” (Melish and Meidinger 2012, p. 312).
Rather than incorporating civil society, Muchlinski (2012) would argue that the executive and/or judicial order is missing in the principle of HRDD. Muchlinski argues that “the introduction of managerial obligations to perform human rights due diligence, based on a binding legal duty of care under tort law for both management and the corporation, would be a significant addition” to strengthen the concept of HRDD (Muchslinski 2012, p. 167). Essentially, Muchslinski focuses on the possibility for “legally binding State-based obligations to ‘harden’ the due diligence obligation” and “create a legally binding obligation to respect human rights” for sustainable development
(Muchlinski 2012, p. 158, cited in Harrison 2013, p. 115). Implicitly, Muchlinski worries both about the lack of anchoring of the principle of HRDD in law and the large room left for companies to determine whether they should employ the concept.
The Theoretical Debate: Due Diligence as a Process for Business
The theoretical debate on HRDD as a process to contribute to sustainable development is split between Ruggie and his endorsers of HRDD and their sceptics. The objections to HRDD relate to conceptual elements of HRDD as well as how the nuances of its parameters create space for companies to undermine it in practice. The objective of this thesis is to investigate whether one side of the debate might be right. Considering the argumentations made in the debate are
theoretical, the debate would benefit significantly from looking at empirical evidence. The evidence will help determine whether Ruggie’s argument that HRDD represents the obvious basis for
companies to contribute to sustainable development holds up in practice. Considering the objective of this thesis the researching question will be:
“Does due diligence (as described by the UNGPs and OECD Guidelines) function as a process for business to deliver on the UN Sustainable Development Goals?”
HRDD as a Process for the Sustainable Development Goals: Sub-Questions
To answer the main research question the research will investigate four multinational enterprises from the Dow Jones Sustainability Index ‘World’ (DJSI World) classification. Specifically, the research analyses the length in which four of the most globally active sustainability-ranked companies employ HRDD and investigates whether their reactions to their HRDD risks enable contributions to sustainable development. To do so firstly requires looking at what HRDD entails, which is captured by the first sub-question below. This question has already been answered under the ‘Human Rights Due Diligence: Its Conceptualization’ section above. The steps and explanations of HRDD in Figure 1 will represent this paper’s interpretation of HRDD, which is crucial to see how each company interacts with each of its elements in the next question.
The second sub-question takes the definition of HRDD as described for the first sub-question and investigates whether and how each company interacts with the steps of HRDD. This provides a picture of the extent to which each company interacts with HRDD and whether the company employs the concept as a process. Data gathered for each case will include two forms of data-gathering: qualitative company reports (e.g. Annual Sustainability Report, Human Rights reports and corporate website) and semi-structured follow-up interviews. Both forms of data-gathering help provide and corroborate information and therefore insight into how the organization incorporates each of the HRDD steps and whether HRDD functions as a process. Specifically, the focus of this question zooms in on if steps are missing in the HRDD process, what this might say about HRDD as a process, and which variables the company employs to promote each step.
Moreover, this question and the next two focus on ‘decent work’ for several reasons. First, ‘decent work’ provides an obvious area in which companies are active because they employ people,
interact with their employees, provide working conditions, and the list goes on. In other words, by focusing on an area in which companies are already active, the research uncovers whether and how due diligence is integral in this process. Second, given the time and energy constraints of the thesis, it is not possible to investigate multiple themes. Rather, the aim of this research is depth over breadth. Third, not all themes have frameworks that can function as a reasonable proxy for
benchmarking company performance on the SDGs. ‘Decent work’ is internationally recognized and described in the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy’ of the International Labour Organization, which has been integrated in the UNGPs, OECD Guidelines, and the SDGs (ILO 2006). For each company, the insights for the second sub-question look at how the company interaction with the steps of HRDD relate to ‘Decent work’. The same goes for the next sub-question.
1. b. “How do companies employ this definition of HRDD; specifically for ‘decent work’?”
Once the interaction and employment of HRDD for each company becomes clear, the research zeroes in on how the company reacts to the salient human rights risks identified by their HRDD process. This is important because it encapsulates the step in the HRDD process where companies are held up with a mirror in front of them. Whether and how companies choose to respond is the backdrop of the third sub-question. The data required for the third sub-question also
include the qualitative reports and follow-up interviews described for the second sub-question. The interviews provide the ideal window of opportunity to corroborate and triangulate the data
received online. The data extrapolation here looks at what the input and output process of the companies’ HRDD under ‘decent work’ reveals: which salient risks are identified by their
assessment (output)? How does the company respond to these risks over time (input)? Does the organization respond to all their salient risks in similar ways or not? To answer this sub-question, this section for each case will report as many observations as possible and relate each company response (e.g. training module) with a corresponding ILO clause depending on the context of the theme. This will be the researcher’s interpretation of determining whether a program promotes a specific clause. For example, if a company employ diversity and non-discrimination training
programs for its employees to counter discrimination and prejudice, then it will be classified under the ‘Equality of opportunity and treatment’ theme in the ILO framework (ILO clause 22).
1. c. “What do companies do with the results/outcomes of this HRDD process?”
After sub-question two and three each of the case studies’ employment of the steps, process and specific reactions to HRDD will be clear, presenting an overall picture of whether and which ILO clauses a company reinforces. If companies follow the HRDD steps, they employ HRDD, which means they should theoretically be responding to HRDD risks. These individual responses are tracked insofar as data exists to support it, meaning there should be tangible outcomes for the people part of sustainable development. For the next and last sub-question, each case study will present a table overview of how each of the promoted ILO clauses tie into the specific SDG targets under SDG 8 ‘Decent Work and Employment’ (UNGA 2015). Again, the context of the delivery on each of the ILO clauses is crucial in determining whether a company initiative promotes a particular ILO clause and whether this encourages a specific SDG target (e.g. labour rights and safe and secure working environments) over another (e.g. reducing forced labour).
Then, at the end of each case study there will be a discussion section to discuss the general patterns in the retrieved data. In other words: based on the company interaction with HRDD under ‘decent work’ does due diligence function as a process for the company to deliver on the UN SDGS? What will be fascinating in this section will be to identify the elements specific to the company with respect to implementing HRDD and hereby contribute to sustainable development. Once this has been completed for each case, the conclusion section at the very end analyses whether due diligence functions as a process for business to deliver on the SDGs. Essentially, the discussion sections per case study are used as examples to illustrate cross-company mechanisms influencing the application of HRDD for business in general. In turn, the evidence presented for this research should illuminate key insights relevant to the theoretical debate. These will be also be included in the conclusion as well as gaps of opportunity for future academic and policy research.
Methodology
This section predominantly follows the methodology put forward by Bryman (2012) by identifying and explaining this research’s approach, sampling cases, data collection and analysis, and validity and reliability.
Although a simplified version of this research, Figure 2 below differentiates the various actors, frameworks, and processes from another. It also visually maps a simplified version of what this research entails, introducing a first overview of how due diligence is theoretically intended to provide a contribution to broader frameworks, including the ILO Declaration and the SDGs. Third, the sections below elaborate on the different steps (1-4) required to walk through the research overview in Figure 2, providing a logical series of methodological steps to complete the research journey.
Figure 2. The Research Overview.
GRI RobecoSAM
Company X Company Y Company Z
Reporting ILO Declaration (2007) ILO SDGs UNGA = Actors = Frameworks = Provision of = Contribution 1 2 3 4 Due di lig enc e Di
Research approach: explorative
The research conducted in this investigation will be of an explorative nature considering questions will be asked with an open mind-set to collect answers on whether HRDD functions as a process for business to contribute to sustainable development. Explorative analysis is productive for this research considering it encourages theory-building, which will be enabled by collecting data and making observations regarding how particular companies employ due diligence as a reflexive process (steps 2-3 in Figure 2 above) to contribute to the SDGs. Nevertheless, explorative research implies the researcher must be profoundly self-aware of how the qualitative information is
vehemently prone to the classical interpreter bias. For instance, interpretations from company reports and statements during interviews might be unclear. To counter this limitation, I have specified in the answer to the first sub-question on the meaning of HRDD in the ‘Theory’ section. Based on this definition, the results section will indicate whether companies fluctuate towards or away from this definition of HRDD.
Variables: companies’ contributions to sustainable development and due diligence as a process
The dependent variable, or outcome variable with possible alternating effects from the independent variable, will be a company’s contribution to the ‘Decent work’ elements of the SDGs. This variable is nominal/categorical because it contains more than two themes that are all equally ranked. My dependent variable can still vary considering its attribute relies on the contribution to its topics under ‘Decent work’, meaning it qualifies as a variable and does not represent a constant. The dependent variable will be operationalized by looking at whether, where and the extent to which the independent variable overlaps with the ‘Decent work’ elements identified by the ILO framework of 2007. In this way, the ILO framework for decent work will function as a proxy for the SDGs, considering the ILO themes reflect company guidelines that have been around for longer (since 1997) and provide a legitimate window for data gathering (2012-2016) since HRDD was formalized in the UNGPs and OECD Guidelines in 2011. The SDGs have only been accepted in September 2015. This means I can look at how due diligence as a process, since the year 2012, facilitates impact on the decent work themes. The ILO includes several categories under decent
work, including: employment (employment protection, equality of opportunity and treatment, security of employment), training, conditions of work and life (wage, benefits and conditions of work, minimum age, safety and health), industrial relations (freedom of association and the right to organize, collective bargaining, consultation, examination of grievances, settlement of disputes) (ILO 2006). These themes qualify as my indicators for decent work because they qualify as a universally accepted definition of decent work.
On the other hand, my independent variable, or variable symbolizing influencing a result on the contribution to the decent work elements of the SDGs, will be due diligence as a process (steps 2-3 in Figure 3). This variable is dichotomous because either a company engages in a due diligence process or not, although the specific outcomes of this process are nominal/categorical considering they will cover more than two themes of equal importance. Although this variable reflects a process of participating in due diligence reporting and systematically responding to the due diligence risks over time, the focus of this paper will be on the company response of their due diligence
assessment over time. This variable was operationalized in the ‘theory’ section based on the UNGP and OECD Guidelines’ definition of HRDD. Then, based on qualitative company reports and semi-structured follow-up interviews, the results posit companies’ interpretation of HRDD and reveal the extent to which their reflexive responses to their HRDD risks have benefitted sustainable
development under ‘decent work’.
Case Studies (sample): due diligence and individual companies
As mentioned in the introduction of this paper, the focus of this research is on due diligence as a case study of private governance. A case study in this research, although broadly defined in the literature, is defined as diverting research attention specifically to “a single instance of some social phenomenon,” (Babbie 2013, p. 338). The broader social phenomenon in this research signifies how companies interact with and employ private governance to contribute to sustainable development. Zooming in on “a particular instance of something”, in this case how specific companies employ human rights due diligence, as a case of private governance, qualifies this research as a case study (Babbie 2013, p. 338). Relying on case studies, or “intensive [studies] of a single unit” goes hand in hand with the explorative approach of this investigation to ultimately begin to understand a larger class of (similar) units” (Gerring 2004, p. 341). The companies as cases
in this research therefore constitute specific, sizeable and active actors representing the private sector.
Employing case studies enables an in-depth research with a rich understanding of case specific developments and provides a research design compatible with a variety of other methods, including: document analysis, interviews and/or participant observation. In the case of this
research, the type of case study falls mostly in line with a cross-sectional time series case study. First, taking several companies as cases with their due diligence response over time, since the year 2012, implies temporal variation. Second, taking different companies implies spatial variation (across-units), ultimately providing me with a cross-sectional time series case approach (Gerring 2004, p. 343). This also helps to construct revelatory cases in which the selected cases might effectively say something about the process of due diligence (Yin 2009).
The case studies will have both a case-centered – due diligence of company X – and theory-centered – due diligence in general - focus (Rohlfing 2012, p. 2). Not only will it be revelatory to see how individual companies contribute to topics under decent work over time but looking at the overall picture of which elements of HRDD impact companies’ contribution to sustainable
development reveals insights into how the concept of HRDD is applied in practice. This is crucial for future research because this inductive research on due diligence facilitates theory-building, which future academics can test for replication, ultimately increasing the number of samples, or ‘N’, of this research. This can counter the fundamental limitation of case studies, which pertains to its low external validity, or generalizability, of the research.
Moreover, case studies are useful for measuring the size of the correlation, in this case the link between due diligence as process and contribution to the ‘Decent work’ elements of the SDGs. This relates to how the research approach is explorative because case studies facilitate
experimentation and cross-sectional research. Selecting companies and looking at their reports with a few follow-up interviews provides an opportunity to ask the ‘why’ and ‘how’ questions, relating to how due diligence might function as causal mechanisms to SDG impact via more “complex causality” (Rohlfing 2012, p. 7; George & Bennett 2005, p. 9-10, 12).
Last, I will be studying different companies using similar methods because I plan to analyse how different companies encounter with and respond to due diligence under ‘Decent work’, although my case study approach will be similar across these companies (Bryman 2016, p. 64). The drawback here is that this research presupposes a direct relationship between due diligence and SDG impact and requires that all other possibly relevant variables are identified beforehand. For example, companies might contribute to elements of ‘Decent work’ via other processes than HRDD. To account for this I will specifically have to zoom in on and clarify whether company responses resemble a step in the due diligence process or not. In addition, I will ensure my cases are
comparable, or sufficiently similar, by selecting them from the same sustainability benchmarking report, the RobecoSAM Corporate Sustainability Assessment, to avoid conceptual stretching (RobecoSAM 2017).
Data Collection & Analysis: sample of four companies
In terms of collecting the data for step 1 in Figure 2 (selecting the sample), I have purposively chosen 4 companies from the ‘Dow Jones Sustainability Index’ World (DJSI World) category of 2,500 companies (RobecoSAM 2017). The DJSI World category is a sub-category of the general DJSI category, which represents the 3,400 largest and leading total publicly traded
companies by market capitalization and activity in the field of sustainability in the S&P Global Broad Market IndexSM (RobecoSAM 2017). Four companies were selected from the DJSI World category
because companies under DJSI World have a high(er) probability of being active and impacting ‘Decent work’ relative to general DJSI companies, let alone companies outside of this classification. Second, this sample contains companies (more) likely to report on their HRDD process because of their societal scope and size. Third, their corporate website and reports have been verified to check whether there is sustainability data available under ‘decent work’. Companies were selected from different sectors to suggestively see whether there might be cross-sectoral differences in human rights due diligence contributions as well as to capture the generalizability for ‘the private sector’ in this research. The sample of the four companies are presented in Table 1 below.
Table 1. Sample overview of DJSI World cases from the RobecoSAM CSA (2016).
Name Country RobecoSAM Industry DJSI World
Heineken NV The Netherlands Food, Beverage &
Tobacco Yes
Adidas AG Germany TEX Textiles, Apparel &
Luxury Goods Yes
Coca-Cola Co United States Food, Beverage &
Tobacco Yes
Unilever NV The Netherlands COS Personal Products Yes
Source: RobecoSAM (2017).
The companies in the ‘DJSI World’ category stem from RobecoSAM’s Corporate
Sustainability Assessment (RobecoSAM 2017). The CSA is an annual sustainability assessment of companies’ sustainability practices by asking over 3,400 publicly traded companies qualified for the general Dow Jones Sustainability Indices (DJSI), ultimately producing one of the few universal reports with sector-specific due diligence data on the social, economic and environmental elements of sustainability performance (RobecoSAM 2017). These 3,400 companies invited to participate in the CSA are published in an excel file on RobecoSAM’s website (RobecoSAM 2017).
Taking four companies qualifying in last year’s (2016) DJSI World category represents a reasonable and realistic first-step in terms of gathering due diligence data on specific companies and linking their due diligence approach to impact on ‘decent work’. These four companies are also invited to semi-structured interviews for further analysis, with a view to triangulating and
expanding on the publicly available date.
Validity and Reliability: strong internal validity but weak external validity
In terms of measurement validity, or the extent to which company reports, responses and interview will actually capture due diligence appropriately, this research would score quite well (Bryman 2012). Considering the definition of due diligence comes from the UNGPs and OECD Guidelines, company data and interviews will provide the necessary in-depth means in order to capture due diligence. Analysing quantitative and qualitative secondary data from companies’
corporate websites and reports and collecting primary data from interviews for comparison and triangulation are useful means to qualitatively understand how companies interact with HRDD.
Regarding this paper’s internal validity, relating to the extent of causality, the main question pertains to whether a conclusion “that incorporates a causal relationship between two or more variables holds water” (Bryman 2012, p. 47). In this case, does HRDD as a process enable companies to contribute to sustainable development? The crux of this research is to specifically zero in on these company reports and interviews on everything dealing with and resulting from a company’s due diligence procedure. Only then will this research be able to capture whether a due diligence process of a company deliver on the ‘decent work’ clauses in the ILO Framework.
The external validity, or “whether the results of a study can be generalized beyond the specific research context” is rather limited (Bryman 2012, p. 47-8). Considering four represents the sample of the mean population of 867 companies participating in last year’s corporate
sustainability assessment of RobecoSAM, this research captures a glimpse of the corporate profile of due diligence. Nevertheless, employing case studies with public corporate data and follow-up interviews is crucial for two reasons. First, the conclusion section of this paper focuses on how companies employ specific initiatives to alter their HRDD and output contributing to sustainable development. Taking a few cases enables focus here. Moreover, these insights might be able to help other companies by learning from best practices. Second, these outcomes facilitate theory-building about HRDD as a process for business to contribute to sustainable development. In other words, one side of the debate about HRDD as a useful concept for sustainable development might be right. The purpose of this research is also to contribute to the theoretical debate on the concept of HRDD, which could have future implications on how companies employ the concept in practice.
Last, in terms of ecological validity, or the question of whether the “social scientific findings are applicable to people’s every day, natural social settings”, this research has a relevant
contribution (Cicourel 1982, p. 15). The insights in this thesis helps relevant partners of these companies and possible others identify where exactly they can contribute to address human rights risks along value-chains. Also, individuals reading this paper can spread their awareness of the importance of business and human rights and individually assess whether and how human rights risks might also present opportunities for social, economic, and environmental development.
Results and Discussion
Case Study 1: Heineken NV
How does Heineken NV employ this definition of due diligence; specifically for ‘Decent work’?
Heineken N.V., a Dutch multinational and the penultimate largest global beer brewer, employs 73,500 full-time employees (FTEs) and owns 140 breweries as production locations in 71 countries2. Since 2010, Heineken N.V. engages with elements of due diligence to map the salient
actual and potential risks emanating from their extensive supply-chain of 60,000 direct and indirect suppliers.
First, the companies’ global public commitment to an Employees and Human Rights Policy (EHRP)3 and their Supplier Code4 capture the spirit of Heineken to endorse all the principles of the
Universal Declaration of Human Rights and the Core Conventions of the ILO for all of Heineken’s operating companies as well as subsidiaries of which Heineken owns a majority share or has management control. The 11 themes behind the EHRP and the Code are the ‘Decent work’
elements laid out in the ILO Declaration of 2006, covering the ‘Policy commitment’ step in the due diligence procedure. Next, Heineken maintains a supplier code procedure with which the company assesses whether potential new suppliers can supply to a Heineken brewery, covering a total 99% volume of Heineken’s current business5. This procedure is encapsulated by Figure 3 below, which
can be interpreted as Heineken’s approach to the second step of due diligence, namely the
‘assessment of actual and potential impacts’. In the words of Heineken: “we ask our whole supplier base to abide by and sign the supplier code and we do a risk-analysis…which can be interpreted as part of due diligence”6.
2 Heineken 2016, Heineken Annual Report 2016, Media releases, Heineken NV. Available from:
http://www.theheinekencompany.com/media/media-releases?Skip=0&Take=10&SubjectFilters=8636B9B3117C4334AFF42707896A7B80&YearFilters=2016. [May 2017].
3 Heineken 2017, Our Policies. Available from: http://www.theheinekencompany.com/sustainability/governance/our-policies. [May
2017].
4 Ibid.
5 Heineken 2016, Heineken 2015 Sustainability Highlights. Available from:
http://www.theheinekencompany.com/sustainability/sustainability-performance-highlights-2015. Also corroborated by Heineken 2017, personal communication, face-to-face interview, 29 May 2017.
Figure 3. Heineken’s 4-layer Process for its Code of Conduct7.
In the process above, any potential supplier of any type must sign the supplier code (step 1 of due diligence) and do a risk-analysis based on Ecovadis’ country and industry-wide analysis from 2010 (step 2 of due diligence). This includes “everyone who (Heineken) has had a payment with more than once in the past 18 months”8. This one-off risks analysis accounts for industry-specific
risks with respect to environmental, social (health & safety, human rights), and ethical (e.g. anti-bribery and corruption) issues. What is not yet clear is when potential suppliers might grosso modo infringe on one or several of the ‘Decent work’ components of the ILO but still pass the initial assessment because the sector performed well in 2010. Also, there is no regular assessment for current suppliers, or the previously new suppliers, so to speak, which makes it more difficult for Heineken to be able to look at a moving picture of the evolving actual and possible risks in their supply-chain. Last, if a potential supplier signals high risk to Heineken in step 2 and proceeds to the Ecovadis assessment in step 3, then it is unclear whether the assessments fully zero in on the rights holder per se. In the words of Heineken: the follow-up for high-risk suppliers in case of assessment is “not completely in line with Ruggie’s Guiding Principles; you should customize your risk-approach purely towards the rights holder whose rights might be violated”9. In this sense, Heineken’s
7 Ecovadis 2017, How Heineken Tackles Responsible Sourcing Using a 4-Layer Approach. Available from:
http://www.Ecovadis.com/heineken-case-study/. [May 2017].
8 Heineken 2017, personal communication, face-to-face interview, 29 May 2017. 9 Ibid.
3rd Party On-site Audit
Suppliers below Heineken's threshold in step 3 are required to do this
EcoVadis Sustainability Assessment
High-risk suppliers from step 2 are required to do this
Supplier Risk Analysis
Based on initial EcoVadis Category & Country Risk Analysis
Supplier Code
approach to acquisitioning suppliers is all-inclusive but their monitoring process is not completely centralized around due diligence pur sang.
Although Heineken employs screening risk analyses for potential new suppliers and monitors compliance rates via their operating companies, their data gathering does not stretch beyond their direct suppliers. Encompassing due diligence steps 3 (integrating commitments and assessments) and 4 (tracking and reporting on performance), requires, according to Ruggie, analyses across the entirety of the value-chain for any business. In this way, a company can maximize the amount of information it receives with respect to causing, contributing to or being involved in adverse impacts. If an assessment is restricted in scope, then its employers de facto receive less
information, reducing the likelihood of following up with commitments, assessments and tracking. However, Heineken ‘Speak Up’, an internal policy for all employees and stakeholders to notify a breach of conduct for investigation, ties into step 5 (remediate adverse impacts) of the due
diligence process10. Since its introduction in 2014, Heineken has been able to trace and respond to
different types and amounts of grievances on a case by case basis, essentially addressing some of the risks employees and external stakeholders have experienced11.
What does Heineken NV do with the results/outcomes of this due diligence process?
Heineken’s experience with due diligence provides little public information with respect to identifying any specific due diligence risks and company responses to these risks over time.
Nonetheless, considering Heineken’s experience with supply-chain assessments and Speak-Up are linked to the process of due diligence, the data relevant to these steps might insinuate something about the predominant risks (output) and response (input) for Heineken over time.
As far as the data reveals, some of the most prominent risks facing Heineken N.V. include compliance with the 4-step supplier code and health & safety working conditions12. Failing to
10 Heineken 2017, Values & Behaviors. Available from: http://www.theheinekencompany.com/sustainability/values-and-behaviours.
[May 2017].
Heineken 2016, Heineken 2015 Sustainability Highlights. Available from:
http://www.theheinekencompany.com/sustainability/sustainability-performance-highlights-2015.
12 Heineken 2016, Heineken Annual Report 2016, Media releases, Heineken NV. Available from:
comply with Heineken’s supply code procedure raises the possibility of: negative claims, adverse impacts in the supply-chain and reputational damage to the company. An overview of overall compliance with Heineken’s supplier code for tier 1 suppliers until 2015 is captured in Figure 4 below, illustrating the compliance percentage for 99% of the scope of Heineken’s operational companies.
Figure 4. Compliance with Heineken’s Supplier Code Procedure13.
For the year 2015, 46 out of the 50 operational companies14 qualified as compliant and the
data for 2016 suggests that the estimated average level of compliance with the procedure across the current 70 operational companies now leans towards 78%15. Considering Heineken reports on
compliance for its operation companies, Heineken predominantly monitors overall compliance across all its suppliers via these operational companies. This represents a decentralized form of compliance monitoring.
Heineken undertakes several initiatives to strategically leverage overall supplier compliance, reflecting output linking with the ILO Declaration (2006) themes of ‘Decent Work’. First, Heineken encourages compliance by repetitively emphasizing its Code of Business Conduct since 2013 via a three-year bribery e-learning training program in 2015 for crucial employees, providing anti-bribery training programs that have 11,000 completed modules, and introducing Code of Business
13 Heineken 2016, Heineken 2015 Sustainability Highlights. Available from:
http://www.theheinekencompany.com/sustainability/sustainability-performance-highlights-2015. .
14 Defined in this paper as the actual manufacturer or producer of any product, in this case beer breweries.
15 Heineken 2017, Sourcing Sustainably. Available from:
Conduct trainings to over 50,000 employees until 201516. These initiatives contribute to clauses 30
and 32 of the ‘Training’ elements under ‘Decent work’ by enhancing generally practical and useful skills, promoting career opportunities and broadening the scope of local management and local staff (ILO 2006). Second, Heineken’s Speak Up policy has been a mechanism for employees to ring the bell in case of any possibility of misconduct at supplier or producer operations since 2014. Since its introduction, Heineken has identified and reacted to some of the cases in 2014, 130
substantiated grievances of the 330 reports in 2015 and 243 substantiated grievances of the 380 reports in 2016. Effectively, Heineken’s Speak Up process contributes to clauses 57 and 58 of the ‘Industrial Relations’ elements of ‘Decent Work by introducing process and control improvements and reimbursements for substantiated grievances (ILO 2006).
In addition to supplier compliance, the health and safety of employees represents an on-going operational risk Heineken relevant to ‘Decent work’, as identified by Heineken’s internal assessments insofar as they gather data on their direct suppliers17. Table 2 below illustrates
Heineken’s data on safety incidents since 2013, capturing the decrease in relative accident frequency and increase in relative accident severity since 2013.
Table 2. Heineken’s Safety Data.
16 Heineken 2017, Values & Behaviors. Available from: http://www.theheinekencompany.com/sustainability/values-and-behaviours.
[May 2017]. Also corroborated by Heineken 2016, Heineken Annual Report 2016, Media releases, Heineken NV. Available from:
