In January of this year, the European Commission released a study examining due diligence requirements on supply chains. The study examined existing practices and regulatory frameworks for identifying, preventing, mitigating and accounting for adverse corporate impacts as well as options for regulating due diligence in companies’ own operations and through their supply chain.

The results showed that while voluntary initiatives are gaining traction among companies, and the United Nations (UN) Guiding Principles on Business and Human Rights is increasingly being introduced into legal standards by European Union (EU) member states, only one in three businesses in the EU are currently undertaking human rights due diligence. One of the factors behind the voluntary due diligence model’s failure is the cost implications of undertaking due diligence activities.

In light of the failure of voluntary efforts, the European Commission noted there is an urgent need for regulatory actions that protect vulnerable people and the environment from negative impacts linked to global supply chains. This conclusion also echoes the sentiments of survey respondents who indicated that general EU due diligence regulations covering human rights and environmental impacts would be beneficial.

Another point of interest that came out of the study was the cost implications associated with mandatory due diligence activities. According to the report, compliance with more comprehensive mandatory due diligence regulations would impose substantial additional costs on companies of all sizes, and data collection would be among the highest cost factors.

The European Commission report went on to point out that businesses that adopt technology-based services often discover cost savings that create opportunities for long-term success both in their due diligence programs and throughout their business. According to the report:

“Digitalisation and new technology tools hold the potential to provide unprecedented solutions to identify, address and eliminate human rights infringements and environmental challenges. […] Emerging tracking and software solutions hold the potential to decrease companies’ costs substantially when it comes to accounting for human and environmental rights in company operations and along global value chains.”

Manual processes take time and resources, and companies that have not invested in technology-based compliance programs are at a disadvantage. However, software solutions that automate data collection provide transparency across supply chains at a fraction of the cost. This allows companies to redistribute those resources into other parts of their business while maintaining due diligence, even as the compliance landscape evolves.

Assent provides companies with a cost effective supply chain data management solution that supports due diligence through automation, centralized risk identification and analysis. Leveraging a centralized database supported by industry-standard templates for data collection and export enables businesses to survey supply chains for more efficient access into key markets. To learn more, contact us today.

Dr. Abiola Okpechi
Regulatory & Sustainability Expert, ESG & Responsible Sourcing

Abiola supports companies in their efforts to integrate human rights into corporate risk management frameworks and supply chain risk analysis. Prior to joining Assent, she worked as a consultant, providing  Read More

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