Downstream due diligence helps companies stay on top

When a company delivers a product or service, it has a responsibility to respect human rights. Not only regarding how the product is designed, made, and marketed, but also to whom it is sold and for how it is used.

What happens after a product or service leaves the company is often referred to as the "downstream" part of the value chain. It is well-established within the key frameworks guiding companies on how to handle their impacts on human rights, that a business bears responsibility for respecting human rights not only in relation to its own activities but also through relationships with business partners across the full value chain.

Downstream human rights impacts affect the full range of rights and rightsholders. They arise across sectors both through internal company practices, including product design or marketing, and through business relationships such as the use of a product or service by a business partner, or use by consumers or end users.

The European Commission’s proposal for a Corporate Sustainability Due Diligence Directive (CSDDD) applies a similar obligation for the companies to do due diligence across to the full value chain. However, recent reporting suggests this approach is under threat in the course of current negotiations on the CSDDD, with some states pushing back against the law applying to the downstream.

The objective of the directive is to foster sustainable and responsible behaviour by companies and regulate how they monitor and address their impact on human rights. But omitting the downstream part of the value chain can lead to severe human rights impacts not being properly considered by a company.

To effectively address impacts on all people affected by business activities, what we need is a mainstreaming of human rights due diligence across the full value chain. As well as clear expectations of how companies address downstream due diligence.

This new revised publication sheds light on how businesses across a range of sectors, including financial services, are already conducting human rights due diligence processes in the downstream part of the value chain, with case studies from companies illustrating their approaches to human rights due diligence across their full value chains.

As the case studies show, conducting downstream due diligence can be ordinary course of business helping companies stay on top.

Here are some of the key takeaways:

There is a need for clear standards and guidance:

Currently the global standards for how companies address the impact they risk having on human rights are outlined in authoritative frameworks such as the UN Guiding Principles (UNGP) and OECD Guidelines for Multinational Enterprises (OECD GL). Each of these apply across sectors, to real-economy companies and financial institutions, and encourage businesses to have regard to the whole of the value chain when identifying and addressing their impacts. However, there is a lack of clear standards and guidance on what responsibilities a company or financial institution may have in relation to impacts which occur in the downstream, or what action they should take when involved in such impacts. 

Clear guidance, including through regulation like the Corporate Sustainability Due Diligence Directive, is needed to help companies better understand how to manage human rights impacts in the downstream and develop their practices.

The downstream affects all kind of human rights:

Downstream impacts can affect the whole spectrum of human rights, including:

• Labour rights, such as restrictions on freedom of association and collective bargaining at a franchise or hazardous work conditions in distribution or disposal of goods;
• Economic, social, and cultural rights, such as mental health impacts driven by algorithms or marketing campaigns;
• Land rights of communities living near large scale projects to which a company provides design and technology services, or environmental impacts surrounding end-of-life disposal sites;
• Civil and political rights such as the sale of surveillance equipment to or construction of prisons on behalf of repressive regimes known to target dissidents.

Downstream due diligence is already helping companies:

• Asset manager LBP AM addresses human rights risks across their investments through risk mapping. For example LBP AM systematically analyses and evaluates key industries to identify sector-specific risks and engages with individual companies to develop strategies to address them.
• Pharmaceutical company Novo Nordisk has expanded their processes concerning anti-bribery and corruption to also include human rights impacts through third parties. For example, the company has revised its business partner questionnaire to also include questions relevant to human rights risks.
• Consumer goods producer Reckitt used their Human Rights Impact Assessment to address impact on consumers and end-user of condoms and baby formula sold in Thailand. For example, they identified a risk to the right to health and sexual and reproductive rights of consumers as condoms might not always be affordable for poorer segments of society.
• Manufacturer of wind turbines Vestas has put an emphasis on the downstream in their Human Rights Due Diligence. For example, Vestas has identified general potential social risk to local communities related to wind farms and have created a Social Due Diligence tool to assess customers in emerging markets.
• Telecommunications company Ericsson is screening human rights risks in their sales processes. For example, Ericsson has an internal system to flag high risks regarding what is being sold, what is the intended use, who are the customers and in which country is the technology being used.
• Logistics company Maersk has created standards to integrate human rights in the recycling of ships. For example, Maersk has launched its own Responsible Ship Recycling Standard (RSRS) to assess recycling facilities and address health, safety and labour issues related to the industry.
• Jewellery brand Pandora has addressed downstream risks through responsible marketing practices. For example, they identified various potential human rights risks for Pandora’s marketing activities, such as the absence of due diligence around online advertising, through a third-party company-wide human rights impact assessment.