STATE OF ETHICAL
TRADING 2016
APRIL 2017
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MEMBERS
State of Ethical Trading 2016
Danish Ethical Trading Initiative
PREFACE
”Well... if that is said to be facts, then I dispute facts!”*
COMPANIES
ALDI *
Bent Vangsøe Natursten A/S
BRICpro ApS
Cocio Chokolademælk A/S
Codex Company ApS *
COFFEEPRINT *
Coop Danmark A/S
Dagrofa
Dansk Supermarked A/S
Dansk Cater A/S *
DK Company A/S
DONG Energy A/S
E. Nielsens Mekaniske Stenhuggeri A/S
FairStyles
Flying Tiger Copenhagen (Zebra A/S)
Froosh ApS
H&M *
IC Group A/S
IKEA A/S
ITP Group A/S
JYSK A/S
KABOOKI A/S
Kluntz A/S
Langhoff Promotion A/S
Lauge Food Selection A/S
LEGO Koncernen
LEO Pharma
Lidl Danmark
MatterBy ApS
Neutral.com ApS
Nordic Fruit A/S
Novo Nordisk A/S
Peter Larsen Kaffe *
PIC PAC Scandinavia A/S
Polar Seafood Danmark A/S
PWT Group A/S
Reitan Distribution A/S
Sociability ApS
Sourcing House ApS
Toms Gruppen A/S
Zibra A/S
Zurface A/S
Danish Fashion Institute
Dansk Byggeri
Dansk Erhverv
Dansk Mode og Textil
De Samvirkende Købmænd
Håndværksrådet
Landbrug & Fødevarer
Legetøjsbranchen – LEG *
WEAR
CIVIL SOCIETY ORGANISATIONS
Amnesty International, dansk afdeling
CARE Danmark
Danish Forestry Extension/Skovdyrkerne
Dyrenes Beskyttelse *
Folkekirkens Nødhjælp
Forbrugerrådet Tænk
Fairtrade Mærket Danmark
IDSN - The International Dalit Solidarity Network
Mellemfolkeligt Samvirke/ActionAid *
MSC Danmark
Red Barnet *
Sex & Samfund
Transparency International
Verdens Skove *
WWF – Verdensnaturfonden
I am not referring to the current President of the USA or his “alternative facts,” but
to a member of the Danish Parliament, Søren Kjær (1827–1893), who, by doubting
the account of facts stated by the opposition avoided taking a position on whether
or not the statement was true.
That many might associate this quote with the newly elected leader of a superpower
demonstrates the great challenge to and obligation of the private sector and its leaders. When alternative facts and post-factual interpretations are legitimised as
anything but nonsense or falsehood, then the responsible conduct that characterises
the ambition of DIEH members is in greater demand than ever.
DIEH’s very foundation is “to join forces and support companies and organisations
in establishing ethical trade and responsible production practices.” This calls for a
thorough understanding of and plans to mitigate the risks inherent in global value
chains in relation to basic human rights, labour rights, and other fundamental rights.
This requires that we do not relate to these issues as spin to be disputed, denied, or
covered up, but as facts that can and must be dealt with.
With increased populism on the right and left, isolationism, disregard for human and
workers’ rights and women’s rights, repressive regimes, and political laissez-faire, the
obligation of enterprises grows stronger to take the lead and engage in transparent
and ethically responsible business practices, which can contribute to security and
dignity for people worldwide.
TRADE UNIONS
3F
HK Handel
LO
Ulandssekretariatet
PUBLIC INSTITUTIONS
Aalborg Universitet, Center for Industriel Produktion
Copenhagen Business School (CBS)
Danmarks Eksportkredit (EKF)
Frederiksberg Kommune
Investeringsfonden for Udviklingslande (IFU)
Københavns Kommune
Odense Kommune
Staten og Kommunernes Indkøbs Service A/S (SKI)
OBSERVER
Erhvervsstyrelsen
Members indicated with a * have joined DIEH after the latest member reporting and therefore do not appear in the statistics in the report.
Mads Øvlisen
Chair of the Danish Mediation and
Complaints-Handling Institution (NCP)
*for Danish readers: ”Jo, hvis dét skal kaldes Fakta, så benægter a Fakta!”
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State of Ethical Trading 2016
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Welcome to State of Ethical Trading
CONTENTS
WELCOME TO STATE OF ETHICAL TRADING 2016
5
DRIVERS OF ETHICAL TRADE IN DENMARK
6-13
WHAT IS ETHICAL TRADE?
6
FOCUS ON ETHICAL TRADE IS ON THE RISE – BUT NOT AT ALL LEVELS
6
RAISING THE BAR THROUGH REGULATION
6
PUBLIC PROCUREMENT
9
INVESTORS ARE GETTING INVOLVED
11
WALKING THE WALK – ALLOCATING RESOURCES TO ETHICAL TRADE
12
LESS FOCUS ON KPIs
13
KEY CHALLENGES AND OPPORTUNITIES IN ETHICAL TRADE
14–23
GEOGRAPHICAL HOT SPOTS
14
SUPPLY CHAIN CHALLENGES
16
HUMAN RIGHTS DUE DILIGENCE: A WORK IN PROGRESS
17
RISK MAPPING
18
AUDITS AND IMPROVEMENTS
18
FOCUS ON PURCHASING PRACTICES
20
SUPPLIER DIALOGUE AND SUPPORT
20
For the second year in a row, we are proud to present State of
Ethical Trading – taking the temperature of the challenges faced
by DIEH members, as well as their progress, in the field of ethical
trade. This report will provide insight into how the work of DIEH
members is progressing and where common obstacles exist.
“Doing ethical trade” is much harder than it sounds. Modern
supply chains are vast, complex, and global. For example, labour
issues are challenging enough by themselves. What should a
company do if it discovers that children are working at a supplier’s production site? Paradoxically, evicting children from the
workplace can make their lives worse. Collaborating in a multi-stakeholder setting, such as DIEH, provides a firm grasp of the
complexities of ethical trade and offers inspiration to reach for
better solutions in supply chain management, production, and
buying practices.
ensuring sustainable growth and development. The United
Nations’ Sustainable Development Goals (SDGs) present a
unique opportunity in the coming 15 years to shape the efforts
of governments, businesses, trade unions, and civil-society organisations around the world to create a sustainable future for
all. Companies with a robust ethical trade programme will find
they already contribute to achieving the Goals.
We extend our thanks to all DIEH members for their loyal contribution to our work. We acknowledge their continuous efforts
to combat violations of human and workers’ rights, improve
working conditions, and minimise environmental footprints
across global supply chains.
We look forward to a continuing collaboration with our growing
membership to advance ethical trade and create positive impact
that benefits people, planet, and profit.
Global trade continues to expose poor and unacceptable working conditions, environmental degradation, and human rights
violations around the world. In a globalised world, we are challenged daily with the responsibility to strive for more sustainable
development. And ethical trade plays a fundamental role in
Collaborating in a
multistakeholder setting, such
as DIEH, offers inspiration to
reach for better solutions in supply
chain management, production,
and buying practices.
CASES AND RESULTS
24-33
SDGs – A UNIVERSAL AGENDA
24
RESULTS AND ACHIEVEMENTS REPORTED BY DIEH MEMBERS FOR 2016
25
CASE: PROMOTING SUSTAINABILITY THROUGH A MULTI-PARTNER-DRIVEN 26-29
Mette Boye, Director
IMPACT ASSESSMENT
CASE: PROMOTING SUSTAINABLE BIOMASS PRODUCTION IN RUSSIA 30-33
AND THE BALTICS A REPORT BY THE DANISH ETHICAL TRADING INITIATIVE, BASED ON ANNUAL REPORTING BY DIEH MEMBERS IN 2016
A FUTURE PERSPECTIVE ON ETHICAL TRADE
34
The findings presented in State of Ethical Trading 2016 are based on DIEH members’ mandatory annual reporting to DIEH undertaken in December
2016–January 2017, as well as external publications and articles related to the topic of ethical trade in Denmark. The member data and percentages
are based on an 82% response rate before the reporting deadline (55 out of 67 members). Graphs and percentages in this publication may be based
on fewer respondents, because not every question in the reporting framework was equally important to each of our member groups. DIEH is not
responsible for, and cannot be held liable for, any misleading or incorrect reporting on behalf of its members.
Secretariat:
Mette Boye, Director
Pi Bjerregaard, Head of Administration
Layanna Martin, Head of Communication
Janine Dortmundt, Project Consultant Responsible
Sourcing & Partnerships, Dortmundt.dk
Julie Bundgaard, Student Assistant
Photographers: Brendan Bannon, CARE, CM Biomass,
DIEH, Dong Energy, Mikkel Østergaard, Shutterstock,
Skovdyrkerne, Jakob Carlsen.
Design: LARSEN LAB
Editing: Fine Point Communication
Printing: 3F Trykkeri
Printed on: The Nordic Eco-label paper
20%
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State of Ethical Trading 2016
10%
0%
30%
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20%
State of Ethical Trading 2016
10%
UN Guiding Principles
0%
for Business and
Human Rights
DRIVERS OF ETHICAL TRADE
IN DENMARK
4%
Danish Ethical Trading Initiative
UN Global Compact
Danish Law on
CSR reporting
Organisations that performed
risk mapping§99a)
(Årsregnskabslovens
EU directives
Other (ISO26000, BSCI,
OECD Guidelines, ILO
Companies that performed
risk SMETA,
mapping
Conventions,
SA8000)
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None
* Multiple responses possible
FIGURE 1:
According to DIEH members, ethical trade is prioritised*
In the company / organisation
For companies and organisations operating on an international level,
engaging in ethical trade and sustainable sourcing is no longer an
optional “add-on” to the operation. Awareness is growing constantly,
and companies, public institutions, and other organisations in
Denmark now realise that the stakes are high if ethical challenges
are not addressed appropriately.
Top 6 most most frequently listed ethical-trade issues in 2016*:
Among larger Danish corporations
Environment
Ethical trade refers to responsible production, responsible purchasing practices, and responsible supply chain management in
global value chains. Ethical trade means taking responsibility for
human and labour rights and the environment, and facilitating
positive change and benefits in every part of the supply chain.
The topic is relevant to all companies, organisations, and institutions that work with suppliers, have their own production
sites, and purchase goods and services, locally or globally. But
ethical-trading dilemmas are absolutely pertinent to those who
operate globally. Improving responsible global supply chain management is certainly central to what brings DIEH members
together. This publication reflects the trends and developments
in this field.
FOCUS ON ETHICAL TRADE IS ON THE RISE – BUT NOT AT ALL LEVELS
According to two-thirds of DIEH members, ethical trade is increasingly becoming a priority within their company or organisation. In 2015, customer and primary stakeholder demand was
the chief force driving ethical trade. This group is now ranked
as an important second, mentioned by 60% of the respondents
These priorities were confirmed by a study in the UK, which
concludes that the foremost driver of company action on ethical
trade and human rights is reputational risk (97%), with human
rights (86%), customer engagement (85%), and investor concern (25%) also cited as important 1.
Growing pressure from abroad was cited as an important influence in Denmark, a change from last year. According to DIEH
members, Germany, Sweden, Holland, Norway, and the UK play
an important role in driving Denmark in an increasingly responsible direction and setting examples of ways to improve the
ethicaltrade landscape. On the other hand, members are less incentivised or impressed by Danish and EU policies than they were
the previous year; only 17% believe that the topic is prioritised
in national politics.
Abroad
Working environment
61%
At the EU level
labour
AmongChild
smaller
Danish companies
49%
44%
At the municipal policy level
Corruption
0%
10%
20%
30%
44%
50%
40%
60%
70%
* Multiple responses possible
42%
Forced labour
The municipal level still lags behind, but a small increase is apparent: 9% now believe that municipalities promote and prioritise ethical trade, compared with 6% last year.
0%
10%
20%
30%
40%
50%
60%
RAISING THE BAR THROUGH REGULATION
FIGURE 2:
More than 65% of DIEH members mentioned the UN Guiding
Principles for Business and Human Rights (UNGPs) as an important guidance to their work in ethical trade. Documents also
mentioned include: UN Global Compact, EU directives, Danish
Law on CSR Reporting, ISO26000, BSCI Code of Conduct, OECD
Guidelines, ILO Conventions, Sedex Member Ethical Trade Audit,
and SA8000. Only 4% makes no use of guidance or legislative
documents at all.
* trade*:
spm15 Guidance
documents
and/or legislation
in relation
to trade
ethical
Guidance
documents
and/or legislation
used in used
relation
to ethical
Body (SKI)
80%
90%
100%
100%
90%
80%
70%
65%
58%
46%
50%
Katrine Pape Huldahl, Danish Central Purchasing
70%
Guidance documents and/or legislation used in relation to ethical trade*:
60%
“At the municipal level, there is a rising interest in
this area. However, this is not the case at the national
level to the extent that proper policies towards the
issue have been adopted. But overall, we are seeing
an increased demand and focus on ethical trade.”
Total 2015
64%
64%
At the national policy level
Working hours
WHAT IS ETHICAL TRADE?
Total 2016
Increased CSR and ethical trading demands
from our primary stakeholders
46%
40%
35%
30%
20%
10%
4%
0%
UN Guiding Principles
for Business and
Human Rights
UN Global Compact
Danish Law on
CSR reporting
(Årsregnskabslovens §99a)
EU directives
Other (ISO26000, BSCI,
OECD Guidelines, ILO
Conventions, SMETA,
SA8000)
None
* Multiple responses possible
Lake, MacAlister, Berman, Gitsham and Page 2016. Corporate Leadership on Modern Slavery. How have companies responded to the UK Modern Slavery
1.
Act one year on? London: Hult International Business School and the Ethical Trading Initiative.
In the company / organisation
Total 2016
Increased CSR and ethical trading demands
from our primary stakeholders
Total 2015
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Internationally, we see a gradual trend towards more “hard law.”
Countries are adopting legislation to ensure that businesses respect
human rights in all of their activities. As shown in the table below, different legislative initiatives have been adopted at a national
level in the past years, requiring transparency or setting obligations to conduct human rights due diligence in line with the UNGPs.
More countries are set to follow, with legislation likely to emerge
next in Switzerland 2. Although civil-society groups have advocated for enhanced legal standards on this topic from the
European Commission, this has hardly led to results. In March
2017, however, the European Parliament adopted regulations
on supply chain due diligence for European importers of tin,
tantalum, tungsten, and gold originating in conflict-affected and
high-risk areas. As more legislative initiatives referring to the
State of Ethical Trading 2016
UNGPs follow, it is reasonable to expect a growing focus on
supply chain due diligence.
In 2015, the Modern Slavery Act was ratified in the UK.
According to a study by the Ethical Trading Initiative (ETI-UK),
CEO engagement with modern slavery has doubled as a result
of the Act, and the feeling of responsibility within companies
for ethical trade has increased tremendously. For example, interest
in ETI training in responsible buying has skyrocketed, with companies stating, “addressing modern slavery is becoming a businescritical issue.” Communication between companies and their
suppliers has increased 58%, and companies are collaborating
50% more with peers, NGOs, and multi-stakeholder initiatives 3.
This exemplifies the enormous influence that legislative requirements can have by putting ethical trade on the agenda.
LEGISLATION RELATED TO HUMAN RIGHTS
DATE AND SCOPE
California Transparency in Supply Chains Act
2010, for retail sellers and manufacturers
US Dodd-Frank Act rule on conflict minerals
2012, focus on transparency and due diligence for conflict
minerals from the DRC
Transparency in Supply Chain Clause of the Modern Slavery Act, UK
2015, for companies with annual turnover in the UK of £36 million or more
Corporate Duty of Care (Le Devoir de Vigilance), France
2017, for companies with 5,000 staff in France or 10,000 staff in combined
French and foreign offices
Child Labour Due Diligence Law (Wet Zorgplicht Kinderarbeid),
Holland
2017, scope to be determined (pending Senate approval;
to be effective from 2020)
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State of Ethical Trading 2016
PUBLIC PROCUREMENT
According to Denmark’s Central Purchasing Body SKI (Staten og
Kommunernes Indkøbsservice), a DIEH member, the Danish public sector spends approximately DKK 300 billion every year on
goods and services provided by private companies 4. This gives
public institutions a great opportunity to shape the private sector’s practices and use their leverage to implement higher ethical
standards in global supply chains. In the case of SKI, all suppliers
sign a contract commitment to follow SKI’s Framework
Agreement, which requests that suppliers perform due diligence
based on the OECD Guidelines for Multinational Enterprises 5.
EU procurement directives determine the legal framework for
public procurement in Denmark. In 2016, the European Union
introduced new rules on this: Public authorities may now con-
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sider social and environmental criteria when evaluating tenderers. This important development allows public institutions to
play a much larger role in facilitating and promoting ethical
trade.
It has been noted that public buyers often do not include social and
environmental criteria to avoid litigation by tenderers. Small- and
medium-sized enterprises (SMEs) that have invested in CSR and
social value report that public buyers continue to base their
decisions on price (and quality) alone. According to the Danish
Institute for Human Rights, more comprehensive legal requirements and policies are needed, combined with better guidance and
training for public buyers 6. For their part, DIEH public-sector
members are starting to implement such training and collaboration
to increase their leverage on businesses’ social responsibility.
Marie Peuliche, Municipality of Copenhagen
The SEE-Initiative (socio-economic enterprises)
was introduced by the municipality of Odense
to facilitate consideration of socio-economic
enterprises for local authority contracts. In acordance with the EU Public Procurement Directive,
the SEE-Initiative makes socio-economic enterprises visible through a vendor portal that enables public authorities to reserve contracts to
certain services.
European Coalition of Corporate Justice 2017. The French Duty of Vigilance Law.
4.
See Footnote 1.
5.
3.
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“Labour and social clauses are a standard part of the contract
paradigms. In relation to our fight against social dumping,
we monitor salaries and working conditions ourselves.”
Mini-case: Odense Municipality
and the SEE-Initiative
2.
Danish Ethical Trading Initiative
So far, the municipality has used the SEE list for
one reserved contract with excellent results, and
more are in the pipeline. The initiative serves as
an example of how local authorities can use
their public purchasing power to embrace a
more ethical and socio-political agenda in
Denmark and abroad.
SKI website, https://www.ski.dk/Viden/Sider/Facts-about-SKI.aspx
and 6 Methven O’Brien, Mehra and Vander Meulen 2016. Public Procurement and Human Rights: A Survey of Twenty Jurisdictions. Copenhagen: The Danish Institute for Human Rights.
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INVESTORS ARE GETTING INVOLVED
From a financial standpoint, investors are playing a larger role
in stimulating corporate responsibility for human rights issues.
At the global level, the community of responsible investors is growing; ten years after being launched in 2006, the United Nations
Principles for Responsible Investment (UN PRI) now counts more
than 1,600 signatories. Responsible investment strategies are
considered influential and encourage companies to formalise
commitments to human rights, to be aware of risks and opportunities, and to adequately tackle the challenges they face 7.
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Recently, Danish NGOs and citizens (e.g. pension fund members)
have advocated a more proactive role for investors, especially
pension funds. Although many Danish pension funds have a
clear ambition to respect human rights, uncertainty in the sector
remains about how proper due diligence should be carried out
according to the UNGPs. Some experts emphasise the need for
a more systematic and open approach to active ownership by investors. To facilitate this, NGOs could share relevant knowledge
with companies and investors about the potential risks and market needs they encounter in certain investment countries 8.
“We definitely see a clear tendency towards a stronger focus
on responsible investment, also in Denmark.”
Troels Børrild, ActionAid Denmark
Increased commitment to responsible
investment practices
Dansif is an independent Danish forum of institutional investors and advisors. A 2015 Dansif
survey revealed that 44 of the 50 largest institutional investors in Denmark have a responsible
investment (RI) policy. What this means in prac-
tice varies from case to case, and critics point
out that often an ad hoc approach is taken to
engaging with companies, thus questioning to
what extent this contributes to actual change 9.
Nevertheless, the trend is moving increasingly
towards greater transparency, with 86% of
investors now making their RI policy publicly
available.
Sources: Dansif 2015, The Current State of Responsible Investment in Denmark and CSR.dk
Vigeo Eiris, 2017. The human rights responsibilities of business in a changing world. How companies across the globe are addressing key areas of human rights.
7.
8.
CSR.dk 2017. Selvom pengene er ansvarlige er det stadig forretning.
9.
CSR.dk 2017. Sværvægter i branchen tror ikke på investorers engagement strategier.
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WALKING THE WALK – ALLOCATING RESOURCES TO ETHICAL
TRADE
Regardless of the organisation or company type, experts have
pointed towards a lack of internal resources as one of the major
obstacles to implementing ethical trade and sustainable supply
chain programmes 10. This is confirmed by DIEH members, with
only 46% reporting that top management have allocated funds
for ethical trade in the budget. It is an increase over last year,
when 40% of top management allocated funds, but it also
means that more than half of the respondents see no funds
allocated to the subject matter at all. Some DIEH member organisations, especially those representing SMEs, point out that they
simply depend on public funds to invest in ethical trade.
State of Ethical Trading 2016
Regarding human resources, it is important to note that this
aspect has improved substantially. Currently, more than 40% of
DIEH members engage more than two employees in CSR, sustainability compliance, and ethical trade. Some larger companies
engage up to 15 full-time employees in CSR, whereas others
indicate that the subject matter is so integrated with core business operations that all functions are engaged in different aspects
of ethical trade. For SME members, it is an entirely different
story. They tend to have fewer resources available and less than
0.25 full-time employees (reported by 26% of the respondents).
At the same time, the trend among top management of DIEH
members is to get more involved. The percentage of members
responding that top management is following up on
ethical-trade efforts grew from 55% to 63%.
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Danish Ethical Trading Initiative
LESS FOCUS ON KPIs
Although key performance indicators (KPIs), if used correctly,
are helpful in measuring progress in ethical-trade activities, this
appears to be less of a priority for some DIEH members. This
year, fewer DIEH members used KPIs or other indicators than
last year: Although 33% claims to have set either qualitative or
quantitative indicators, 44% does not use them at all. This may
reflect the fact that DIEH also has a large number of SMEs that
tend to work with ethical trade on a project or ad-hoc basis,
whereas larger companies tend to integrate ethical trade more
systematically throughout their operations, enabling them to
measure and report progress.
“As assessments of environmental and
social issues are a natural part of the
business processes at EKF, ethical trade
forms part of our internal employees’
daily life.”
Rikke Mandrup, Danmarks Export Credit
Agency (EKF)
“As an organisation for SMEs we are quite dependent on external funds when it comes to
implementation of social responsibility. The Danida funding programmes we previously could
apply for are now either cancelled or require co-funding, which is basically impossible for us
or for our SME members.”
“The Executive Board itself is involved in our CSR work, including company and supplier codes
of conduct, social responsibility, environment, animal rights, and strategic development efforts
for the UN Global Compact and the 17 Sustainable Development Goals.”
Jens Kvorning, Danish Federation of Small and Medium-Sized Enterprises
46%
Christian Rask-Jepsen, Reitan Distribution
46% of DIEH members report that
top management have allocated
funds for ethical trade
THE ETHICAL TRADE JOB
Ethical-trade efforts are run and managed by a variety of functions in Danish companies and organisations:
•Social compliance officer
•Corporate Responsibility Manager
•Head of CSR
•CSR consultant
•Compliance Manager
•Social Compliance assistant
•Sourcing manager
•CSR officer
•CSR auditor
•Ethical Trade Supervisor
•Head of CSR and Compliance
•Public Affairs and Communication Director
•Social Compliance & Human Rights Manager
•Supplier Code of Conduct Manager
•Head of Responsible Sourcing
Source: DIEH member reports 2016
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HEC and Ecovadis 2017. Scaling Up Sustainable Procurement: A New Phase of Expansion Must Begin.
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KEY CHALLENGES AND OPPORTUNITIES
IN ETHICAL TRADE
Seventy-four per cent of DIEH members operate globally, either in trade or
through their presence. Furthermore, two out of three indicate that the company
or organisation has focused specifically on one or several countries. The map
illustrates in which countries and regions DIEH members currently see
particular challenges or opportunities with ethical trade.
FOCUS AREAS FOR ETHICAL TRADE
AS LISTED BY DIEH MEMBERS:
High focus country/region for DIEH members
Focus country for several DIEH members
GEOGRAPHICAL HOT SPOTS
Bangladesh, Turkey, and China are among the hot spots
listed most frequently by DIEH members. All of the countries
are particularly important for garment and textile companies,
and China is a hot spot for the toy-production industry. For
other sectors and industries, geographical hot spots are much
more diverse. For example, Europe, Kenya, Malawi, South
Africa, Madagascar, and Thailand are highlighted as hot spots
for food and beverage and the retail industry. In some cases,
investigative journalists and the media have been influential by
spotlighting certain countries and products 11.
11.
Danwatch website, DIEH dialogue meetings, and DIEH member reports.
Focus country for individual DIEH members
For example:
• Danwatch’s investigations have shed light on vanilla from Madagascar and coffee from Brazil and Guatemala.
In both sectors, unacceptable practices were exposed,
including modern slavery and child-labour abuses. These
issues occur in supply chains that are potentially linked to
private companies and supermarkets as well as public buyers.
• The Lake Turkana Wind Project in Kenya has received attention related to issues of land rights and indigenous
populations, as investigated by Danwatch and reported in the media. Various Danish investors are involved in the project.
• Amnesty International exposed harmful labour conditions at seven palm-oil plantations in Indonesia, including instances of forced labour, child labour, and the use of hazardous chemicals.
• Other media hot spots for 2016 were the South African wine sector (on which a highly critical Danish documen tary reported unacceptable working conditions), modern slavery practices in Thai fishery and poultry sectors, and rights violations of Syrian refugees in the Turkish textile
sector.
In some cases, investigative
journalists and the media
have been influential by
spotlighting certain countries
and products
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30%
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10%
0%
We undertake corrective actions if we find
deviations from our guidelines.
We conduct internal and/or
external audits.
We offer regular trainings
for our staff.
DIEH members’ most important ethical-trade issues are shown
in the figure below. Most of these issues have seen an increase in
priority over the previous year (with the exception of corruption).
Other topics gaining ground are forced labour (from 32% to
42%), freedom of association and collective bargaining (from
25% to 37%), regular employment (from 17% to 32%), and
marginalised populations (from 19% to 31%). This increased
attention may reflect a better general knowledge of the most
pressing issues in global supply chains. It may also be a result
of the increasing focus on human rights and climate change
prompted by the Paris Climate Agreement (COP21), stories in
the media, and the SDGs.
The media’s role was addressed during several DIEH dialogue
meetings. Most members agree that stories and articles about
* Multiple responses
possible
production
practices
in global supply chains are important and
raise awareness of the need for ethical trade. However, many
have indicated that they would like to see the stories and information presented in a more constructive manner. This discussion
will definitely continue in the coming years.
ipsum
DIEH members' risk mapping Lorem
in 2016:
SUPPLY CHAIN CHALLENGES
100% supply chain challenges are identified and addressed
How
varies
90% greatly from one company and organisation to another.
Although some DIEH members are still in the phase of mapping
80%
or “creating an overview of potential risks and issues,” others
70% gone beyond that and have a clear picture of which issues
have
are
of primary importance for their operations. Among the to60%
pics related to ethical-trade issues
in 2016, those listed most
47%
50%
frequently are the environment (including issues related to
40%
climate,
water, chemicals, and energy), working environment,
and
child
labour (see the graph below).
30%
When asked how they address the aforementioned issues,
most DIEH members emphasise collaboration with stakeholders
(60%) and partnerships. Just under half refer to their own purchasing practices and/or responsible buying as an approach.
The following graph illustrates the different characteristics and
qualities of the DIEH membership base, by outlining the different approaches.
HUMAN RIGHTS DUE DILIGENCE: A WORK IN PROGRESS
With 65% of DIEH members referring to the UN Guiding Principles for Business and Human Rights (UNGP) to guide their
ethical-trade efforts, human rights due diligence is now certainly on the agenda. At the same time, a survey of more than
3,000 companies listed in 35 countries worldwide revealed that
only a minority of companies commit to all areas associated
with human rights for which they are responsible 14. The Organisation for Economic Cooperation and Development (OECD)
has developed supporting documents that can help different
sectors (e.g. textile, agriculture, minerals) implement the UNGPs.
This is being warmly received by the many businesses that are
still slightly unsure about exactly what is expected of them.
74%
Several DIEH members affirm that they prefer to focus on risk
sectors and risk countries rather than on specific issues. Others
point out the difficulty in pinpointing the most pertinent issues,
because they deal with so many countries or supply chains,
each featuring their specific challenges. A common challenge
for all, however, remains the lack of transparency throughout
the supply chain. A sustainable procurement barometer study
20%
conducted among 120 (primarily European) companies disclosed
Other international business surveys also make climate change
that only 15% have complete supply chain visibility into the
a 10%
top priority. In this respect, managing energy use and greenCSR and sustainability performance of both Tier 1 and Tier 2
house
gas
(GHG)
emissions
in
operations
is
by
far
the
most
0%
andrisk
only
6% report having full visibility into Tier 3
important focus
of climate-mitigation
efforts.
Yet, it was menOrganisations
that performed risk
mapping
Companies suppliers,
that performed
mapping
suppliers and beyond 13.
tioned that achieving actual change on climate action throughout the value chain is the number-one barrier to businesses
wishing to improve in this area 12 .
FIGURE 4:
Main approaches of DIEH members to addressing supply chain issues*:
BUYING
Responsible
buying
(40%)
Own
purchasing
practices
(48%)
PARTNERING
OTHER
Ethical-trade
partnerships
(41%)
Lobbying
(31%)
Collaboration
with other
stakeholders
(60%)
Training and
education
(59%)
(24%)
Other research, capacity
building, investments,
certification support,
project management,
site visits
FIGURE 3:
Top 6 most most frequently listed ethical-trade issues in 2016*:
Top 6 most most frequently listed ethical-trade issues in 2016*:
Working environment
61%
Child labour
Recently, the OECD published a guidance document that helps garment and footwear companies scope risks across their entire supply chain,
including risks related to subcontracting and
homeworkers. The guidance was prepared by
49%
Working hours
44%
Corruption
44%
a wide range of stakeholders and experts, and
will help companies manage global operations
consistently, by meeting customer and market
expectations regarding responsible supply chains
in the garment and footwear sector. The company assessments need to move beyond auditing to not only identify labour, human rights,
and environmental impacts, but also to understand why they are occurring.
42%
Forced labour
0%
10%
20%
30%
40%
50%
60%
spm15
Guidance documents and/or legislation used in relation to ethical trade*:
12.
BSR/GlobeScan State of Sustainable Business Survey 2016
Guidance documents and/or legislation used in relation to ethical trade*:
100%
Due Diligence Guidance for Responsible
Supply Chains in the Garment and Footwear
Sector
64%
64%
Environment
70%
80%
90%
100%
Source: OECD Insights, 2017. A Responsibility Revolution in the Fashion Industry: How OECD’s new Due Diligence Instrument can Transform the Global
Garment Industry.
12
HEC/EcoVadis 2017, Scaling Up Sustainable Procurement: A New Phase of Expansion Must Begin.
11.
Vigeo Eiris, 2017. The human rights responsibilities of business in a changing world. How companies across the globe are addressing key areas of human rights.
40%
18
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State of Ethical Trading 2016
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State of Ethical Trading 2016 Danish Ethical Trading Initiative
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19
20%
10%
0%
RISK MAPPING
AUDITS AND IMPROVEMENTS
Seventy-four per cent of DIEH members indicated that they
conducted risk mapping of both the company and the supply
chain to identify and prioritise problems related to human and
workers’ rights as well as the environment. Slightly less than
half of the organisations performed risk mapping (see figure 5);
several public institutes and NGOs reported that risk identification occurs on a more ad hoc or project basis.
Conducting audits is listed more often this year than in the
previous year as a key instrument for DIEH members to improve their ethical-trade efforts; 63% reported auditing as a
key approach, and 67% reported taking corrective actions to
continuously improve their efforts.
Risk mapping forms an important part of due diligence. When
done properly, it helps identify the primary areas for improvement in the entire value chain. A company is ultimately responsible for all impacts caused directly by its own operations or
indirectly as part of a (global) supply chain. Although it makes
good practical sense to prioritise top-tier suppliers, greater risk
may exist further down the supply chain. In practice therefore, companies need to prioritise their efforts based on the risk
profile and then gradually extend the scope based on their experiences 15.
Risk mapping is clearly an area that occupies DIEH company
members, and several respondents stated that they were currently updating or improving their risk-identification processes.
The OECD Guidelines and the UNGPs are mentioned as important references.
Although audits can be useful in identifying (certain) areas of
concern, experts warn about the potential pitfalls of auditing,
especially when used as a stand-alone tool. A study based on
interviews with ethical auditors, business executives, NGOs,
and supplier firms published in 2016 encapsulates the downsides of audits: “Focusing on Tier 1 suppliers, most audits tend
to exclude labour agencies and subcontractors further down
the supply chain in low-value activities such as harvesting, processing, dyeing, and mining. Evidence from food, clothing, and
other industries indicates that the most exploited workers (e.g.
forced and child labour) tend to be found in sites with complex
subcontracting arrangements. Some evidence suggests audits
have worsened conditions by shifting problems further down
the supply chain 16.”
It is positive that DIEH members report their use of auditing as a
tool for improvement among primary suppliers, and so demonstrate a shift from pass/fail compliance to continuous improvement programmes. In line with this trend, there is an increased
tendency to share responsibility between buyer and supplier
and collaborate to achieve the necessary improvements in production or sourcing countries.
“At Coop Danmark
haveactions
a risk-based
toconduct
our suppliers,
and this defines We
our
follow
process. We
We undertake we
corrective
if we find approachWe
internal and/or
offer
regularup
trainings
external audits.
for our staff.
deviations from our guidelines.
look at suppliers based in risk-countries, whether they receive materials from risk-countries and whether the
value chain of a product could possibly be connected to certain risks with regards to workers’ rights, human
prepared by DIEH company members in relation to their work within ethical trade*
* MultipleDocuments
responses
rights
and
the possible
environment. This informs us which suppliers and topics we should pay extra attention to.”
Kathrine Lykke Kirk, Coop Danmark A/S
FIGURE 5:
Total 2015
ipsum
DIEH
risk risk
mapping
in 2016:Lorem
DIEH
members'
mapping
in 2016:
100% members’
Total 2016
88%
90%
100%
80%
74%
72%
90%
70%
60%
60%
80%
48%
50%
70%
40%
60%
30%
48%
44%
74%
44%
44%
41%
22%
47%
50%
20%
12%
15%
10%
40%
0%
30%
20%
Supplier Code of
Conduct
CSR Policy
Company Code
of Conduct
Strategy on
ethical trade
Policy for
human rights
Green procurement
policy
Strategy on SDG's
/ Global Goals
10%
0%
Organisations that performed risk mapping
Companies that performed risk mapping
FIGURE 6:
Top 3 approaches to how DIEH members ensure continuous improvement of ethical trade efforts *
100%
Top 6 most most frequently listed ethical-trade issues in 2016*:
90%
Total 2015
Total 2016
80%
70%
Environment
64%
64%
67%
63%
60% Working environment
61%
51%
47%
50%
44%
Child labour
49%
40%
30%
20%
Working hours
44%
Corruption
44%
10%
0%
42%
Forced labour
We undertake corrective actions if we find
deviations from
0% our guidelines.
10%
20%
30%
We conduct internal and/or
external audits.
40%
50%
60%
* Multiple responses possible
15.
DIEH Principles for Implementation, Principle 2 – Identification. Accessible via www.dieh.dk
16.
2016, SPERI Global Political Economy Brief No.1. Ethical Audits and the Supply Chains of Global Corporations
spm15 Guidance documents and/or legislation used in relation to ethical trade*:
Guidance documents and/or legislation used in relation to ethical trade*:
100%
Lorem ipsum
70%
We offer regular trainings
for our staff.90%
80%
100%
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Danish Ethical Trading Initiative
FOCUS ON PURCHASING PRACTICES
Purchasing practices form a crucial part of ethical trade.
Suppliers’ experience and insights reveal that purchasing practices can have negative consequences and undermine relationships with suppliers. For example, insufficient lead-times and
last-minute changes to orders may force suppliers to require
their workers to put in overtime. In the race to remain competitive, suppliers may cut corners or neglect to improve ethical
standards, and workers may suffer harsh labour conditions and
unfair pay.
A unique supplier survey conducted by ILO and the Joint Ethical
Trading Initiatives17 provides valuable insight into how current
buying practices affect suppliers worldwide. One important
finding demonstrated the prevailing imbalance of power in the
supply chain: The buying organisation typically has the upper
hand. This is validated by the following: In 2015, 36% of suppliers accepted orders worth less than the cost of production,
which some suppliers attributed to customer pressure (see the
box below). The survey also found that buying practices are
often at odds with requirements in supplier codes of conduct.
DIEH company members are concentrating more on staff training in purchasing and buying departments, with 44% reporting
|
State of Ethical Trading 2016
that they invest in this area. Specifically, almost half of DIEH
members (48%) report that they now focus on their own buying
practices when addressing ethical-trade issues. Another indicator
of progress is that several DIEH members report they are developing or updating a buying or procurement policy.
Nevertheless, action in this area is still in its infancy; quality, price,
and lead-time remain decisive in negotiating with suppliers.
Often, aspects of ethical trade have yet to be integrated in the
process, for example by providing suppliers commercial incentives
to improve social performance, such as price, volume, duration,
and preferred supplier status18. This takes time and commitment
and requires a trusting, direct, and honest relationship between
buyer and supplier.
SUPPLIER DIALOGUE AND SUPPORT
Supplier or company codes of conduct are high on the list of
ethical-trade documents used by Danish buyers. Codes of conduct that were drafted to conform to an industry-wide initiative,
such as the Business Social Compliance Initiative (BSCI), were
also mentioned frequently. The use of BSCI’s Code of Conduct
by DIEH members could possibly explain the decrease in the
reported supplier or company codes of conduct.
“DK Company is aware that we cannot put any requirements on our suppliers without looking at our
own approach and sourcing methods. To keep becoming better and better at ethical sourcing, we
are currently building up capacity within our company to make everyone aware of their influence in
achieving a more ethical supply chain.”
DK Company (website)
Key Findings of the joint ETI-ILO supplier survey on purchasing practices (conducted in 2016):
• 36% of suppliers accepted orders worth less than the cost of production, which some suppliers attributed to customer pressure.
• Nearly 80% of respondents said that only 10% (or less) of buyers reward them for making ethical improvements. Although some training is provided, many respondents reported not
receiving any support from their customers in meeting the standards set out in their code of conduct.
• The determining factors in buyer–supplier negotiations are product quality, price, and lead-
time. Price is the main reason that a buyer might terminate a supplier relationship, with social compliance named last after product quality and delivery.
Source: The Joint Ethical Trading Initiatives, 2016 Guide to Responsible Purchasing Practices. Pilot Edition December 2016
17.
The Joint Ethical Trading Initiatives, 2016 Guide to Responsible Purchasing Practices. Pilot Edition December 2016
18.
ILO, IOE, 2015, How to do business with respect for children’s right to be free from child labour: ILO-IOE child labour guidance tool for business
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State of Ethical Trading 2016
Quality, price, and lead-time remain decisive in
negotiating with suppliers. Often, aspects of ethical
trade have yet to be integrated in the process.
Danish Ethical Trading Initiative
|
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State of Ethical Trading 2016
Documents prepared by DIEH company members in relation to their work within ethical trade*
FIGURE 7:
Documents prepared by DIEH company members in support of their work in ethical trade*
100%
90%
80%
Total 2015
Total 2016
88%
74%
72%
70%
|
State of Ethical Trading 2016
Noting the preferred use of codes of conduct, it is interesting
that most suppliers participating in the joint ETI-ILO survey stated
that their customers provided little or no support for implementing codes of conduct. This is an important gap in the global
ethical-trade field; and although some actors are taking steps
here, Danish buyers still need to acquire more experience in this.
According to the suppliers in the survey, the following types of
support are considered valuable.
Danish Ethical Trading Initiative
•
•
•
•
•
|
23
Training suppliers’ staffs
Rewarding suppliers when improvements are made
Providing financial assistance for improvements
Co-funding social audits
Conducting joint projects to identify breaches19
60%
60%
48%
50%
44%
48%
44%
44%
41%
40%
22%
30%
20%
12%
15%
10%
“We have developed an internal evaluation tool specifically for the furniture/interior sector, known as the
dialogue tool. We use this tool locally with our collaboration partners. The tool focuses on health and
safety in the factories and has proven to work extremely well in identifying dangers and risks.”
Signe Mørk Sørensen, BRICPro
0%
Supplier Code of
Conduct
CSR Policy
Company Code
of Conduct
Strategy on
ethical trade
Policy for
human rights
Green procurement
policy
Strategy on SDG's
/ Global Goals
46%
Almost half of DIEH members (48%)
report that they now focus on their own buying
Total 2015 Total 2016
practices when addressing ethical-trade
issues
100%
90%
80%
67%
70%
63%
60%
51%
47%
The
50% Business Social Compliance Initiative (BSCI)
44%
40%
Twenty-two per cent of DIEH company members are also members of BSCI, an initiative open to
retailers,
importers, and brands engaged in improving working conditions in their global supply
30%
chains. The initiative supports the integration by buying companies, among others, of BSCI’s Code
20%
of Conduct in their supply chain, thus reducing audit fatigue and increasing efficiency and leverage.
10%
Complementary
to social auditing, the initiative focuses on capacity building and establishing
relationships with all stakeholders across the supply chain. Peter Nielsen from the Danish promotion
0%
company Kluntz explains,
We undertake corrective actions if we find
deviations from our guidelines.
We conduct internal and/or
external audits.
Grievances and complaints:
Over the past few years, more attention has
been given to the role of grievance mechanisms in improving social performance, in
addition to the role of trade unions. Forty
per cent of DIEH members report that they
We offer regular trainings
for our staff.
“We are a small company and therefore not a primary customer of our suppliers, which means it
can be difficult to make demands of them. This is why BSCI is a good solution for us.”
* Multiple responses possible
have a procedure or mechanism in place that
addresses grievances and complaints, up from
34% last year. Some state that this is part of a
certification or external auditing procedure,
whereas others state that internal whisle-blower
functions exist within the company or
organisation.
Source: DIEH Member reports 2016
18.
ILO, IOE, 2015, How to do business with respect for children’s right to be free from child labour: ILO-IOE child labour guidance tool for business
ipsum
DIEH members' risk mapping Lorem
in 2016:
100%
The Joint Ethical Trading Initiatives, 2016 Guide to Responsible Purchasing Practices. Pilot Edition December 2016
19.
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Danish Ethical Trading Initiative
CONCRETE RESULTS AND CASES
Results and achievements reported by DIEH members for 2016
Danish actors see increased global awareness of and debate surrounding
ethical-trade issues, but they also note that solutions receive more focus. This
constructive attitude is illustrated by the 45% of DIEH members that use DIEH
actively to engage in dialogue with other members. It is also at the core of the
two case studies presented later in this section.
RETAIL
SDGs – A UNIVERSAL AGENDA
An important development for the ethical-trade agenda is the
recent global commitment to the United Nations Sustainable
Development Goals (SDGs) or Global Goals agreed in 2015. The
SDGs aim to guide governments, civil society, and businesses to
“end poverty, protect the planet, and ensure prosperity for all.”
SGD 8 (decent work and economic growth), SDG 12 (responsible consumption and production), and SDG 17 (partnerships for
sustainable development) all apply directly to global supply
chains and ethical trade.
The early response from business has been promising:
International business surveys20 reveal that one in three companies use the SDGs to set corporate targets or are communicating
about the SDGs in their corporate non-financial reporting 21. In
Denmark, 22% of DIEH members have developed a strategic
document on the SDGs. They use them either to map their
activities to the goals or as input to their strategy.
A recent WWF report on the SDGs stated, “Achieving the SDGs
represents a business opportunity. Poverty, inequality, water
scarcity, climate change, and the degradation of natural resources and services are all ultimately bad for business. Conversely,
investing in meeting the SDGs can unlock new markets and
opportunities and secure a company’s long-term prosperity22.”Such benefits are exemplified in the two case studies of DIEH
members in multi-stakeholder collaborations as presented in the
next section of the report. Case 1 relates directly to SGD 2 (End
hunger, achieve food security, and improved nutrition and
promote sustainable agriculture). Case 2 demonstrates action
to achieve SDG 13 (Take urgent action to combat climate
change and its impacts).
• We have audited our top 100 suppliers (80% of our turnover),
and we now have a clear insight into the risks we face in the
different countries
•
• We identified all of our Tier 1 and Tier 2 suppliers and
investigated their performance in the area of CSR. This resulted in dismissing two-fifths of our supplier base. Afterwards, we collaborated with the remaining suppliers to improve their efforts.
In 2016, we specifically followed up on 150 European suppliers that had been identified as possibly delivering risk products. Based on evaluations, individual improvement plans have been initiated to ensure a better compliance level with our code of conduct.
• We are working on a packaging (and environmental) policy that
reduces negative environmental impact in the production process.
• We take part in the project “Step Up” in Bangladesh.
• To improve living and working conditions for women in factories in Bangladesh, we have initiated, in collaboration with a development organisation, an educational programme on
various topics such as finance, career options, women’s rights, nutrition, and health. We also implemented facilities to take care of their children during work hours.
• We have established a control unit to prevent social dumping.
• In one case, we rejected a supplier’s documentation. Consequently,
the supplier developed processes for due diligence.
• We have ensured that our investments meet our sustainability
policy, which includes implementing a management system,
hiring a qualified CSR employee, ensuring responsible supply chain management, etc.
• In 2016, we built our own online system for our audits.
• We have set up local bodies that now operate independently,
to monitor and combat child labour.
• We have developed freely accessible educational material on
global value chains to promote the ethical-trade agenda.
WBCSD 2016. New research shows that the Sustainable Development Goals matter to leading global businesses.
WWF 2017. SDGs mean business: How credible standards can help companies deliver the 2030 agenda.
• Our auditing programmes in Turkey and India have led to
improvements, either by relocating the factory to a safer
building or investing in the factory’s safety measures.
• We invested a lot of time and effort in recycling our waste
at all locations, with the aim of reusing as much as possible.
• We have co-established the database Fabric Source, a
physical library with samples of sustainable materials by
suppliers in developing countries.
PUBLIC SECTOR:
• We agreed on detailed corrective action plans and roadmaps
with direct suppliers on working hours.
22.
• We have assisted our suppliers and clients in becoming certified.
• We have set concrete KPIs for our supplier audits.
• We have conducted a materiality map and updated our CSR
strategy. More than 200 audits were carried out in Asia to
assess social compliance indicators, and a CAP management
system was implemented with indicators. We also launched
training programmes for suppliers.
BSR/GlobeScan 2016. State of Sustainable Business Survey 2016
TEXTILE SECTOR
• We have met our target to map and conduct a risk assessment
for 95% of our supplier base, and we have initiated three new
partnerships with local suppliers.
STONE, ENERGY, TOYS, IT, AGENCIES)
21.
25
This overview of concrete results achieved by DIEH members clearly demonstrates a strong diversity in approach.
OTHER INDUSTRIES (FOOD, FURNITURE, MEDICAL, NATURAL
20
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NGOS AND UNIVERSITIES
• Our partnership with an investment fund has resulted in the
formation of important analyses of why, how, and to what extent companies focus on health and human rights.
•
We have implemented procedures to examine our suppliers’
ethical and social responsibilities. We did this because our
banking business was put out for tender. The socially
responsible profile of the bank was a major assessment
area, prioritised on the same level as economy, quality, service,
and IT solution systems.
• We have replaced some of our most risky suppliers, because they cannot be influenced through dialogue to meet our standards.
• We have influenced several companies to increase their
focus on CSR and human rights.
•
We have been in dialogue with investors about UNGP
compliance with a particular emphasis on Danish
investments in the occupied territories in Palestine and with
regard to land rights in Lake Turkana.
• We have established partnerships with companies in
Denmark and Bangladesh to integrate a better working
environment and greater productivity.
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CASE:
PROMOTING SUSTAINABILITY THROUGH A
MULTI-PARTNER-DRIVEN IMPACT ASSESSMENT
PARTNERS
F
Aim: An impact assessment of the potential adverse effects of
developing and introducing a new dairy product to the local
market in Ethiopia. It was carried out in the early planning
phase of a multi-stakeholder, value-chain project, “GAIN access
to better dairy Ethiopia,” supported by Danida’s Market
Development Partnership for the period 2017–2020.
F o o d s I n g re
di
A
rla
en
ts
Arla
ts
ds Ingredien
oo
The methodology was based on the Human Rights Impact
Assessment guidance and toolbox developed by the Danish
Institute for Human Rights. The report added a new layer to the
analysis, linking the impact assessment methodology with the
SDGs, through a comprehensive value-chain approach.
THE ADDED VALUE OF LINKING AN IMPACT ASSESSMENT
Approach: partners in the GAIN Nordic platform (Arla Food
Ingredients Group P/S, Global Alliance for Improved Nutrition,
DanChurchAid, and the Danish Confederation of Industries)
conducted the assessment. GAIN Nordic is a multistake-holder
platform developing solutions that contribute to food security
and nutrition based on SDG 2. DanChurchAid’s role is to promote solutions that are sustainable, responsible, and
pro-poor.
Location: Ethiopia
Why this case: When businesses, civil society organisations
(CSOs), and other stakeholders work together in multi-stakeholder partnerships, numerous opportunities, dilemmas, and
risks arise. Global supply chains pose great risks to people and
the environment, but can also be a significant leverage point
for creating positive impacts in line with the SDGs. With this
impact assessment, GAIN Nordic partners wanted to “walk the
walk” and assess how to reduce harm and create social value
in a combined approach. Partners used the assessment process
to identify potential impacts in their own proposed activities,
and agree on follow-up actions and mitigation measures
through joint knowledge, leverage, and resources.
WITH SDGs
GAIN Nordic partners found that the SDGs proved to be an
important strategic framework for identifying and assessing key
issues in the impact assessment, and for maintaining a focus on
sustainable development throughout the process. For example,
the SDG lens concentrated attention on people most at risk in
dangerous situations in the analysis, for example on the role of
women and children in milk production and consumption. The
reference to specific SDG targets allowed partners to assess
risks, as well as identify where to create positive leverage in the
Ethiopian dairy value chain. Partners are now able to demonstrate their contribution, however small, to the global agenda
through follow-up actions and mitigation measures.
GAIN Nordic partners recognise that more work is needed to
further develop the methodology, and hope to exchange knowledge and collaborate with other stakeholders interested in coherently linking the UNGP and SDG frameworks.
GAIN Nordic partners wanted to
“walk the walk” and assess how
to reduce harm and create social
value in a combined approach.
“When you conduct an impact assessment, you identify where in the supply chain you make an
impact, both positive and negative. As a result of this process, we have increased our awareness
about our responsibility as a company. We have learned that we are more than a supplier, we are
also an influencer.”
Charlotte Sørensen from Arla Foods Ingredients Group A/S
27
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KEY LESSONS FROM A MULTI-PARTNER-DRIVEN APPROACH TO
IMPACT ASSESSMENTS
The process facilitated a change within the partnership, creating
more awareness about risks and opportunities. An empowering
factor was the trusted atmosphere and open space for dialogue
that exists in the GAIN Nordic partnership on key issues and
challenges, as well as hands-on field exposure to the situation
in the team.
In a multi-partner setup, each partner comes with a different
background, skillset, and perspective. This can provide a wealth
of information and resources, but can also be challenging
because roles are being mixed. A key lesson from the impact
assessment was therefore that it is important to distinguish
between the roles and responsibilities of different partners, e.g.
in MoU/agreement documents, to ensure clarity and accountability internally among partners and externally in the process and
project design.
An empowering factor was the
trusted atmosphere and open space
for dialogue that exists in the GAIN
Nordic partnership on key issues and
challenges, as well as hands-on field
exposure to the situation in the team.
“By conducting an impact assessment together, we were able to integrate the
mindset of responsible business conduct into the design and planning phase of
proposed project activities. It served as a catalyst to understand and apply human
rights due diligence thinking into the on-the-ground activities.
It facilitates a strategic discussion on partners’ roles and responsibilities to
increase their leverage to limit risks and increase social impact through
responsible supply chain management, taking into consideration the various
actors and issues at play in a local development context.”
Gitte Dyrhagen Husager from DanChurchAid
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31
CASE:
PROMOTING SUSTAINABLE BIOMASS
PRODUCTION IN THE BALTICS AND RUSSIA
“We work with our suppliers to ensure the biomass we source originates from forests
that are sustainably managed and regenerated.”
Erik Elingaard-Larsen, Forester and biomass procurement officer, DONG Energy,
Bioenergy and Thermal Power
PARTNERS
Collaboration for sustainable solutions: DONG Energy is
collaborating with peer companies, suppliers, and independent
auditor NEPCon through an industry-led partnership initiative
to promote the development of resilient and sustainable woody
biomass supply chains.
Renewable energy is a critical part of reducing global carbon
emissions and facilitating the transition to a low-carbon economy. DONG Energy wants to lead the energy transformation
and believes sustainable energy can assist societies to develop
and thrive without compromising the health of our planet.
Aim: To document regulatory compliance and promote sustainable biomass supply chains that contribute to a low-carbon
economy.
Since 2006, DONG Energy has reduced its coal consumption by
73% by reducing capacity and converting its central power
plants into multi-fuel plants and replacing coal with sustainable
solid biomass. This includes sustainable wood pellets and chips
made mainly from residue products such as twigs, branches,
and sawdust. Since 2006, DONG Energy has achieved a 52%
reduction in its CO2 emissions from its total power and heat
generation. DONG Energy now aims to phase out coal completely
and achieve CO2 reductions of 96% by 2023.
Approach: Proactive engagement of biomass suppliers to
achieve certification through industry collaborative initiatives.
Location: The Baltics and Russia.
Background: The Baltics and Russia are increasing biomass production capacities and are lead exporters of woody biomass to
Denmark.
Why this case: This case demonstrates the importance of
co-creating solutions to systemic sustainability challenges. DONG
Energy has had to overcome the challenge of a lack of common
European regulation for sustainable, solid biomass production
and to reach key suppliers. The challenge required a collaborative approach to move forward.
DONG Energy wants to lead the
energy transformation and believes
sustainable energy can allow
societies to develop and thrive
without compromising the health
of our planet.
To reach this goal it is essential that
biomass be sustainable. DONG Energy
wants to ensure:
• Regeneration of forest stands,
• Stable or increasing carbon stock in forests,
• Inventoried and protected ecosystems and biodiversity,
• Respect for social and labour rights.
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The cross-border collaboration between industry, biomass suppliers, and different kinds of stakeholders drives structural progress in improving sustainability performance and generating
positive outcomes for societies, the environment, and
business.
SUSTAINABLE BIOMASS PARTNERSHIP (SBP)
In 2013, DONG Energy and other energy companies came together to address the lack of common European regulation and
co-developed, based on all existing national requirements and
available experience, sustainability criteria for biomass
sourcing, the Sustainable Biomass Partnership (SBP). The SBP
was developed to complement existing certification schemes
such as FSC® through a comprehensive process, which included
stakeholder hearings and consultation with key experts.
Since 2015, SBP has provided a certification system that allows
biomass operating companies to meet the increasing demand
for green energy while demonstrating compliance with regulatory and sustainability requirements associated with the production of woody biomass. One feature of SBP is that greenhouse
gas emissions from production and transport throughout the
supply chain are documented, reported, and audited.
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PROMOTING SUSTAINABLE BIOMASS PRODUCTION
The growth and impact of the SBP initiative demonstrate a clear
desire among companies and stakeholders for coordinated
action to drive positive change on the ground.
“The introduction of the SBP has promoted sustainable approaches to forest management and biomass production. The
demand for SBP-certified biomass has resulted in the mapping
of key biodiversity areas in Latvia and multi-stakeholder country
assessments in the Baltics, Denmark, and Portugal. It is also
driving more producers to achieve FSC certification,” says Peter
Kofod Kristensen, Lead Sustainability Advisor, Bioenergy and
Thermal Power.
WORKING COLLABORATIVELY
The expansion of SBP into key biomass production areas was
only possible through the collaborative efforts from across the
biomass value chain. For example, CM Biomass, a large Danish
commodity trader, invested extensive time and effort in helping
many biomass producers understand the importance of sustainable production and achieve SBP certification.
Since then, DONG Energy has introduced the SBP to its
suppliers. The certification entails:
• An assessment of suppliers’ compliance with applicable
sustainability requirements; the assessment is performed by an independent certification body, NEPCon; suppliers
receive certification only if they meet the requirements;
• An annual surveillance audit by NEPCon to ensure that
suppliers continue to comply with all sustainability requirements;
• Recertification every five years based on a new assessment.
In 2013, DONG Energy and other energy companies came
together to address the lack of common European regulation
and co-developed, based on all existing national requirements
and available experience, sustainability criteria for biomass
sourcing, the Sustainable Biomass Partnership (SBP).
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A FUTURE PERSPECTIVE ON
ETHICAL TRADE
”State of Ethical Trading 2016” reveals that cross-sector collaboration on ethical
dilemmas is gaining traction across the DIEH member base. Companies,
NGOs, business associations, public institutions, and trade unions are coming
together to discuss common solutions to create sustainable development in
global supply chains.
STATE OF ETHICAL TRADING HIGHLIGHTS
With the recent legislation and guidelines promoting supply
chain responsibility, it is impossible to evade ethical trade if companies and organisations wish to maintain their “license to
operate.” Among other things, the subject of human rights due
diligence is increasingly on the agenda, and top-level involvement is rising, with 63% of top management closely engaged
in efforts related to ethical trade. In addition, 46% of DIEH
members report that top management have allocated funds in
the budget for ethical trade.
Investors and the public sector have also begun to recognise
their role in ethical trade. The influence that public buyers can
exert on ethical procurement practices is substantial. However,
too often price remains the determining factor in the buying
process, a practice that especially affects SMEs at home and
abroad. An emphasis on price alone prevents them from initiating ethical-trade practices on a scale similar to larger Danish
companies and suppliers. Although they are aware of and wish
to address the ethical challenges that exist across their supply chains, they are often faced with financial-resource
constraints.
Moving forward, responsible buying practices will become more
significant as companies and organisations increase their awareness of the positive and negative impacts of their purchasing
processes. Already, they rely less on social audits as a stand-alone
check in assessing their ethical trade practices. Instead, they are
focusing on building long-term relationships with suppliers as a
way of integrating ethical trade in global supply chains.
The SDGs also present opportunities for companies and organisations to organise their CSR programmes around the SDG
framework. Twenty-two per cent of DIEH members have already
integrated SDGs into their ethical-trade strategies. We look
forward to facilitating a greater knowledge exchange about
concrete actions and results related to SDGs with our members
and the business community.
Thank you for reading.
The Danish Ethical Trading Initiative is
a multi-stakeholder alliance that strives
to develop tangible improvements in
global value chains.
We gather companies, NGOs, trade
unions, business associations and
public institutions; and support our
members through a unique network,
tools and concrete solutions. At the
same time, we work to reinforce
support for ethical trade across the
public domain.
Dansk Initiativ for Etisk Handel
Overgaden Oven vandet 10. st
1415 København K
www.dieh.dk