Conduct a supply chain risk assessment and action plan

Mapping supply chains does not necessarily imply that an Owner is responsible for all impacts and risks associated with every entity in the chain. As stated in the UN Guiding Principles on Business and Human Rights, "where business enterprises have large numbers of entities in their value chains, it may be unreasonably difficult to conduct due diligence for adverse human rights impacts across them all. If so, business enterprises should identify general areas where the risk of adverse human rights impacts is more significant, whether due to certain suppliers' or clients' operating context, the particular operations, products, or services involved, or other relevant considerations and prioritize those for human rights due diligence."

Step-by-step guidance for identifying high-priority human rights risks in supply chains:

Step 1: Supply Chain Mapping

• Begin by listing all agents, vendors, producers, manufacturers, distributors, contractors, or relevant entities (Suppliers) involved in your supply chain. This can be achieved through the following:
  • Requiring Tier 1 Suppliers to list their Tier 2 and so on as well as each Supplier listing products and materials to be sourced as part of the project
  • Using supply chain mapping software that has database connections to shipping bills of lading or other technology innovations
  • Third-party supply chain mapping entity
• Categorize suppliers based on tiers: Tier 1 (direct suppliers), Tier 2 (suppliers of Tier 1), and so on.
• Document the location, products/services provided, and scale of operation for each supplier.
• Map all specified products and materials in your supply chain, especially beyond Tier 3, as they might pose a high risk. By doing so, you can identify and include Suppliers linked to these high-risk items on your map.

Step 2: Impacted Party Engagement (where possible)

• Identify impacted parties within each tier of your supply chain.
• Prioritize engagement with vulnerable groups within these tiers.
• Use surveys, interviews, and on-site visits to gather insights on potential human rights concerns.

Step 3: Comprehensive Rights Assessment

• Identify and list all potential human rights risks using any of the following methods:
  • Analyze impacted party engagement results
  • Consult a third-party expert in human rights assessment
  • Utilize a software application that identifies human rights risks in supply chains (see Guidance below)
  • Conduct desktop research using materials lists (see Guidance below), official databases, and other open-source intelligence resources

Step 4: Determine severity of Impact

• Number of people affected (scope) is given a score of 1 to 3 where:
  • 3 = >20% total population in impact area or >50% identifiable group
  • 2 = >10% total population or 11-49% identifiable group
  • 1 = >5% total population or <10% identifiable group
• Severity of issue (scale) is given a score of 1 to 3 where:
  • 3 = Will cause death or adverse health effects that could lead to significant reduction in quality of life and/or longevity
  • 2 = A tangible human right infringement of access to basic life necessities (including education, livelihood, etc.)
  • 1 = all other impacts
• Remediability (whether the consequence can be reversed) is given a score of 1 to 3 where:
  • 3 = difficult
  • 2 = moderate
  • 1 = easy

Score each impact by adding scores for each aspect of Severity. A score of 3 is considered low severity. A score of 4 is considered medium severity. A score of 5 or higher for any impact is considered high severity.

Step 5: Assign an attribution level (connection to company)

• Directly caused = high – the actions of the Owner alone are sufficient to cause the negative impact
• Contributes = medium – the actions of the Owner lead to or create incentive for another entity to cause the negative impact
• Directly linked = low – the Owner has a direct and active involvement in the impact, either through its own actions or through its business relationships

Step 6: Risk Prioritization

• Plot each human rights issue on an x-y axes matrix where impact is on the y-axis with high at the top and low at the bottom, and attribution (connection to company) is on the x-axis with high on the right and low on the left. Use the following model to determine if plotted points fall into the red, which are high-priority risks.

Owner should ensure reasonable policy coverage of all high-priority human rights issues.

Policy Development

Establish clear policies that address high-priority human rights issues identified through the Arc exercise.

Steps:

1. Examine existing company policies to identify gaps related to high-priority human rights issues.
2. Engage with internal and external impacted parties to gather insights and recommendations for policy formulation.
3. Develop clear and comprehensive policies addressing each high-priority issue.
4. Seek approval from senior management or the board for the newly drafted policies.
5. Ensure that all employees, suppliers, and relevant impacted parties are aware of and understand the new policies.

Process Implementation

Implement internal controls and processes to prevent and mitigate potential human rights abuses.

Steps:

1. For each high-priority risk identified, develop a specific mitigation plan. This should detail the actions to be taken, responsible parties, timelines, and expected outcomes.
2. Develop and implement training programs on human rights best practices for employees, especially those in high-risk areas.
3. Regularly engage with impacted parties, including local communities and NGOs, to gather feedback on company operations.
4. Implement safeguards, such as identity document checks for new hires, to prevent issues like child labor.
5. Regularly review and update processes based on feedback and changing circumstances.

• Bamboo (furnishings, construction materials)
• Bricks
• Calcium carbonate (limestone)
• Carpets
• Copper
• Cotton (textiles, furnishings)
• Electronics (integrated technology solutions)
• Glass
• Gold (electronic components, luxury fittings)
• Granite
• Gravel (crushed stones)
• Polysilicon (solar panels)
• Rubber
• Sandstone
• Sodium carbonate (soda ash)
• Steel
• Stones
• Tantalum ore (coltan) (electronics)
• Tin ore (cassiterite) (electronics)
• Textiles (interior furnishings)
• Timber
• Tungsten ore (wolframite) (electronics)