What is Due Diligence?

Due diligence is the effort required from companies to combat involvement in human rights abuses. The need for due diligence is included in the UN Guiding Principles (UNGPs) and The Organisation for Economic Co-operation and Development Guidelines (OECD).

This term is used more widely, for example for accounting research in acquisitions and mergers. If we look at it from the CSR perspective, due diligence is associated with human rights and the environment. Additionally, it is a permanent evaluation and responding to (potential) risks and violations in supply chains both in its own business operations and in its outsourcing of business activities. The risks for societies where companies actively engage in business activities are more central than its own risks and rights.

Why should you practice Due Diligence?

Companies have various reasons for purchasing in a socially responsible way:

  1. Reducing business risks: sustainable suppliers prevent damage to their reputation; liability claims and problems with deliveries.
  2. Increasing business opportunities: a CSR company that has its supply chain in order often has loyal suppliers, access to new markets (including government subsidies or contracts) and capital, competition advantage, fewer costs, and more satisfied customers.
  3. Increasing pressure and demand from clients and stakeholders for sustainable products and transparent processes.
  4. Helps to identify the mitigation measures that are necessary to reduce any environmental and social risks that are identified.
  5. Moral/ethical considerations.

How can SIM support you?

Due Diligence process support

SIM consultants help you in setting up your supply chain due diligence process, based on their experience with retail and producing organizations. This includes providing a framework that complies with international guidelines and is aligned with your organization and leading you through the steps.

Risk assessment support

SIM risk experts help you to conduct a risk assessment based on your portfolio of products to identify and set priorities for your due diligence.

Supplier risk scan

Based on your due diligence risk assessment or in the context of ad-hoc issue management, SIM supply chain analysts perform an initial risk scan on one or more suppliers. A custom questionnaire will be designed based on research by the SIM Knowledge Center, zooming in on possible issues and negative impacts relating to the specific sector or product. The risk scan provides a useful benchmark of suppliers delivering the same product, for buyers and sustainability managers to decide on follow-up action.

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