In this Insights piece, Julie Schindall, our Director of Responsible Sourcing and Responsible Investment, distils key takeaways from recent projects and conversations she has led that clarify how voluntary sustainability standards can – and cannot – help businesses practice effective human rights and environmental due diligence.
(Not) another conference about voluntary sustainability standards!
How many times are we, as a sector, going to talk about voluntary sustainability standards? How many studies are we going to have, how many assessments, how many conferences, how many harmonisation exercises?
The minerals sector (and other sectors as well) has invested a huge amount of resources into voluntary sustainability standards for well over a decade. And voluntary sustainability standards play a role in many businesses’ human rights and environmental due diligence. But we continue to see studies, assessments, conferences and guidance on the use of these standards for due diligence. Why? Because their use remains a (sometimes major) part of due diligence for many businesses – yet they have limitations, some of which are significant. | The German Sector Dialogues have provided a platform for exchange and guidance on this topic for some time, which Levin Sources has supported, including through our guidance about going beyond audits.
Are businesses retrenching to lagging practices?
The current increase of pressure on business to conduct human rights and environmental due diligence – driven by regulations, not least in Europe – seems to be triggering a retrenchment – a backpedalling – by some (maybe many) businesses on meaningful due diligence.
Speaking with experienced, passionate sustainability practitioners, civil society representatives and trade unionists, I hear great distress and frustration that we’re “back in 2013”. I consistently hear from practitioners within businesses that the business is reverting to reliance on tickbox exercises like low-quality supplier questionnaires and audits. That companies are doubling down on the ‘command and control’ model rather than the ‘engagement’ model with their supply chain.
Reaching a tipping point on due diligence
As more functions within the business pay attention to due diligence because of regulations, we’re seeing a tipping point on due diligence – and the use of voluntary sustainability standards appears to be a significant differentiator of meaningful or not meaningful practice. Will the use of these standards tip us into meaningful due diligence that improves outcomes for affected people and environments? Or will it yank us back to practices that tick a box but fail to meet the spirit and purpose of global norms and the new crop of due diligence regulations?
Achieving the ‘positive tip’
Wrapping up my moderation of an event on voluntary standards on November 29 in Berlin, convened by the German Sector Dialogues and the Ministry for Labour and Social Affairs, I observed key factors, surfaced through our exchanges, that could represent a pathway toward meaningful due diligence. It hinges on two key elements:
- The utility of voluntary sustainability standards should be recognised but not distorted, exaggerated, or misconstrued. For instance, too many businesses use auditing and certification schemes (the core of many voluntary sustainability standards) as nearly their sole due diligence tool. The necessity of ‘putting standards in their place’ and not outsourcing due diligence to schemes is hardly a new position and is reflected in guidance and regulations from the OECD and the European Union, among others. In addition, the German Federal Office for Economic Affairs and Export Control (BAFA) has recently released helpful guidance on the use of voluntary standards and schemes for due diligence, making very clear that businesses must carefully ascertain the strengths and limitations of the standard(s) they want to use, and not externalise their due diligence to standards. The guidance discusses nine common limitations of schemes and provides a helpful set of questions to support businesses’ evaluation of schemes’ utility. | See BAFA guidance (questions on pages 8-9). Currently available in German only
- Voluntary sustainability standards must achieve a high degree of credibility. What is credibility? The BAFA guidance and OECD analysis from late 2024 are two recent examples that discuss factors that make a standard credible for use. At the core of credibility is buy-in for the utility of the standard by all relevant stakeholders – and the most important stakeholder group are affected people themselves. How does a standard achieve credibility through the integration of affected people’s perspectives? These perspectives must be integrated at all levels of the standard: in the standard’s governance, in the development of its content and requirements, in its implementation, in decision-making, in corrective actions. To put it plainly, if we do not integrate the perspectives of affected people across due diligence practice, we have not performed due diligence. | Read more about how our 3-year European project on due diligence focuses on the centrality of affected people in due diligence.
Perhaps it is excessively optimistic (in the room on November 29, I saw a mix of hopeful and frustrated interactions), but if we focus on these key factors, we may see a pathway to a ‘positive tip’.
If this tip can become reality – meaning if voluntary sustainability standards are seen for what they are (not more and not less) and if, characterised by strong credibility, they become a means to build trust with affected people – then there is a potential for these standards to be, collectively, much more meaningful in due diligence. That potential, if realised, would open a door to a world beyond tickbox questionnaires and audit exercises. A world where collaborations with affected people tackle systemic challenges and overall lead to responsible, resilient, rights-respecting business conduct – which is in all of our interests.
This article is an adaptation from closing remarks given by Julie Schindall during her moderation of “Voluntary Sustainability Standards – Understanding Strengths and Weaknesses for Human Rights Due Diligence,” convened by the German Federal Ministry of Labour and Social Affairs and the German Sector Dialogues on 29 November 2024 in Berlin.
