Create mechanisms for a learning system
In the National Action Plan on Business and Human Rights (NAP), the German government formulates its expectations for companies to respect corporate due diligence along the value chain. This is defined in five core elements (in German only):
- a human rights policy statement
- procedures for the identification of actual or potential adverse impact on human rights
- measures to ward off potentially adverse impacts and review of the effectiveness of these measures
- a grievance mechanism
Starting point: What are the requirements?
- Assess existing complaints channels to gather information about the groups of people identified in the risk analysis that are (potentially) affected by negative impacts on human rights and to check and potentially expand existing processes
Target Group: Who should participate?
- All departments through which (potentially) affected persons can get in touch with your company.
- The HR department, the works council, the legal department and departments that are responsible for customer relations and service.
- Management to ensure support for processing complaints and further development of the management system
- The communication department to handle external reporting
Result: What is the goal?
- To establish a grievance mechanism to improve the situation for affected persons if your company has caused or contributed to negative effects
- To integrate a grievance mechanism into the management process
- To establish processes that make use of previous findings - successes and opportunities for improvement - in order to continuously improve the due diligence processes in the company.
Identify target groups
Based on the risk analysis, determine the possible users of your grievance mechanisms and record their concerns.
Basic understanding: What to pay attention to?
Grievance and remediation mechanisms
Grievance and remediation mechanisms are crucial for a well-working due diligence process in your company.
In the beginning, it is important to better understand the terms “grievance” and “remediation”:
If something goes wrong in the company or is not well managed and people are negatively affected by it, there must be opportunities to express complaints.
The term “grievance” and the corresponding systems are already established in most companies. In general, they relate to their employees and customers. Think, for example, of the works council, employee surveys or your compliance hotline.
In order to adequately manage sustainability risks in the value chain, the term must be expanded to include all groups of people who are (potentially) negatively affected by your company's activities or business relationships. The same logic of connecting your company to sustainability impacts applies here as it does in phase 3 (see step 3.3 Derive measures from risk management).
It is recommended to follow a pragmatic approach. As a smaller company, you can achieve a lot if you gradually expand existing mechanisms to your direct suppliers and create a central contact option on your website for third parties.
Grievance mechanisms in the context of sustainable supply chain management are not a substitute for legal proceedings, but should be seen as a supplement, aimed at the proactive management of risks and conflicts. Grievance mechanisms function in the sense of an "early warning system" to uncover problems wherever they arise and can be remedied immediately.
If your company has caused or contributed to a negative impact, you need to address the issue of remediation. There is no one size fits all solution. Rather the process could include an apology, financial compensation, or preventative action. What is adequate is based on two criteria:
- The method of remediation should be worked out from the perspective of those affected.
- The method of remediation should be based on the results of your risk analysis and the severity of the negative impact.
Based on the explanations, highlight the specific added value of a grievance and remediation mechanism for your company. This will prevent your colleagues from associating it with a mechanism to blame your company, but instead with the creation of an information and improvement mechanism.
The added value can manifest itself in that your company...
- detects negative developments at an early stage and avoids them, averting conflicts that are costly and damaging to the company's reputation.
- improves its relationships with its neighbours at the production site due to the willingness to engage in an open and honest dialogue.
- deals constructively with grievances, and strengthens the culture of continuous learning.
Hint: Emphasising the added value of the grievance mechanism for your company
Bringing your own employees on board is of utmost importance in this step of the Due Diligence Compass.
The guideline "Understanding and implementing human rights-based grievance mechanisms" from the Global Compact Network Germany (in German only) provides comprehensive information on how companies can deal with human rights complaints. In addition to concrete assistance in establishing a grievance and remediation mechanism, the guide provides reasons why such a mechanism represents added value for companies. Use the information for communication in your company.
The DGCN's information portal mr-sorgfalt.de contains examples from companies and a webinar on the management of human rights complaints and the creation of access to remedial measures.
Implementation: How to proceed?
Identifying possible users of a grievance mechanism
- Even though you will identify many (possible) complainants along your value chain, especially at the beginning of the systematic analysis of complaints, you should design this exercise on a broad basis.
- A prioritisation is foreseen but should only take place afterwards.
- Draw on the results of your risk analysis and list the groups of people who could be affected by your company's business activities.
- It is useful to distinguish between groups of people in your company and third parties who cannot directly be assigned to your company.
- To enable you to revise or set up suitable complaint channels in the following steps, it is helpful to determine where the different groups are located at this point. This will help you to better integrate the cultural context.
- Here, too, you can draw on the results of your risk analysis:
- Groups of people in your company
- Internal employees
- External employees (service providers such as cleaning or security staff)
- Neighbours of your production sites
- Groups of people outside your company
- Employees at direct and upstream suppliers
- Neighbours of the production sites
- Affected individuals in the broader sense (e.g. through environmental impacts that go beyond local impacts)
- Check whether there are particularly vulnerable groups among the (potentially) affected persons who need special protection:
- Migrant workers, (labour) migrants, people on the run
- Temporary workers, seasonal and atypical workers
- Women, children and young people
- People with physical or mental disabilities
- People of different sexual orientations
- Ethnic or religious minorities
- Indigenous groups
- Unskilled/non-literate people
- People in extreme poverty
Prioritising specific groups of people
- As with the risk analysis, it is legitimate for SMEs to prioritize and focus on specific groups of people first.
- It is important that prioritization only takes place once you have gained an overview of all groups of people who may be affected by the business activities of your company.
- Expand the circle of groups of people step by step over the course of the continuous improvement in the examination of corporate due diligence.
- You can use the results of your risk analysis. When doing so, the following applies: The greater the human rights risk for certain people and the closer your company's relationship with these people, the greater the responsibility to set up a complaints channel that covers environmental and human rights risks in your own company and along your company's entire value chain.
Assessing possible grievances:
- For the identified groups of people, record which grievances could be directed to you.
- It is important that you also record potential complaints so that you can establish a mechanism to proactively cover a wide range of issues and groups of people and provide suitable complaint channels.
- A complaint issue could, for instance, be the lack of a limit on working hours, which is complained about by your own employees or a supplier.
- Another example is a harmful environmental impact, such as the unauthorized disposal of chemicals and the associated contamination of the groundwater at a production site, which endangers the health of the surrounding residents.
- You should document the results of the research.
- How you visualise the results is up to you.
- However, the visualisation should be designed so that it helps you assign existing complaint channels to the various groups in the next step. This makes it easier for you to identify gaps and determine where there is need for improvement.
Compare and continuously improve grievance mechanisms
Many companies already have formal or informal grievance mechanisms in place, especially for their own employees. You should therefore record existing complaint channels, check them for their effectiveness and target group orientation, and expand them if revision is required.
Basic understanding: What to pay attention to?
Reviewing existing mechanisms
All key groups of people who were identified in the previous step of the Due Diligence Compass should have access to the grievance mechanism. In addition, it should be possible to record all possible relevant complaints about human rights violations and environmental damage.
Perhaps the company already has a compliance system, but it has so far not actually identified any complaints about human rights violations because the employees have not yet received sufficient training. It is also advisable to gradually establish an approach that will help you check the effectiveness of existing mechanisms based on defined criteria.
Building on existing mechanisms
Building on existing mechanisms and establishing new mechanisms only when needed saves resources and you can usually build on established processes. Also check whether there are mechanisms at the association level or within multi-stakeholder initiatives that you can use.
Proceeding step by step
You are not expected to immediately identify and improve all gaps in existing mechanisms. As in phase 3 Take measures, develop an action plan to help you get started. Start with the central channel, especially if you have multiple complaint channels. Proceed in a risk-based manner and address those groups of people for whom the risk of being affected by negative effects is greatest.
In the future, you should determine whether certain groups of people have access to grievance mechanisms outside your company (e.g. via business partners) and whether groups of people are neither recorded by your mechanism nor by that of another company in your value chain. The inventory can help to gradually close these knowledge gaps.
Implementation: How to proceed?
Capturing existing complaint channels:
- Capture the existing grievance mechanisms being used in your company.
- Are key groups of people covered by (informal) grievance mechanisms?
- Visualize the results from the first step. Usually channels such as hotlines, e-mail addresses, surveys among employees, ombudspersons, audit processes or stakeholder dialogues are already in use.
Hint: Complaint channels
The guideline Worth Listening – Understanding and Implementing Human Rights Grievance Management " lists complaint channels that you can use for a comparison:
- Hotline (complaints hotline for employees or affected individuals)
- Customer/compliance /ethics hotline/whistle-blower hotline
- Email address
- Hotlines in the value chain
- Suggestion box
- Open door policy
- General employee surveys
- Meetings with an explicit opportunity to address problems
- Work process meetings (shift handover)
- Audit processes (and interviews with employees)
- Stakeholder Dialogues/Stakeholder Engagement
- Designated contact person
- Arbitration Committee
- Labour union
- Works council
- Grievance systems via public bodies
- Sector or multi-stakeholder initiatives
Checking the effectiveness of existing grievance mechanisms:
- Ask the following questions: Are the existing mechanisms effective? How do you determine the effectiveness?
- Based on the comparison, it is helpful to check the effectiveness of the existing mechanisms in order to identify gaps and the need for action.
- Possible results:
- Not all relevant groups of people have access to an existing mechanism;
- Not all possible relevant grievance issues are covered; or
- It is not accessible to relevant groups due to language barriers and other restraints.
- In the beginning, concentrate on the central complaint channel in the company.
- If available, gradually take other complaint channels into consideration as well.
- Consider the following typical questions about effectiveness:
- Is the procedure carried out by staff that have sufficient experience and are familiar with the grievance procedure?
- Are potential users familiar with the process?
- Are the users informed about the progress of the procedure?
- Does your company develop solutions in the interests of affected persons?
Explanation: Criteria to determine the effectiveness of grievance mechanisms
The effectiveness of the grievance mechanism is guaranteed if it is legitimate, accessible, predictable, balanced, transparent, compatible with rights and a starting point for continuous learning. In addition, it should promote exchange and dialogue with those affected.
The NAP Business and Human Rights and the UN Guiding Principles on Business and Human Rights have defined eight criteria to determine the effectiveness of human rights grievance mechanisms. Use this as a checklist to help you focus and gradually improve your mechanism. As an SME, your grievance mechanism is not expected to meet all of the criteria right away.
Further information is available in the following guidelines:
- "Understanding and implementing human rights-based grievance mechanisms “; (in German only).
- MOC-A Tool Checklist for Effective Grievance Mechanisms by CSR Europe.
- Interpretive Guide of the Office of the High Commissioner for Human Rights (OHCHR) (p 63 ff)
- The Federal Ministry of Labour and Social Affairs’ background paper on " the Establishment of company and industry-wide complaint mechanisms” (in German only)
- Check the accessibility of the grievance procedure well. In practice, it has been found that this can be a frequent obstacle to the effectiveness of the procedure.
- Note: not receiving a complaint is not necessarily a sign of good supply chain management and a functioning grievance mechanism!
- Think about which access barriers could prevent different groups from using your central grievance mechanism and how to address these barriers.
- Is it unclear to certain groups of people how they can lodge a complaint?
- Does your company operate internationally and can groups of people not submit complaints in their language?
- Is there a lack of trust in the grievance mechanism?
- Choose pragmatic solutions to facilitate access, such as by graphically explaining the procedure of the grievance mechanism, disclosing processes that ensure confidentiality, or designing physical complaint channels so that they are protected from outside scrutiny.
Hint: Exemplary process of a complaints mechanism
DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH displays its complaints mechanism graphically:
Implementation support: Seeking exchange with external parties
An important requirement for the human rights grievance mechanisms is the regular exchange with the users of the mechanism. This helps ensure that the mechanism is accessible to them.
At the same time, the practical implementation is challenging and direct contact with (potential) users is usually not available, especially for companies with international supply chains.
In these cases, NGOs and sometimes researchers can be good mediators, as they are often in direct contact with (potentially) affected persons. They can help your company get a more complete picture of (potential) grievance issues from people outside your company.
The Helpdesk Business & Human Rights can help you identify suitable contacts in production countries. The Business and Human Rights Resource Centre (BHRRC) also offers a multilingual information platform to facilitate dialogue between civil society actors and support companies and thereby helping to remedy human rights abuses.
Identifying the need for action
- If you have identified gaps and areas where there is need for action (for example because not all relevant groups of people are covered via existing channels or because human rights issues are not (yet) adequately addressed in the company) the following steps can help to further develop the handling of grievances from groups of people from outside the company:
- Expanding and formalising informal channels:
- Especially in smaller companies, exchange with groups of people related to the company often takes place directly and informally.
- To increase the reach of your grievance mechanism, setting up a special email address or telephone number and communication possibilities on your own website can help.
- Fears that a well-known grievance mechanism will lead to a significant increase in complaints do not match up with practical experience.
- Checking industry solutions:
- The establishment of sustainability and human rights grievance mechanisms is increasingly being discussed at the industry level.
- Whether as a central or supplementary solution for your company – ask your industry association before you develop your own solutions.
- Developing remediation measures:
- When your company causes or contributes to human rights issues, it should develop or participate in remediation measures.
- Your HR and legal department as well as the works council will be familiar with basic remedial options – you can check whether these are transferable to other groups of people, such as the employees of your suppliers.
- The results of the risk analysis form the basis for the selection of suitable measures.
- Focus on making up for the negative impact on those affected.
- For instance: If you are dealing with the inadequate occupational health and safety conditions of suppliers, the focus can be on non-repetition by offering training and specifying occupational health and safety requirements in supplier contracts.
Explanation: The possible remedies
If your company has caused or contributed to human rights impacts, you are required to develop measures to redress and “remedy” the damage. This obligation is also incumbent on the state, which must take judicial, administrative, legislative or other measures to ensure that those affected by negative human rights effects receive help.
As a company, it is also your job to cooperate with the state and provide those affected with access to remedial measures. Based on the UN Guiding Principles for Business and Human Rights (Chapter III), remedial action can take the form of apologies, reimbursements, corrective action or compensation.
Hint: External support in dealing with grievances
When it comes to especially serious grievances, such as those related to child or forced labour, it is recommended to involve third parties. This can include contact with your industry association, but also the exchange with NGOs and consultancies.
The Helpdesk Business & Human Rights can help you identify suitable contacts.
Feedback results into the processes
So that your due diligence process can continuously develop, you should systematically record the complaints and feedback their findings. That way you can continuously improve your strategy, risk analysis, the measures taken, reporting as well as grievance management.
Implementation: How to proceed?
- Train employees to handle and evaluate grievances.
- First, your employees should look at grievances from the perspective of the (potentially) affected person.
- Even if your company questions and, if necessary, adjusts its own management processes in the company, the first concern should be how to help the (potentially) affected individuals.
- It is recommended to train employees to work out patterns from the grievances they receive so that your enterprise can identify negative developments as early as possible and take countermeasures.
- In addition, complaints can also provide substantive information that you can feedback directly into the risk analysis (phase 2). For example, if you receive more grievances or tips from certain countries or on specific sustainability issues.
Developing indicators to measure the implementation status:
- Most companies are still in the beginning stages when it comes to developing indicators.
- As an SME, keep the number of indicators low at the beginning to ensure that you can generate data and derive follow-up action from it.
- In addition, companies usually focus on output-based indicators that measure the effectiveness of the grievance mechanism and are easier to record.
Key performance indicators for due diligence
Implementation support: Indicators for the grievance mechanism
Here is a selection of indicators that you can collect to measure the implementation status of the grievance mechanism. The following selection is derived from the guideline "Understanding and implementing human rights-based grievance mechanisms“ (in German only).
Indicators that measure the effectiveness of the mechanism:
- Number of complaints the company has received over a period of time;
- Number of remedies;
- Proportion of positive responses from random surveys of relevant stakeholders or similar feedback systems with third parties.
Indicators that measure the impact of the grievance mechanism on the company as a whole:
- Complaints or feedback from stakeholders lead to changes in the guidelines, management processes or structures in the company.
Indicators that measure the benefits of the mechanism for the company:
- Grievances on the same subject are not submitted repeatedly
- Declining number of lost working days (e.g. due to illness)
Further information is available in the guide “Worth Listening – Understanding and implementing human rights grievance management”.
Improving exchange between departments and stakeholders / suppliers
- If your company offers several complaint channels, make sure to bring together the information from the various channels.
- This way, you can both identify patterns and make targeted improvements for those affected.
- For example: you can gradually bring improvement suggestions that you have developed for your own employees into the supply chain and in this way support suppliers. Support programs for companies are also available for this purpose.
Continuously improve the due diligence process
- Make the implementation of a robust management system an ongoing task in your company. As an SME, you are not expected to have effectively established all processes immediately. However, it is important that you get started and improve your due diligence processes step by step.
- Initiate discussions within your company as well as with suppliers, customers and other stakeholders in order to achieve further progress.
- Network with companies and other actors from the sustainability initiatives that are relevant to you in order to exchange experiences and achieve improvements in your value chain.
- Check whether findings such as audit reports or received complaints are also relevant for other steps.
- Use the findings of your grievance management to derive new measures, and to sharpen your management systems, for example regarding risk analysis.
- Use the results of a new risk analysis (see phase 2 Identify and evaluate risks) as a basis to check whether your grievance mechanism is accessible to all relevant stakeholders.
- During training, identify specific topics, which you want to continue working on with your supplier.
- A gradual improvement is possible if you learn to determine how the individual phases of the due diligence process interlock and how you can best utilize the existing knowledge inside and outside your company.
Complying with due diligence is a continuous improvement process. Use the Due Diligence Compass to gradually expand and deepen the scope of your activities in the five phases.
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