What Standards can achieve

While risk-based due diligence processes have to be implemented by companies themselves, sustainability standards can still provide assistance with this implementation.

What are sustainability standards? Voluntary sustainability standards (shortened to "standards" in the following) are largely non-governmental instruments for more sustainable management in companies’ own operations and along the supply chain. They include labels such as Fairtrade or SA8000, as well as member initiatives like amfori BSCI or the Fair Labour Association.

What is required? Standards define social, environmental and/or economic requirements for companies or products which must be fulfilled or reinforced. Some of these standards follow international frameworks, e.g. the ILO Declaration on Fundamental Principles and Rights at Work, the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises.

What do standards offer? Most standards have a secretariat and offer various services to their members or customers, e.g. certifications, platforms for dialogue, or support in production countries.

Who is behind these standards? The governance system of a standard can be managed by one or more stakeholders, with activities ranging from internal company standards to industry-wide initiatives and multi-stakeholder initiatives.

Certification and participation-based standards

In order to classify standards you need to know what approach is being taken. We can differentiate between certification-based and participation-based standards:

Certification-based standards (on-site audits) review and confirm compliance with the requirements the standard has set for products (e.g. cotton), processes, services, locations (e.g. factories), the entire company or the entire supply chain ("chain of custody").

Participation-based standards (multi-stakeholder partnerships, industry initiatives) promote dialogue, joint projects, or capacity building in companies and along the value chain. As member-led initiatives, they require active participation from companies and other groups of stakeholders (e.g. NGOs, trade unions, governments and academia). Members generally commit to comply with certain requirements or a code of conduct. Actual implementation of the requirements is largely down to the member companies and is not necessarily reviewed using any sort of standardised mechanism.

The Standards Compass contains both types of standards. In practice, standards often follow a combination of both approaches in their activities, as visualised here:

Determine the status quo

• Use existing overviews or enquire internally as to whether your company has already come into contact with standards (e.g. EcoVadis, FSC or SMETA) either directly or indirectly via business partners or external enquiries. You might be able to get information on this from Purchasing, Quality Management or Senior Management, for example.
• Enter an exchange with colleagues from different departments to create an overview of existing standards within your company and among your business partners, or expand on existing overviews, divided into certification and participation-based standards as far as possible. Make sure you also keep an eye on what standards have been requested or used in the past. That way you can get an initial overview of standards in the context of your company.

Consider your options

• If your company is using standards, ask what the primary motivations were behind the choice of standards – e.g. was it something that was stipulated by a major client or was the decision made independently, and if so what criteria was this based on?
• Even if your company has not used any standards yet, it is also worth identifying the reasons why  – has it been seen as not beneficial or is there limited staff or budget?
• Check whether previous reasons still hold up considering the increasing demands on sustainable supply chain management.

Make a decision

• Come to an agreement within the company and decide whether you are going to actively engage in one or more initiatives and/or whether you are going to aim to get yourselves or your suppliers certified.
• When making your decision, think about what standards can achieve in a due diligence process (see Supporting the due diligence process) and what they can't achieve (see Identifying limitations).
• Use the Standards Tool to find and compare standards. The Compare standards section below offers an introduction.
   
• Tip: The Helpdesk on Business & Human Rights can offer advice on any questions about approaching and implementing due diligence.

Standards have widely spread since the 1990s as a way of helping companies with certain sustainability activities in their own area of business and along the value chain in light of the regulatory loopholes and lack of governmental oversight in production countries. Today, there are countless standards with differing approaches (certification/participation-based). For example, standards can differ in terms of their governance system, their level of ambition, or their scope of application. Some standards focus on a single industry, while others target specific (or all) levels of the value chain. Different stakeholders from science, business or civil society are involved in developing standards depending on the governance system.

Not all standards are prepared for the increasing focus on a sustainable supply chain management system that is based on due diligence and aimed at the core business (for overarching criticism of standards, see Identifying limitations). As a result, some standards have adapted, or are considering adapting to meet these new requirements.

Discover what standards can offer in terms of due diligence processes in the Standards Tool!

Use the tool to get an overview of the extent to which specific standards contribute to the key aspects of the due diligence process. This will help you find the right standards for your needs – credible, ambitious and based on due diligence.

Situating standards within the due diligence process

• Use the Standards Tool to identify and compare which standards can best support you across the five phases of the due diligence process.
• Make sure that you have understood the requirements for the due diligence process. Not sure? Then navigate through the Due Diligence Compass first.
• Be aware that standards can only be used to support you in the due diligence process and do not relieve you of your individual responsibility (see Supporting the due diligence process).

Identify and review which standards  best meet your needs using the Tool:

• Use the Standards Tool to navigate the standards that are relevant to you in order to explore them in more detail, and to compare them:

• Download the results of your comparison as a PDF to give your own team or your superiors insight into the standards and help prepare them for the next steps.
• Use the Checklists to help you with next steps:
  
  Which standard is right for your company? A tool for decision-making
  How does a certification-based standard work? A catalogue of questions
• Tip: The Helpdesk on Business & Human Rights offers advice on all questions regarding approaching and implementing due diligence.

• Check whether there are suitable standards for your company's due diligence process and investigate the most effective way for you to implement them. Standards differ in terms of their focus (what sustainability aspects are covered, management systems etc.), the actions they stipulate (audit, certification, dialogue), and their governance systems.
• Use internal and external knowledge to get an overview and continuously check whether and to what extent the selected standards are effective and suitable for your purposes. You should also read up on Classifying standards and Compare standards. Use the Checklists to see exactly which steps you should take next.

The instructions below can help you structure this process in order to make a more realistic assessment of the standards and save time and money by making your implementation of them more focused and effective.

Not all standards cover the sustainability aspects, supply chain levels or management process requirements that are relevant for your due diligence process.

• Use the filter functions in the Standards Tool to limit your search according to a standard's approach, industry or supply chain level.
• Use the results to assess if and to what extent your selected standard can also help you implement your due diligence process. The Standards Tool can help your company determine whether the standard has certain requirements regarding effective management processes and whether it can support due diligence requirements.
• Check also other aspects such as whether the standard in question requires that participating or certified companies establish a Code of Conduct or Policy Statement which refers at least to the human rights established in the International Bill of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, or the UN Guiding Principles on Business and Human Rights. This will enable you to find out whether suppliers who are certified according to or participate in this kind of standard have acknowledged fundamental standards of human rights and whether they want to implement these with the help of a management system - and your support.
• You can also identify whether the standard offers an effective grievance mechanism and, if so, whether this mechanism is also accessible to impacted employees of suppliers and others who might have grievances (e.g. residents) and whether this leads or has led to concrete results for the people impacted. The mechanism should also be open to third parties (e.g. human rights advocates, NGOs). Provided the mechanism is implemented effectively, participating in this kind of external grievance procedure can be enormously beneficial to your company. It is worth checking, for example, whether standards have an adequate process in place for compensating the people impacted and resolving the violation in case of grievances concerning potential violations of human rights or labour and social standards. Companies need to pay attention to this because if there are any doubts surrounding this, it is then the company itself that must ensure that grievances are managed effectively and that the people impacted benefit from the remediation. However, the principle of proportionality must also be applied here. For more information on this, see also the section on Supporting the due diligence process.
  
  Guidelines on effectively managing grievances
   
• You should also identify whether the standard organisation offers supplier training. Standard organisations can make an important difference to improving working conditions or helping suppliers manage environmental impacts in producing countries better through trainings and capacity-building programmes.
• Check whether the standard also has requirements regarding fair purchase prices and practices that allow suppliers to pay their workers a living wage (in many countries, the legal minimum wage is far below a living wage) or that allow independent smallholder farmers and small-scale miners to achieve a liveable income.
• Then continue analysing the results of the assessment for the remaining components of your due diligence process.

Use our Due Diligence Compass if you still haven't identified yet what challenges you will face when it comes to implementing due diligence requirements.

Contact the Helpdesk on Business & Human Rights if you have any questions.

Another important indicator of the quality and credibility of a standard, besides the areas it covers and its scope, is its governance system.

Bringing in different stakeholders (e.g. from civil society) can have a positive impact on respecting the interests of affected parties (workers, neighbouring communities etc.). Involving stakeholders from developing and emerging countries, such as workers, local communities or their legitimate representatives can help identify needs in terms of capacity-building programmes, as well as measures for implementing environmental and social standards in production countries and also remediation and compensation measures.

Check whether the standard has a governance system that fulfils as many of the following requirements as possible:

• Investigate whether civil society or other experts (e.g. state actors, academia etc.) have been involved in the development of the standard, in addition to business.
• Check which stakeholders have a right to vote on important strategic decisions. Is the right to voice opinion restricted to (select) member companies, or are there also representatives from civil society, and especially (potentially) impacted parties, on committees?
• Enquire as to how the standard is being financed. Through company contributions or through other subsidies, e.g. from government agencies?
• Check whether and how private sector and civil society stakeholders from the Global South are involved in the processes.
• Assess how the standard is implemented. What goals do you need to achieve and within what timeframe? What enforcement measures are there? What happens if your supplier breaches the code of conduct? Does the standard stipulate initial measures to facilitate remediation and compensation? And what resources and trainings does the standard offer?
• Clarify what the reporting requirements are. What needs reporting and how often? What is shared with selected third parties, what is published?

Use Checklist How does a certification-based standard work? A catalogue of questions to help you plan a concrete review.

In many countries, governance (enforcement of political values) is weaker. This can for example take the form of inadequate state labour inspections. However, weaker governance can also affect the implementation of private standards with negative consequences for the implementation of labour standards, environmental standards and human rights. People may try to use bribery, to influence the results of audits and certifications.

The following points offer guidance on how to ask the right questions and better assess the likelihood of corruption.

• Look at how clear the rules are on dealing with breaches of the policies contained in the standards.
• Check how transparent decision-making processes are and which stakeholders have the right to voice opinion and make decisions here.
• Check what regulations auditors have to follow. What does the audit process look like? Are audits performed without notice? How are quality and objectivity ensured? How are gifts handled?
• Find out what requirements there are to remedy and improve in the event of a breach of rules and how these requirements are enforced. Is the focus here on a cooperative approach or the comply and sanction approach?

• Investigate whether there is a clear and comprehensible process for awarding labels and certificates or what conditions exist for revoking these if it transpires that these were obtained due to irregularities or corruption.

• Use our Checklists as guidelines on questions to ask the owner of the standard regarding their audit and certification process.

Identifying the limits of audits

Many systems of standards are based on audits that verify compliance with the sustainability criteria of the standard.

Potential uses: Audits with strict quality and accountability criteria are suited to verifying what policies and processes a supplier has established and whether they are complying with these.

"Blind spots": Many human rights violations are often very difficult or even impossible for audits to uncover. It is not always clear at first glance how effectively the specifications of a standard are actually being implemented. Audits are a snapshot. Therefore it is hard to identify deep, structural problems such as gender-based violence or discrimination or price and deadline pressure that comes from the buyer and dramatically increases the risk of (unpaid) overtime, loss of wages and unacceptable working conditions. There might also be certain issues that are not identified as risks.

Susceptibility to fraud: There are countless examples of fraud in audits (even unannounced audits), such as when illegal workers are hidden during the audit or protective clothing is only handed out during an audit. The risk of conflicts of interest is high – especially when the company being audited is also the one paying for the audit. The workers and worker committees that are interviewed by auditors are sometimes pre-selected or made up by company management. It is therefore important not to blindly rely on audits alone, or on standards based on the audit model.

Neglecting supplier relationships: Audit systems tend to only shed light on the business being certified, without considering the important role of the companies purchasing from them. As a result, while business customers can make a crucial difference to improvements at the supplier, they can also undermine progress. If an audit system does not require these purchasing companies to make any active contribution to solving the problem (by for example eradicating problematic business models and procurement practices), the standard will be stuck using a simple comply and sanction approach.

Stakeholder involvement: One of the challenges in using the audit and certification approach is effectively and reliably involving workers, communities, human rights advocates and other stakeholders in the development, audit and decision-making processes. Involving these stakeholders systematically and proactively can help strengthen the due diligence process – from risk analysis, to designing and implementing preventive and remedial measures, all the way to compensation.

The following points will help you to better identify the limits of audits.

• Use the Standards Tool to learn how individual standards contribute to your due diligence processes and what your company has to do itself.

• Check what activities each standard focuses on and what approach is used. Are suppliers given long-term support in the form of training and capacity-building programmes and requirements for fair procurement and pricing policies (cooperative approach), or does the standard focus on assessing the current situation (comply and sanction approach)?

• Consider how detailed the documentation of audit results is. Is it simply a checklist or are there spaces for comments and summaries that offer you a deeper insight into the results of the audit?
• Find out how frequently suppliers are audited, how long the audits themselves take (one day is often not enough to cover all relevant aspects) and how corrective action plans are monitored.
• Check whether and how workers are interviewed as part of the audit. How are these workers selected? Are conversations held on the factory sites or externally (e.g. at workers' homes)? What opportunities do workers have for contacting the auditors in confidence? What is done to ensure that workers do not have to fear negative consequences from having conversations or getting in touch with auditors? Conversations with workers provide an important perspective on the actual situation locally.
• Look at what is done with the results afterwards. Is it possible for you to contact the responsible auditor in case you have follow-up questions?

Use the Standards Tool to help you choose the right standard.