EU Publishes Draft Directive for Corporate Sustainability

Aligning with the UN Guiding Principles on Business and Human Rights, the European Commission has published guidance for member countries to develop corporate due diligence laws. When the directive is finalized, member countries will implement binding laws to promote responsible corporate behavior. These laws will require companies operating in Europe to implement due diligence strategies in their operations and value chains, including creating a due diligence system. 

A draft directive adopted by the European Commission provides guidelines to EU member states for the development of national corporate due diligence laws. The current guidance is a draft awaiting full European Parliament approval. However, Germany and Norway have both adopted corporate due diligence laws that have reporting requirements in 2023. Companies operating in Norway should review the Norwegian Transparency Act to determine if it applies to their business. Companies that operate in Germany should review the German Supply Chain Due Diligence Act to determine if it applies to their business. Requirements include the development of a supply chain human rights management system. Businesses will also be required to assess their human rights impact and conduct due diligence assessments (monitoring). 

Companies that do not already have a social responsibility and sustainability management system must develop a program with the required elements before the initial reporting periods. The first reports are required on June 30, 2023, in Norway and April 2023 in Germany. 

For over 20 years, UL Solutions has helped organizations from various sectors around the world implement international standards and assess, develop and improve effective HRDD policies and procedures. Our services are customized to meet your unique needs and provide a clear path to compliance.

Code of conduct, policies and program development

UL Solutions can help organizations establish and communicate human rights due diligence expectations to their suppliers and stakeholders and create a shared understanding from which informed decisions can be made. We can help develop new codes of conduct and policies or enhance existing ones. Additionally, we can help organizations develop program manuals, which govern program and due diligence execution and allow suppliers, vendors and staff to better understand and prepare for program execution and development.

Supply chain risk, research and due diligence systems

UL Solutions can support organizations’ human rights risk identification and risk analysis via the deployment and development of supplier self-assessment questionnaires. We also offer risk analysis tools that allow for the segmentation of low- and high-risk suppliers, empowering customers to tailor their due diligence approach appropriately. Customized risk research reports can be provided as desktop and/or field research services and can cover areas such as human rights risks tied to country, specific products, commodities and industry. We offer review and verification that management systems are in place to identify and react to human rights risks in the supply chain.

Audit programs

Where organizations intend to deploy supply chain audits to assess human rights practices in their supply chain, we can develop, customize and benchmark audit tools, report templates, grading matrix, and summary of findings to fit the organization’s needs. We can also carry out social labor audits, as well as audits that focus on specific risk areas (e.g., environmental, recruitment, foreign worker employment, forced labor and trafficking, and prison labor or industry, such as agriculture). Traceability and chain of custody audits investigate the source of raw materials used in a product.

Audit alternatives

Our services can help organizations establish programs to review and leverage existing human rights due diligence programs and supplier reports.

Improving supplier performance

UL Solutions offers a spectrum of education services addressing human rights. Trainings educate organizations and suppliers on topics critical to supply chain responsibility, helping key stakeholders learn about risks, understand definitions and key issues, identify risk indicators, address and remediate issues, and implement long-term management solutions. Our remediation and capacity-building services can help organizations improve human rights performance by engaging with organizations, suppliers and vendor management teams through on-site consultations and remote assistance to enhance knowledge and understanding of management systems. Where non-conformances in the supply chain are identified, we can support the review of corrective actions, validation of evidence provided by suppliers, as well as review of root cause analysis carried out by suppliers.