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SUPPLY CHAIN

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The update of the OECD Guidelines, completed in May 2011, intended to put up with the new globalised economic scenario, characterised by more complex models of supply, production, distribution and consumption and dominated by multinational corporations and by open cross-border supply chains of SMEs.

This scenario raises the international community in the face of major challenges no longer limited either to the national jurisdiction, nor to the mere enterprise perimeter: the search for appropriate responses to climate change, an effective system of promotion and protection of human rights and the overcoming of the economic and financial crisis through a new-found confidence in the markets and their sustainable management.

This has given rise to the development of policies and tools to help manage the impact of entrepreneurial activity on some core goods and values and to focus the company's relationship with its stakeholders, especially in the global supply chain, with respect to which the environmental and social standards are becoming increasingly widespread and stringent, with preventive and reactive functions.

On this basis, the new OECD Guidelines - which, it is worth remembering, are addressed to all enterprises, including SMEs - have introduced some important concepts:

  1.  the enterprise should avoid causing or contributing to adverse impacts on matters covered by the Guidelines (i.e.  on  persons, workers, environment compliance with law etc..) through their own activities, and address such impacts when they occur;
  2.  the enterprise should also seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship; the term ‘business relationship’ includes relationships with business partners, entities in the supply chain and any other non-State or State entities directly linked to its business operations, products or services.
  3. the enterprise should carry out risk-based due diligence, understood as the process, also included within broader enterprise risk management systems, through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts referred to in paragraphs (1) and (2) as an integral part of business decision-making and risk management systems;
  4. in addition, where practicable, the enterprise should encourage business partners, including suppliers and sub-contractors, to apply principles of responsible business conduct compatible with the Guidelines.

In the light of these new concepts, in 2011, the Italian NCP, has appointed the advisory firm KPMG to develop the Guidance for the due diligence in the supply chain (ITA), with the purpose of giving effect to the directions on due diligence already contained in the OECD tool, to offer to businesses - especially SMEs, given their difficulties in finding management tools adequate to their size - a guideline for the responsible management of the supply chain, which has a special importance in the processes and activities of internationalisation.

 

Textile Industry

On April 24, 2013 in Dhaka, Bangladesh, about 30 kilometers from the capital, Rana Plaza, a nine-story building that housed five apparel companies employing about three thousand people, almost all women, collapsed. As a result of this collapse, more than 700 people have died and about 2,500 were wounded, some of them very seriously.

 This incident has found strong echo among the national and international media and drew the attention of governments and international organizations on the importance of a correct approach to the issue of responsible conduct in the supply chain and business relationships.

On 26 and 27 June u.s. the tragedy has been the core issue of the works of the OECD Global Forum on Responsible Business Conduct. In the presence of the Foreign Minister of Bangladesh Dipu Moni and the French Minister for Foreign Trade Nicole Bricq, immediate actions have been screened in response to the incident of Rana Plaza - the latest in a long series in Bangladesh and neighbouring countries - in particular focusing on work conditions, labor rights and the responsible management of the supply chain.

During the Forum, the Accord on Fire and Building Safety in Bangladesh has been presented, signed by 65 mostly European multinationals, which provides their financial commitments for the safety of the plants  and the training of workers, in collaboration with the trade unions. The Canadian and American companies, for their part, are turning to business-to-business agreements. It is also worth mentioning the Sustainable Compact for Bangladesh, which was launched on 8 July 2013 in Geneva by the EU and ILO.

For their part, the National Contact Points meeting on  June 24, 2013 signed a joint statement through which they are committed to consult with stakeholders and to support initiatives in line with the OECD Guidelines, paying particular attention to the international framework agreements and to the due diligence in the supply chain for the textile sector in order to prevent risks related to the conduct of economic activities.

The Italian NCP - with the approval of its Committee, July 17, 2013 - has developed and adopted an Action Plan on Bangladesh, with the aim of involving Italian companies in the textile sector having business relationships in this country in a process of analysis of the problems encountered in managing the global supply chain and of overview of the possible solutions and tools available and to encourage them to undertake / continue / increase the paths of social responsibility.

On December 10, 2013, at the Ministry of Economic Development - DGPIC in Rome, Via Molise, 2, the first meeting was held between the NCP and some companies in the sector, in the presence of Secretary Mr. Claudio De Vincenti.

The meeting took place in an climate  of open and constructive dialogue in which companies have highlighted the difficulties faced in meeting the challenges of globalisation and in operating in third countries without adequate institutional safeguards and regulations.

It has also been underlined the need to disseminate the knowledge of existing international instruments of on corporate responsibility and of private and institutional initiatives to prevent, manage and / or to remedy risks related to the economic activities.

Finally, as a next step, the NCP has announced its intention to cure an information / training session dedicated to all firms in the textile sector and open to other stakeholders (auditing firms, traders, consumers, etc.) in order to examine  the issue of due diligence in the value chain.

This meeting was followed by a meeting of the NCP with the institutes of advice and/or auditing, as privileged connoisseurs of the global competition (10 February 2014); a meeting with the NGOs (April 7) and a meeting with consumer groups (11 April).

 

Report on responsible business conduct in the textile and garment supply chain

On June 23, 2014, in Paris, on the occasion of the NCPs' annual meeting and of the OECD Global Forum on Responsible Business Conduct (OECD, 23-27 June 2014), the Italian NCP presented the"Report on responsible business conduct in the textile and garment supply chain. Recommendations of the Italian NCP on implementation of the OECD Guidelines for Multinational Enterprises".

The report is one of the espected outcomes  of the aforementioned "Action Plan on  Bangladesh" and has been presented by the Italian NCP  at the OECD  one year after the NCPs'j joint statement,as an important result of the efforts it carried out together with trade associations, trade unions, NGOs and other stakeholders. The report is, in fact, not just a report on the work done to date, but also one of the main outcomes of it. 

The report contains 24 recommendations addressing icompanies, both operating in Bangladesh, and more generally in the global textiles and clothing supply chain,to help improve the responsible management of the supply chain in accordance with the Guidelines. 

In addition to stating the recommendations, which are the core of the  Report, also the most critical aspects of the global supply chain in terms of respect for human rights are pressnted,therein, as detected with the help of businesses and stakeholders. 

 In the context of the OECD and of its works on responsible management of the supply chain of the textile and clothing sector the Report of the Italian NCP is noted as one of the main orientation and benchamrking tools for the sector.

Read the interview of the Italian NCP on "The Guardian" 

 


Governments of seven European Countries, including strongly recommend International Companies contribute to Rana Plaza Donors Trust Fund

Upon occasion of the  second Global Forum on Responsible Business Conduct an informal ministerial meeting reaffirmed the commitment of governments to work together to create an international environment characterided by responsible trade and sustainable development, working in particular on the supply chains of the textile and mining and stressed the importance of the OECD and the NCP in the field. The Government of Bangladesh and local businesses are encouraged, in turn, to make greater contributions to what has been done so far to compensate the workers and their families, but also to ensure an adequate  productive context that protects foreign investment from reputational risks.

In particular, seven European Governments including Italy, in the person of the Minister of Economic Development, Dr. Federica Guidi (in addition to France, Germany, Netherlands, United Kingdom, Spain and Denmark), have signed a declaration in which they recommend international companies contribute generously to the Rana Plaza Donors Trust Fund,set up to compensate victims of the accident in Bangladesh.

 Read the Declaration


 

 

Extractive Sector

In conflict- affected and high-risk areas areas of the world, the companies involved in mining and mineral trading are capable to generate income, growth and prosperity and to encourage local development, but are also likely to contribute to significant negative impacts including serious violations of human rights.

The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High- Risk Areas  suggests a series of measures to enterprises responsible for the management of global supply chains in the extractive sector, to help them to respect human rights and not to contribute to conflict through their activities.

Of this guide, the OECD has also developed two specific supplements, one that provides specific guidance on the due diligence for the supply chain in the areas of mining tin, tantalum and tungsten, and one for the gold mining industry. Other supplements will be added in the future.

The "Due Diligence Guidance ..." was developed in collaboration with the International Conference of the Great Lakes Region, and adopted by the OECD in 2011. With the Declaration of Lusaka (December 2010), the governments of the Conference pledged to fight the illegal exploitation of natural resources in the region and endorsed a regional certification mechanism on the basis of the Guidance. The Guidance was also indicated by the United Nations Security Council as a benchmark for States promoting due diligence on the part of the processing industries, importers and consumers of mineral products from the Democratic Republic of Congo, in order to exclude armed groups from the supply chain. In 2012, the Guidance has been recognised by the US Securities and Exchange Commission as an international framework of reference for the due diligence measures imposed by US law for minerals from the Great Lakes. Finally, the proposal for a Regulation of the European Parliament and of the Council for a voluntary due dilgence self-certification for responsible importers in the supply chain of minerals from conflict zones (COM (2014) 111 final) indicates the OECD Guidance as a due diligence paradigm  to refer to.

The OECD is also working to ensure the widest possible dissemination of the Guidances and their effective use by companies along with trade associations, financial institutions and civil society organizations.

The program for the jewelery industry, in particular, launched in 2013, brings together key players in the supply chain and aims to promote constructive dialogue and mutual understanding on the practices of due diligence and the challenges related to the supply chain. It focuses, in particular - but not exclusively - on the Great Lakes Region in Africa. It is a voluntary exercise, with the expected duration of 12 months, with possibility of extension.

The Italian NCP, having developed the Guidance for the due diligence in the supply chain (ITA) collaborated with Feralpi ( international steel group specialised in the production of steel service building) and Assofermet (Association of breakers) for the development  of a guidance for the due diligence in the steel supply chain (ITA) and with Confindustria - Federorafi and the responsible Jewellery Council (non-profit international organization that promotes responsible practices in the field of gold and diamonds, from extraction to sale) for the construction of a similar instrument in the gold sector.

 

More in this category: NATIONAL ACTION PLAN ON CSR »