Governments increasingly expect businesses to carry out social and environmental due diligence in their operations and along their supply chains. They enforce and encourage this through a wide range of policies, including legislation and non-binding policy measures. Governments have shown interest in exploring opportunities for greater co‑operation across mandatory measures to avoid unnecessary costs and complexity for companies, suppliers and enforcement authorities.
The OECD has carried out a mapping and analysis of 21 pieces of legislation that directly require or indirectly encourage social and/or environmental due diligence. Measures analysed include disclosure measures, due diligence conduct measures, and product and market-based measures (see Methodology section).
Findings from the legislative mapping show important areas of convergence, including similar policy objectives and expectations. The measures tend to be rooted in the same international standards, including the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. Many of the measures expect regulated companies to identify and take responsibility for addressing social and/or environmental impacts in and beyond the remit of their own operations. They also expect somewhat similar processes, requiring companies to adopt proportionate measures to prevent and mitigate significant adverse impacts. Most require public disclosures on due diligence. These commonalities provide a reference point for governments in the process of designing new laws and policies on due diligence. They also provide an opportunity for policy co‑operation between governments that have existing legislation, particularly in terms of developing guidance or other support on common topics to support compliance and/or enforcement.
Findings from the legislative mapping also show areas of divergence in how companies are expected to identify and prioritise risk. The measures vary, for example, in how far they define the supply chain, the role and relevance of risk, prescribe priority issues or commodities for companies, and set out expectations for a credible prioritisation process. While differences in scope and design naturally reflect domestic policy decisions and legal frameworks, they can also introduce complexity for companies and their business partners – such as where terminology or expectations differ, are ambiguous, or potentially conflict across jurisdictions. Such differences can result in companies being asked to consider a different potential “pool” of risk areas. They can also have implications for how companies and their business partners direct their time and resources, in some cases necessitating distinct parallel tools and methodologies for risk identification and prioritisation. They can potentially result in different outcomes in terms of which impacts are considered salient or significant. As a consequence, it can be challenging to demonstrate coherent and credible decisions to external stakeholders, including enforcement authorities.
There are divergences in approach around how companies are expected to respond to risks they identify. Some product and trade‑based measures, for example, require companies to demonstrate no or negligible risk in relation to a specific issue (e.g. forced labour or deforestation), with due diligence a tool to demonstrate or support compliance. Others ask companies to demonstrate appropriate and proportionate prevention, mitigation and remediation processes based on continual progress against targets, rather than meeting a risk threshold. Measures vary in how far they define prevention and mitigation expectations, and whether and how they address topics such as responsible disengagement. These differences can result in uncertainty for companies and their business partners, including around what an appropriate response looks like in a particular context, and how companies engage with suppliers and when they choose to disengage. It can also risk conflicting expectations for companies responding to the same issue under two different regulatory approaches.
Understanding areas of convergence and divergence across the due diligence legislative landscape can help policymakers promote coherence around due diligence concepts, as well as map and explain differences in approach or terminology. Entry points for this may include where policymakers or supervisory authorities are developing guidance, tools or other accompanying measures, or forming co‑ordination networks to promote coherent support measures and/or enforcement. Policy co‑operation can promote a common understanding of key concepts, drive consistent and effective practice by companies, and support common approaches to enforcement.