The OECD (The Organisation for Economic Co-operation and Development) Guidelines for Multinational Enterprises on Responsible Business Conduct provide a framework for companies to manage risks related to human rights, labour rights, environmental impact, and corruption in their operations and supply chains. The due diligence component of these guidelines helps companies identify, prevent, and address negative impacts that they may cause, contribute to, or be directly linked to.
What is the purpose of the OECD guidelines?
Global businesses operate in complex supply chains that can include high-risk regions, subcontractors, and multiple tiers of suppliers. The OECD developed these guidelines to ensure that companies take proactive responsibility for their impact, rather than simply reacting to crises.
Several key factors have driven the adoption of due diligence standards:
• Legal and regulatory requirements: Many countries (e.g., Norway’s Åpenhetsloven, the EU’s upcoming CSDDD) now mandate companies to conduct due diligence.
• Risk management: Preventing legal, reputational, and financial risks linked to poor supply chain practices.
• Stakeholder trust: Investors, customers, and business partners expect companies to ensure ethical and sustainable business operations.
Why are they important?
Ignoring due diligence obligations can lead to severe consequences:
• Fines and legal action: Regulations enforcing due diligence are becoming stricter.
• Reputational damage: Public exposure of labour rights violations, environmental harm, or corruption can damage a company’s brand.
• Supply chain disruptions: Unethical suppliers may face bans, creating operational and financial risks.
• Lost business opportunities: Investors and partners may avoid companies without robust due diligence processes.
On the positive side, good due diligence practices can:
• Build long-term supplier relationships based on transparency.
• Improve operational stability and cost-efficiency by reducing supply chain risks.
• Strengthen a company’s reputation and attract responsible investors.
The OECD Due Diligence Guidance breaks down due diligence into six key steps
1. Embed Responsible Business Conduct in Policies and Management Systems – Set clear expectations for ethical business practices.
2. Identify and Assess Risks – Map supply chains and evaluate potential risks in human rights, environment, and governance.
3. Prevent and Mitigate Risks – Take action to address risks before they lead to harm.
4. Track Implementation and Results – Monitor supplier compliance and effectiveness of mitigation measures.
5. Communicate How Impacts Are Addressed – Report transparently to regulators, investors, and the public.
6. Provide for or Cooperate in Remediation – Support solutions if negative impacts have already occurred.
Why use a software solution for Due Diligence?
Manually tracking and managing due diligence can be overwhelming, especially when dealing with large supplier networks across different jurisdictions. A due diligence software solution simplifies this process by:
• Automating supplier assessments: Software can send, collect, and analyse supplier surveys and compliance documents.
• Providing real-time risk analysis: AI and automated scoring help flag high-risk suppliers quickly.
• Ensuring audit-readiness: All documentation is stored in one place, making reporting and compliance checks easy.
• Enabling supplier collaboration: Platforms allow suppliers to update their data, reducing the workload for your company.
• Standardizing compliance processes: Helps ensure alignment with OECD Guidelines, EU regulations, and industry best practices.
By using a supply chain sustainability software, companies can save time, improve accuracy, and reduce risk exposure, making due diligence a proactive, manageable, and efficient process rather than a bureaucratic burden.
