Characteristics of Supply chain due diligence
Each system of supply chain due diligence regulations contains its own specific content. However, from a technical perspective, supply chain due diligence regulations across countries, regions, and organizations worldwide share some common features regarding the process:
- Firstly, supply chain due diligence is a multi-step, iterative, and cyclical process
During the due diligence process, enterprises subject to regulation need to carry out multiple steps, from policy formulation, risk identification, prevention, mitigation of adverse impacts, to monitoring implementation, reporting on the resolution of adverse impacts, and adjusting policies to better identify potential risks…
- Secondly, the due diligence process is designed according to the specific circumstances of the enterprise and follows a certain order of priority
Depending on the nature, scale, type of product, and scope of the supply chain and operations of the regulated enterprise, the risks and adverse impacts on humans, the environment, and society may vary. The enterprise’s due diligence process must be designed corresponding to the risks present in its supply chain. Likewise, depending on specific circumstances (likelihood and severity of adverse impacts), the enterprise must determine the order of priority for addressing risks.
- Thirdly, the due diligence process needs to adapt and change according to circumstances
When performing due diligence responsibilities, regulated enterprises must review to (i) timely update any changes that may affect the extent or manner of impacts on humans, the environment, and society in the supply chain (e.g., changes in legal standards, new product development, or new business relationships), and (ii) reassess and adjust the order of priority accordingly.
- Fourth, due diligence requires continuous information exchange.
While performing due diligence obligations, regulated enterprises must provide information on how they identify and address actual and potential adverse impacts and share this information with relevant stakeholders (rights-holders, investors, consumers, etc.) to demonstrate that the enterprise has responded appropriately to such adverse impacts.
Source: Compiled by the TTWTO-VCCI Research Group