The Transparency Act: A Due Diligence Guide
The core of the Transparency Act is the duty to conduct due diligence assessments. This may seem complex, but the process can be broken down into five simple steps. Here is the guide you need to get started with your compliance work.
Anchoring at the Top is the First Step
Before the practical work begins, responsibility must be anchored at the top of the organization. The board has the overall responsibility for ensuring the company complies with the law and must adopt a policy for responsible business conduct. The CEO is responsible for the practical implementation and must assign the task to a person or group. Without clear anchoring and allocation of responsibility, the work quickly becomes a mere formality without real effect.
This signals that the company takes its responsibility seriously.
You Need to Know Where to Look to Find Risk
A due diligence assessment starts with mapping. You must first get an overview of your own operations and the most important supply chains. Then, you must identify where the greatest risk of negative impacts on human rights and working conditions lies. Focus your efforts where the risk is highest, based on an assessment of severity and probability.
The law does not expect you to have full control over everything, but that you know where you should focus.
Fact box: Due diligence assessment in five steps:
- Anchor: The board must adopt a policy and assign responsibility for implementation.
- Map: Get an overview of your own operations and the most important supply chains.
- Assess risk: Identify where the risk of negative impact is greatest.
- Implement measures: Create a plan to stop, prevent, or reduce the identified risk.
- Report: Document the process and publish an annual account of the work.
Risk Assessment Must Be Followed by Concrete Measures
Based on the risk assessment, a concrete plan for measures must be created. This can range from improving your own internal guidelines to setting clearer requirements in supplier contracts. Dialogue with suppliers in high-risk areas is often a key and effective measure. The entire process, from assessment to implemented measures, must be documented and monitored.
It is the measures that create real change.
“A due diligence assessment is not a one-time exercise, but a continuous process.”
Wondering how you can best structure and document your compliance work? Contact us, and we can help you go through the five steps!