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Nestle Case Study: Human rights due diligence

February 27th, 2017 - Posted by Mark Dunn in Anti-Bribery And Corruption

According to research by Ethical Corporation in 2016, nearly 50% of businesses stated human rights was their number one supply chain issue in the next year. The United Nations Guiding Principles on Business and Human Rights provide the global standard since 2011. In this blog, we provide insight into an international company that is dealing with human rights issues in its supply chain from the past, but which in recent years has been one of the early adopters of ongoing human rights due diligence.

UNGPs – the global framework

The United Nations Guiding Principles on Business and Human Rights (UNGPs) were endorsed in 2011. The UNGPs have since become the authoritative global framework on business and human rights. They are based on the three pillars 'Protect, Respect and Remedy':

  • The State duty to protect against human rights abuses by third parties;
  • The corporate responsibility to respect human rights, a responsibility for companies to avoid infringing the rights of others and to address any adverse human rights impacts that occur as a result of their corporate activity;
  • The need for greater access by victims to effective remedy, a responsibility of both States and companies.

Corporate responsibility to respect human rights

As UNGP15 states, in order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances, including:

  • A policy commitment to meet their responsibility to respect human rights;A
  • A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights;
  • Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.

The United Nations Office of the High Commissioner for Human Rights (OHCHR) guidance on implementing the UNGPs advises that human rights due diligence should be initiated as early as possible in the development of a new activity or relationship. The reason is that human rights risks can be increased or mitigated already at the stage of structuring contracts or other agreements, and may be inherited through mergers or acquisitions.

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Case study: Nestlé, modern slavery and human rights due diligence

In recent years, regulatory requirements for human rights reporting across the world have increased, as have statutory and civil law for criminal liability of businesses regarding activities of their suppliers and subcontractors. As the OHCHR UNGP guidance mentions, civil actions can also be based on a business's alleged contribution to harm.

An example of a case that shows this and the importance of ongoing due diligence and monitoring is:

Doe v. Nestle SA: Six men from Mali are trying to sue Nestle in U.S. Court (after failing to do so the first time). The men who are in their twenties/thirties claim they were forced to harvest cocoa pods on cacao plantations in Ivory Coast when they were children. The plantations supplied to international chocolate giants and the men claim that Nestle should have known about the human rights abuses in its suppliers' operations.

As Bloomberg reported, according to the lawsuit the boys "worked 14-hour days under armed guard without pay six days week. Sleeping on the floors of locked rooms and given only food scraps, those caught trying to escape were severely beaten or forced to drink urine. Some had their feet cut open, with salt or pepper sprinkled on their wounds."

Nestlé's response

Nestlé took action regarding tackling child and forced labour in their cocoa supply chain in 2012 by partnering with the Fair Labor Association (FLA), a non-profit multi-stakeholder initiative that works with major companies to improve working conditions in their supply chains. They put in place an action plan to prevent human rights abuses in their supply chain.

Based on the FLA recommendation for Nestlé "to develop a robust and comprehensive internal monitoring and remediation system that covers all actors (including farmers, métayers, farm workers and their families) in the supply chain, Nestlé is working with the International Cocoa Initiative to set up such a system and implement it.

This is in line with UNGP13 which sets out that businesses are expected to put human rights due diligence processes in place which go beyond the perceived risks to the business, by including the risks to rights-holders. In addition to the impacts resulting directly from their operations they should "seek to prevent or mitigate adverse human rights impacts that are directly linked to their activities, products or services by their business relationships, even if they have not contributed to those impacts."

Read more about modern slavery risks in the cocoa industry in our report Dark Chocolate.

Nestlé and the UNGPs

In 2015, Nestlé was one of the six early adopters of the UNGP Reporting Framework, alongside Unilever, Ericsson, H&M, Newmont and ABN AMRO. This Framework is based on the global standard of the UNGPs. It turns the corporate responsibility to respect human rights pillar of the UNGPs into a set of straightforward questions. These are questions to which companies should have answers in order to know and show that they are respecting human rights in practice. The Framework's Database currently covers 67 companies, including the largest companies by FT500 in the apparel, banking and financial services, extractive, food and beverage, ICT and tobacco sectors. This shows again how the UNGPs have become the global standard for business on human rights.

Steps you can take right now to improve your human rights due diligence
  • Manage risks in your supplier and third-party portfolio ahead of a financial stress score with LexisNexis Entity Insight. The solution leverages a wide range of market intelligence unavailable on the open Web and applies the industry standard PESTLE scoring analysis framework (Political, Economic, Socio-cultural, Technological, Legal and Environmental) to support a rapid risk assessment.
  • Implement a strong due diligence process: explore Lexis Diligence, a solution for enhanced due diligence of suppliers and production chains which provides access to millions of public and private company profiles, in-depth country risk analysis reports, biographical sources, plus other open sources such as global, national and regional newspapers to blogs.

What do you think?