【Event】From Passive to Active: Due Diligence for Responsible Supply Chains

 

Company's understanding of its own social responsibility constitutes the foundation for the construction of responsible supply chain. How do purchasers evaluate and supervise suppliers to undertake corporate social responsibility? And how do suppliers conduct scientific and standardized construction of systematic and institutional social responsibility to improve CSR performance and inform the public of the results? Due diligence and life cycle management are commonly agreed effective approaches to create responsible supply chain. On June 4, 2015, the Twelfth Sino-European CSR Roundtable Forum, jointly hosted by Business Social Compliance Initiative (BSCI) – Foreign Trade Association (FTA) and China WTO Tribune, aims to share the influence of due diligence on supply chains value and new perspectives on responsible and sustainable supply chains construction.
Mr. Guo Xiuming, Divisional Director of General Division, Department of Policies and Laws of MIIT, pointed out that“Made in China 2025” Action Plan gives high priority to supply chain management in his address. He introduced that in terms of green development, it requires to build a green manufacturing system, create green supply chain, and accelerate the establishment of a resource-saving and environment-friendly system for procurement, production, marketing, recycling and logistics. He said, due diligence and responsible supply chains are significant for companies’ sustainable development and to meet economic globalization. Mrs. Zhang Ruiling, Deputy Director of Legal Affairs Department, All China Federation of Trade Union (ACFTU), focused on information disclosure through market forces, enabling enterprises to perceive it as a profitable mode to release and perform their social responsibility. She stressed that gains and losses of economic benefits is a great workout for driving enterprises to perform social responsibility.
What is due diligence? Mr. Chen Yuanqiao, Senior Engineer of China National Institute of Standardization and Secretary General of ISO 26000 Social Responsibility Working Group introduced that ISO 26000 define the due diligence is to have an overall identification of the actual and potential negative impact of the projects and organizations on the society and environment in their entire life cycle in order to avoid or mitigate the negative impact of their decisions and activities. He added, it is not limited to the supply chain, it is a most common and the most basic method for CSR practice.
Mr. Christian Ewert, Director-General of Foreign Trade Association remarked that due diligence is important to enterprises. “Due diligence is about how companies ensure that they aware of, and can describe, the risk of violations taking place, and their potential harm. In this context companies must implement initiatives which limit the risk of violations occurring.” “Due diligence is an “ongoing risk management process to identify, prevent and deal with the challenges on operation, product and service and report the results.” He said. It is an approach that can help companies to reduce the operation risk but also can promote the construction of responsible supply chain. In Yuchai Group, they perform the overall evaluation every year of the suppliers’ performance in terms of technology, quality, response, delivery, cost, environmental and social responsibility. Mr. He Xiaoyu, Deputy Director of the Party Committee, Guangxi Yuchai Machinery Group Co., Ltd, said that the evaluation can stimulate supplier’s value business metrics and pay attention to controlling the environmental safety and finally form sustainable supply chain. “Due diligence will benefit suppliers,” Mr. Meng Jianguo, Office Director, Hangzhou Samsung Down Products Co., Ltd, said, “after participating responsible factory project for one year, Samsung Down Products has made great progress on brand building, innovation and staff satisfaction and reduced operating cost.
Apart from buyers and suppliers, other stakeholders also join the forum to discuss the responsible supply chain management. Mr. Harvey Jia, Senior Strategy Director of TUV NORD China, believed that the big difference between due diligence and previous responsible supply chain practices lies in over decades the enterprises has changed their passive CSR practice to active CSR practice. “Unlike the previous action driven by clients or third-party certification body, companies now will actively develop a systematic planning, conduct due diligence according to national laws, buyer code, industry standard and companies’ characteristics to discover the gap and do alteration for sustainability, by which companies also reduce cost and enhance competitiveness.” However, there are some challenges during the due diligence for responsible supply chain. Some companies conduct “due diligence for due diligence” or “for certification”, but they don’t rise due diligence to be their strategy. For this, Jia called on certification bodies to direct the value orientation instead of certification orientation or interests orientation.
Mr. Sun  Lihui, Director of Communication Department of China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC) talked more about the hot issue in international mineral industry—conflict minerals. He said:" it is not the issue for whether conduct due diligence on conflict mineral. American legislation requires enterprises conduct due diligence on minerals mined from African regions and EU is also pushing this legislation, which will be passed in 2016. Now there are at least 70 to 80 companies received due diligence in China. Thus, it is the whole international society’s requirement for due diligence and it is even mandatory requirement by law in some countries and regions.
Jointly hosted by Business Social Compliance Initiative (BSCI), an initiative of Foreign Trade Association (FTA) and China WTO Tribune, the Sino-European CSR Round Table Forum has focused on related topics such as caring for employees, harmonious labor relations, good communication mechanism and partnership between buyers and suppliers, building a professional and practical CSR communication platform and channel between China and European market.