The OECD Guidelines and Due Diligence

The Guidelines  require adhering governments to set up National Contact Points (NCPs) tasked with furthering the effectiveness of the Guidelines by undertaking promotional activities, handling inquiries, and providing a mediation and conciliation platform for resolving issues that arise from the alleged non-observance of the Guidelines, termed “Specific Instances.”

The Guidelines recommend that companies use due diligence to identify, prevent and mitigate actual and potential adverse impacts as well as account for how these impacts are addressed.  The due diligence concept as described in the OECD Guidelines is consistent with the UN Guiding Principles on Business and Human Rights.

Due diligence is a flexible, risk-based process and not a specific formula for companies to follow.  It requires companies to know and describe the risk of adverse impacts as a result of their operations, and on that basis take steps to address the risk.  The fundamentals of the concept are familiar to companies working on a daily basis with risk management and management systems.  The Guidelines acknowledge that due diligence can be included within broader enterprise risk management systems, provided that it goes beyond simply identifying and managing material risks to the enterprise itself to include the risks of adverse impacts related to matters covered by the Guidelines.

Companies implementing due diligence processes are much better equipped to handle actual and potential adverse impacts.  Due diligence processes may also reduce the risk of becoming the subject of complaints.  It is recognized, however, that the nature and extent of due diligence will be affected by factors such as the size of the company, context of its operations, the severity of its adverse impacts, etc.

Note:  The recommendations about the exercise of due diligence do not apply in the same way to the chapters of the OECD Guidelines covering Science and Technology, Competition and Taxation.  More information on this subject is available in the OECD Guidelines’ chapters on General Policies and Human Rights.