Finland

3. Expectations towards companies and support services

3.1. Clarification of due diligence [page 23]

 The OECD Guidelines for Multinational Enterprises were updated in 2011. In the same connection, the UN Guiding Principles on Business and Human Rights were included in the Guidelines along with due diligence. In the OECD Guidelines, due diligence is seen as an examination process with which companies identify and prevent the actual and potential adverse impacts of their activities in their decision­ making and risk management. This means that due diligence is not a single action. lnstead, it is an ongoing process where the human rights impacts of business activities are assessed with appropriate and sufficient care.

Due diligence also includes the mitigation of adverse impacts and communication on how companies deal with these adverse impacts. Potential effects are dealt with by preventing or mitigating them, whereas actual impacts will be dealt with by remedying them.

By following due diligence, an attempt is made to prevent the adverse impacts which a company will either cause itself, to which it will considerably contribute towards, or which are directly related to the company’s activities, products or services through a business relationship.

The contribution refers to a situation where that contributing impact is substantial. This means activities resulting in indirect adverse impacts caused, promoted or encouraged by another party. This does not cover minor or insignificant contributions. If a company contributes to a detrimental effect on human rights, it should take the necessary measures and use its influence to prevent or alleviate the adverse impact.

In the Guidelines, business relationships cover relations with business partners, supply chain operators and other operators independent of the state and governmental operators that are directly related to the company’s business activities, products or services. If the company has a lot of suppliers, it should identify the areas where the risk of adverse impacts is highest and contribute to the prevention of these risks.

 What it sufficient?

At the consultation events organised by the working group, it was suggested that a new statutory obligation on due diligence should be established for companies when implementing the UN principles on a national level.

Transforming the due diligence described above into a legally binding obligation is difficult to envisage. The problem with statutory due diligence for respecting human rights is the difficulty of defining the obligation included therein. On a national level, respecting human rights is defined in appropriate legislation, and careful actions may be important for assessing company responsibilities. Extending national legislation to international activities is even more challenging. The special questions related to the regulation of international business activities have been described above in Section 1.1.

According to the international guidelines, the sufficiency of following due diligence and the possibilities of making a difference are always weighed on a case­ by-case basis. The issues mentioned above (such as the size of the company, branch of activity, operating conditions, ownership and business structure) are taken into consideration. The seriousness of the adverse impacts caused is important as well. Since both the UN principles and the OECD Guidelines emphasise prevention, a retrospective assessment on sufficiency will cause challenges of its own for preparatory  actions.

The discussion on the content of due diligence and the ways it is applied also continues in international organisations.

Though there is no binding regulation on due diligence, it is a central concept in

managing human rights risks related to international business activities. For these reasons, more discussion and information is required on the types of risks an possibilities related to each branch of activity, on the types of risk management needed, and on the expectations for observing due diligence in various branches of activities.

As a follow-up measure, the working group proposes that:

• companies, non-governmental organisations and other key stakeholders are invited to a roundtable discussion by branch of activity. For example, the discussion could begin with the forest industry, the consumer goods trade and the textile industry.With the discussions, an attempt shall be made to create a dialogue amongst various stakeholders and to establish the essential risks for each branch of activity as well as sufficient risk management and due diligence.
• In co-operation with the business sector, the collective industrial organisations and non-governmental organisations, sharing of due diligence best practices is promoted in order for companies to apply them.

Principal responsible parties: Ministry for Foreign Affairs and Ministry of Employment and the Economy, schedule by the end of 2015.