The key elements of due diligence
The objective of monitoring the National Action Plan for Business and Human Rights (NAP) is to determine whether at least half of all companies in Germany with more than 500 employees will have adequately integrated the core elements of human rights due diligence into their business processes in a verifiable manner by 2020. The Federal Government is supporting the companies in this task. The Helpdesk Business & Human Rights offers all companies confidential and tailor-made advice regarding the NAP and monitoring.
Final survey 2020 launched
On 2 March 2020, the final quantitative monitoring survey was launched. As planned, this is the second survey following on from the first large-scale survey which began in July 2019.
Back then, Foreign Minister Maas commented:
Germany and the German economy are reaping the benefits of globalisation. That is why we have a particular responsibility to protect the rights of the people working in our global supply and value chains. Businesses in Germany are now being asked to report how they ensure human rights are respected in their processes – and what challenges they encounter on the way. Now the businesses in question need to use the opportunity and respond.
Of the just over 7400 businesses in the focus of NAP monitoring, some 2200 randomly selected businesses will be invited to complete the questionnaire for the survey in 2020. Due to the difficult situation for many companies in Germany and worldwide as well as the special challenges for their resources caused by the COVID-19 pandemia the timeframe for the survey has been prolonged until end of May, 2020. The new deadline for the companies’ participation is May 29, 2020. At least 365 completed questionnaires need to be submitted to ensure the results can be considered representative.
The final results are to be published in summer 2020 meaning the Federal Government will subsequently be able to discuss and adopt potential followup measures before the end of the legislative term. The scientific survey will be anonymised: the names of businesses contacted by Ernst & Young GmbH, the company commissioned to perform the survey, are not known to the Federal Government and will not be published. The FAQs which you can download at the end of this article provide detailed information on various aspects of monitoring.
Interim report published: results of the 2019 survey
The first quantitative survey was completed on 31 October 2019. Of the 3300 businesses contacted, some 460 submitted questionnaires meaning the results are, within certain parameters, considered representative. The service provider EY assessed the data in line with the methodological requirements presented by the Federal Government and outlined in the first Interim Report published in July 2019. The central result is that between 17 and 19 percent of businesses were able to document that they are adequately meeting the NAP requirements on human rights due diligence (“compliers”). EY identified a further 9 to 11 percent, which are not yet meeting the requirements but are all in all working to high standards with good practices (“companies on the right track”). The second Interim Report published in February 2020 explains the findings and methodological aspects in detail. It is to be discussed with companies and business associations, social partners and civil society in dialogue events designed for that purpose.
After the results were presented in December 2019, Foreign Minister Maas commented as follows:
In the age of globalisation, companies bear an increasing responsibility for human rights protection all across the world. For this reason, Germany has implemented the National Action Plan for Business and Human Rights continuously since 2016. The initial evaluation shows however that the aims have not yet been achieved. If the results of the monitoring are confirmed, we should look at the possibility of statutory regulations. This is a way of creating incentives for businesses to commit to respect for human rights. At the same time it will provide a framework for naming and shaming if they do not.
After the 2019 survey, the Federal Government established that the evaluation methodology is all in all appropriate. Changes that were made for the 2020 survey include altering the sample size and the way in which the businesses are contacted. Furthermore, in the light of the experience gained during and the results of the 2019 survey, the questionnaire and the requirements framework were examined and adapted slightly to prevent potential misunderstandings regarding the requirements of the NAP.
The early monitoring phase in 2018: finding the right method
The first qualitative interviews with 30 businesses were held in autumn 2018 (exploratory phase). The aim here was not to obtain results which were statistically representative. There were also talks with nine representatives of stakeholder groups, that is social partners, business associations and non-governmental organisations. It was the Inception Report of September 2018 which provided the basis for this phase. The interviews provided valuable findings which fed into the comprehensive interviews subsequently carried out in 2019 and 2020.
Transparency and expertise
The Federal Government is keen to make the monitoring process transparent and to base it on methodologically sound scientific standards. A nuanced evaluation system ensures that the requirements to be examined regarding the content and implementation of the core elements by the businesses are reasonable. The assessments are anonymised and comply with applicable data processing legislation.
The requirements with regard to human rights due diligence anchored in the NAP are considered to be implemented if a company has introduced all five core elements of human rights due diligence to an adequate extent. The monitoring also takes into account the possibility that a company may be able to provide reasonable grounds for not being affected by individual risks or for not (yet) being able to implement certain procedures or measures. The questionnaire provides for a comply or explain mechanism in all questions.
In the questionnaire, companies can submit their implementation planning for individual NAP requirements by the end of 2020. This planning must be sufficiently concrete, credible and appropriate for closing an identified implementation shortfall by the end of 2020. In early 2021, it will be verified whether the companies have actually put these plans into practice. Until that time, such companies will not be regarded either as “compliers” or “noncompliers”. The final report, which will be presented in the summer of 2020, will then be supplemented in the light of post-validation.
The information provided by the companies in the questionnaire will undergo a multistage plausibility review. For example, their answers will be compared with media reports; followup questions may be asked and external stakeholders may be requested to provide information.
The question and answer options are based on Chapter III of the NAP. In uncertain cases, the text of the UN Guiding Principles on Business and Human Rights was used to define the requirements in more detail. The Interim Reports provide transparent information as to which parts of the NAP or UN Guiding Principles the questions and answers are based on (see annex 5 to the first Interim Report and annex 1 to the second Interim Report).
The reports on the findings of the 2019 and 2020 surveys will be published and show what percentage of large companies in Germany meets the NAP criteria and what percentage does not. In order to acknowledge that companies have made a tangible effort to comply with human rights due diligence, the reports will also provide information on a group of companies that are “noncompliers” and have not yet planned full implementation by the end of 2020, but are already making good progress (“companies on the right track”, that is a maximum of three unsatisfactory responses, but no gaps in key elements of due diligence, and a recognisably good overall performance).
No conclusions can be drawn on compliance with the NAP requirements in the case of companies that fail to provide information (“nonresponders”). Above all else, they cannot be included in the group of companies meeting NAP requirements. The reports will also state the number of nonresponders. In addition, data will be collected and existing data evaluated to compare the companies that provided information and the nonresponders in order to see whether there is any problematic bias in the results due to systematic differences in the response behaviour of individual groups of companies.
From 2020 onwards, the findings of the monitoring process will form the basis for the Federal Government’s decision on further steps in the field of business and human rights. These steps can include legislative measures.