"Downstream due diligence - Setting the record straight", 16. December 2022

Why it is clear that the risk-based approach to due diligence expectations in the OECD Guidelines and United Nations Guiding Principles apply to the full value chain, including downstream business relationships

The due diligence expectations contained in the OECD Guidelines and United Nations Guiding Principles (UNGPs) have always, since their inception in 2011, been intended to take a risk-based approach that includes the full “value chain” of business relationships. This includes “downstream” entities and business relationships as well as “upstream” relationships. Despite overwhelming evidence and clarity on this point, some are currently attempting to take discussions at the OECD and EU back a decade in order to restrict and limit business responsibility by disingenuously claiming that established due diligence standards were not intended to have a full value chain scope. This briefing paper explains why it is clear that the risk-based approach to due diligence expectations in the OECD Guidelines and UNGPs apply to the full value chain, including downstream business relationships, drawing on provisions from the OECD Guidelines and UNGPs themselves as well as various OECD due diligence guidance documents, statements by OECD National Contact Points in various countries, and clarifications by the United Nations Office of the High Commissioner for Human Rights (OHCHR) and the OECD Investment Committee.

International consensus on the risk-based approach in downstream value chain due diligence expectations

The OECD, ILO, and OHCHR, as well as a plethora of businesses and business associations, have all confirmed that the OECD Guidelines and UNGPs have always covered the full value chain and downstream relationships. [...] The risk-based approach thus means that arguments insisting on “supply chain” but not “value chain” miss the point of due diligence, which is to prevent harm in the global economy in a risk-based manner, wherever it actually occurs – not according to an arbitrary upstream-downstream or tier-restricted designation. The OECD itself recently clarified that the risk-based approach to due diligence “means prioritising their most severe risks and impacts – regardless of where they sit in the value chain” (emphasis added).

The risk-based approach and downstream value chain due diligence expectations under the OECD Guidelines

Since the 2011 update, it is clear that the risk-based approach in the due diligence provisions of the OECD Guidelines includes downstream business relationships and impacts, consistent and in line with Principle 13 of the UNGPs. Although the Guidelines use the term “supply chain” rather than “value chain”, it is clear that the Guidelines use the term “supply chain” to refer to relationships and impacts both upstream and downstream, all of which are in the scope of the due diligence provisions. [...]

Preventable harm: why risk-based downstream value chain due diligence is crucial for preventing severe adverse impacts in global value chains

Downstream due diligence is particularly important in certain sectors such as financial services, ICT/surveillance, pesticides, arms, pharmaceuticals, and heavy machinery. [...]

Conclusion: downstream value chain due diligence is already expected under the Guidelines and UNGPs and crucial to ensuring responsible business conduct

In conclusion, despite some claims to the contrary, international standards including the OECD Guidelines and UNGPs already expect companies to conduct due diligence on risks and relationships throughout their full value chain, covering downstream risks and impacts. Given the large number of severe adverse impacts on human rights and the environment that downstream due diligence is capable of preventing, it is crucial that governments not follow these conservative businesses’ efforts to turn the clock backwards, and instead reconfirm and further codify these downstream value chain expectations in ongoing and future processes to update the OECD Guidelines and legislate due diligence.