The duty of care or how to sanitize the procurement and supplier relation industries

This image will remain in memories : the collapse of a building, the Rana Plaza, on April 4, 2013, accommodating several textile factories in Bangladesh. More than 4,000 people were trapped and 1,135 were found dead. In these garment factories, they were manufacturing clothing for international brands.

procurement and supplier relation industriesThe passage of the Duty of Care Act, a complex but unavoidable process

This tragic event has been triggering awareness for the legislator and ordering companies of the procurement and supplier relation industries. In 2015, a draft law was tabled before the National Assembly, to enforce the large corporations to implement a duty of care plan that should be made public.

“Goal : to sanitize the Supply Chain and make the large corporations accountable for their choice in subcontractors and suppliers, thanks to prevention measures.”

Since its introduction to the National Assembly on February 11, 2015, the draft law has been going back and forth several times from the National Assembly to the Senate, like a legislative marathon, as the scope and implementation of this future law are very hot topics.

 

Eventually, after more than three years of deliberation, the “duty of care” act for the multinationals, regarding respect for human and environment rights for their subcontractors, was definitively adopted on Tuesday, February 21, 2017.

The arrangements are more limited in foreign law. The United-Kingdom adopted the Modern Slavery Act in 2015. This law provides for an obligation of transparency on the supply chain of a parent company, prohibiting the purchase of goods or services resorting to human trafficking.

One thing is for sure, the more a company prevents the occurrence of risks, the more it is respected and legitimated. The establishment of a duty of care plan is thus to its benefit, combining both an ethical and environmental requirement, but also by putting pressure on the legislators in the subcontracting countries.

 

procurement and supplier relation industriesHow should this duty of care plan be implemented in the procurement and supplier relation industries ?

“This plan has to identify the risks and prevent the serious violations to human rights, fundamental freedoms, health and security of people, as well as to environment.”

Are concerned the ordering companies with more than 5,000 employees in France (including their direct or indirect subsidiaries), or with more than 10,000 employees throughout the world (including their direct or indirect subsidiaries).

Whether it’s about their own activities, or those of their subcontractors, as soon as a business relationship is established, they are responsible.

 

 

This duty of care plan must contain the following elements:

  1. A risk mapping, country by country, with the setting-up of a fact sheet, indicating the level of risk for the procurement and supplier relation industries
  2. Evaluation procedures of the situation of the subsidiaries, subcontractors or suppliers, as soon as a business relationship is established
  3. A list of the actions implemented to prevent those risks
  4. Alert and reporting mechanisms coordinated with the trade union organizations
  5. A follow-up of the measures implemented to eliminate these risks

Civil penalties are provided when the duty of care plan is not respected : an association, an individual, or even a company can trigger a legal action. In the absence of agreement, and based on the seriousness of the infringement, a fine of 30 million euros, instead of 10 million initially planned, can be imposed.  

procurement and supplier relation industries

Hosting of a think tank “Duty of care”, with the BY.O Group and the law firm Bird & Bird

It’s obvious that this growing awareness from the ordering companies is real, but it comes with many questions which remain unanswered.

The law should be applicable by 2018. Therefore, it is necessary to prepare ourselves.

At BY.O Group, we have been engaged in a reflection process for several months. Initiated and supervised by the Procurement Managers’ Club of the CDAF (National Council of Procurement), we co-host a think tank with the law firm Bird & Bird, on the measures to implement by the companies, to prevent such incidents from happening again.

Composed of the Procurement Managers of Air France, Covea, Lafarge, Sanofi, Total, Legrand, Malakoff Mederic, but also of the law directorates of Macif, Suez, SNCF, and Sonepar France, we met twice, in November 2016 and January 2017.

 

 

Through these roundtables, we first listed a number of grey areas contained in the draft law :

  1.      Can we protect ourselves in the contracts ?
  2.      Can we delegate the risk mapping ?
  3.      Which people are really concerned by this duty ? The procurement department, the Risk Manager, the CSR, the RSE, the HR, or the legal expert ?
  4.      Can the audit and control of the partner networks be outsourced
  5.      What about the non-declared subcontractors ?
  6.      What’s the liability in case of plan failure ? Obligation of means or obligation of result ?

We also implemented an action plan with each of the roundtable participants, to make further headway in our reflection :

  1.      Building a framework with the major information to collect for each company
  2.      Mobilizing the professional associations
  3.      Sharing the research already engaged on the ISO standard, to detect the duplications in the law
  4.      Working on a proposition for a common reference base

 

More than ever, we need to continue to take part in a durable and ethical vision on the long-term, not a deregulated one.

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