‘Due diligence: Respecting human rights and the environment in international business’

Speech by the Minister for Foreign Trade and Development Cooperation, Lilianne Ploumen, at the conference ‘Due diligence: Respecting human rights and the environment in international business’, The Hague, 6 March 2014.

Ladies and gentlemen,

When preparing for today I had to think of the late Hilda Verwey-Jonker, a member of my party, who took up her duties on this spot in 1956 as the first female crown member of the Social and Economic Council. A lady socialist talking to capitalists about the way the national economy should be run! For some people, it was hard to take. It was indeed a big step forward, compared to half a century earlier. Back then, social democrats and industry weren’t on speaking terms, and women didn’t even have the vote.

They were backward times, ladies and gentlemen, in many respects. Reading about Hilda Verwey-Jonker now, it is hard to imagine that she could ever have been regarded as the odd one out. Today you see before you a Minister for Foreign Trade and Development Cooperation who is both a social democrat and a woman. No one here bats an eyelid about a Social Democrat or a female minister anymore. Now it’s the combination of portfolios that raises eyebrows. In fact only a short time ago it would have been unthinkable. Surely trade and aid were unhappy bedfellows?

But here too, progress has been made. Just as in the case of women and socialists, our thinking has changed across the board. Social democrats and people who work in development cooperation now look differently at the business sector. Just as business people have a quite different take on the world in general.

The mind-set of entrepreneurs has changed radically in the last century. They have very different notions about the role of their businesses. More and more, exercising social responsibility is in the genes of CEOs of multinationals as well as owners of smaller companies. That provides scope for broad, fruitful and close partnerships, in which the interests of our businesses and of society at large converge. Due diligence, today’s theme, is an excellent example.

The government expects businesses to know what goes on in their value chains, to ensure that human rights are upheld throughout the production process and to take action when things go wrong. It’s about knowing and showing; knowing where the risks are and showing how you minimise them. Due diligence is closely connected to corporate social responsibility, a concept that a lot of Dutch companies have been familiar with for some time.

But due diligence isn’t a matter of course for all businesses yet. Many companies think it’s only about making thorough checks before a takeover. Whereas due diligence is about all the risks: not just direct financial risks for the company itself. It’s also about the consequences for society. Due diligence means more than just avoiding risks to one’s own image and profits. I believe it’s about fairness in business.

The government helps companies to put CSR and due diligence into practice. It starts by raising awareness of possible problems and risks like corruption, environmental damage and human rights violations. To this end we have developed the CSR risk checker. Available online, this tool helps businesses assess risks per country and per product. It also gives them tips on how to minimise these risks.

I want to work with business and civil society on structural improvements and innovations to CSR. That’s why we’ve adopted a National Action Plan on Business and Human Rights, for instance – making us an international frontrunner in this area.

Economic affairs minister Henk Kamp and I have also commissioned an international first: we call it a CSR Sector Risk Analysis. It focuses on the main social and environmental risks in Dutch business and its supply chains. KPMG Sustainability started this ambitious project at the end of 2013. The analysis identifies societal risks, based on the OECD guidelines. It matches these to all sectors of the Dutch economy. This comprehensive list of 89 sectors has now been reduced to 13 important economic sectors with a high risk profile.

As we speak, KPMG is engaging in intensive dialogues with representatives of these sectors and NGOs. They will discuss the results of the analysis and assess the way due diligence is organised in these priority sectors. A lot still needs to be done before the summer. Then we will formalise agreements with businesses aimed at achieving structural reductions in societal risks in their value chains.

In today’s workshops, you will hear about the six steps of due diligence. The Sector Risk Analysis will follow several of these steps as well. It will enable us to pinpoint the CSR risks faced by the sectors, one of the six steps. The sectors will formulate a policy in cooperation with the government to reduce these risks – another one of the six steps. The companies will reach agreements that ensure the sector adopts the policy, just as any individual company should ensure adoption of the human rights policy in every part of its organisation. And while companies must monitor the results of their human rights policy, the government will inform society about the progress of the analysis.

Several sectors are already operating collectively to conduct their due diligence. One of these sectors is the Dutch textile sector. Comparing the six steps of CSR risk management to what is happening in the textile sector, I see several overlaps. The sector organisations have mapped their stakeholders. They have come up with a policy, the ‘Action plan for a sustainable textile sector’. This plan brings focus. It indicates clearly which topics need to be addressed urgently. Freedom of association in Turkey, for example. Child labour in India. Or the safety of buildings in Bangladesh. We hope to see several other sectors arrive at similar policies.

The sector is now working on implementation. This month no fewer than eleven working groups will start. Companies, the government, sector organisations, NGOs and unions are all taking part. Together we will agree on who contributes what towards a solution to these problems. The sector is also communicating with the public about its approach. Together with its stakeholders, it has decided how to inform people about the working groups. Clear communication improves cooperation, and that means better solutions. Two days ago at a conference of the Foreign Trade Association I called upon textile companies to join the working groups. Here I repeat that call.

There is still a lot more that can be achieved, including by the textile sector. Implementation remains a challenge, and nothing has been decided yet on matters such as monitoring. It is a work in progress, but the determination and energy are there.

The government appreciates the useful work done by the Social and Economic Council in conducting due diligence. We should not underestimate how the six-step programme can be applied by even the smallest firms. Take the company H2Onsite [H2O on site], represented here today. It extracts water from air. It operates in countries like Kenya. Even though it only has three employees, the company has a complete oversight of the risks it poses to nature, the environment and the local community. It shows that with the right knowledge and expertise, even SMEs can apply due diligence.

I’d like to see more SMEs follow this example. Because after all, sound CSR policy makes our private sector stronger. By combining CSR with innovation, companies can help solve major social issues abroad. And that is a unique selling point.

We see CSR movements at all levels: nationally in the shape of the Sector Risk Analysis, at sector level, and even at the level of the smallest companies. Increasingly, surveys show that CSR pays off. CSR can boost confidence and the loyalty of both customers and staff. It can also contribute to a better relationship with NGOs, producers, local residents and government. What’s more, according to the Harvard Business School, companies that engage more in CSR are financially healthier in the long term. Their shares perform better, for instance.

For many of you, this is nothing new. By being here today, you show that you recognise the advantages of CSR. And that you have a long-term vision of CSR. You also show that you want to be part of the economy of the future. In which NGOs, government and businesses share responsibility. So that we limit human rights violations and prevent environmental damage.

I hope that your good example will inspire others. Because businesses are my ally in creating inclusive and sustainable growth – both in the Netherlands and internationally. For some, this still requires a change in mentality. But I have every confidence that it will soon be taken for granted. Just as Hilda Verwey-Jonker’s membership of the Social and Economic Council was soon accepted as normal.

I wish you all a productive conference.

Thank you.