From compliance to strategy: When risks are everywhere, stakeholder-validated data can mark the path forward
Research increasingly establishes the connection between Human Rights and Environmental Due Diligence (HREDD) and better business performance. Last year, for example, the UNDP published research establishing a positive relationship between improvements in a company’s human rights conduct and its subsequent financial performance. At Fair Wear, this connection reflects what we see in practice.
Business processes, purchasing practices and sourcing decisions shape worker wellbeing and environmental outcomes. The reverse is also true: Labour issues, worker dissatisfaction and environmental impacts can quickly become operational, financial and reputational risks including quality issues or shipping disruptions. HREDD gives businesses strategic intelligence about risks that affect both people and business continuity. That is why HREDD belongs in the boardroom. But that intelligence is only valuable if it is grounded in the realities of affected stakeholders and translated into business decisions.
More data, more insights?
Companies have access to more supply-chain information than ever before; a trend accelerated by Artificial Intelligence (AI). But more information does not necessarily mean better intelligence. What makes information actionable is context, including the perspectives of affected stakeholders. Because there is one thing technology cannot replace: the perspectives of the people affected by business decisions.
For due diligence information to become truly useful, it needs to be stakeholder-validated. Lasting improvements in working conditions require the voices of those most affected. Yet in many supply chains, workers have limited power and opportunity to influence the decisions that shape their rights and daily realities. This means that currently, key strategic insights are often missing in information flows.
Meaningful stakeholder engagement helps address this imbalance. It builds the trust, context and accountability needed to structurally turn worker's voices into a strategic input for due diligence, alongside the perspectives of suppliers, trade unions, civil society organisations and other stakeholders.
In the era of AI, the challenge facing our industry is not simply collecting more information. It is ensuring that the information we rely on is grounded in the realities of the people most affected by our decisions.
From insight to impact: make information count
But the process does not stop with gathering information. Information only becomes valuable for business and workers when it changes decisions. If HREDD reveals that a human-rights risk is being created or exacerbated by the company's own commercial decisions, addressing it cannot remain the responsibility of the sustainability team.
And this is where oversight from the board and senior management becomes critical. Human rights risks are rarely isolated supplier issues. They are often connected to wider business practices and commercial decisions throughout the supply chain. An integrated HREDD approach, like the one our HRDD Hub offers, helps companies identify these connections and determine in which team(s) action is needed to create lasting change; whether that is changing your planning processes, being more critical about future sourcing partners or savvier about your modes of transport.
Connecting root causes to a company's own purchasing practices, sourcing decisions and business processes is where HREDD has the potential to transform from an isolated compliance exercise into a strategic business asset, that improves worker wellbeing as well.
What evidence should guide the boardroom?
As research continues to demonstrate the value of impactful due diligence for both businesses and workers, HREDD is increasingly becoming a tool for guiding consequential business decisions. Yet this raises an important question: How do we ensure the evidence informing those decisions is stakeholder-validated? And what kind of ecosystem is needed to generate, validate and use that information effectively?
I look forward to deepening this conversation.
Sincerely,
– Annabel Meurs, Executive Director at Fair Wear