02 June 2023

Environmental and human rights due diligence: key reflections from the cobalt industry

1 June 2023

By Susannah McLaren, Head of Responsible Sourcing and Sustainability, Cobalt Institute; Anna Triponel, Founder and Advisor, Human Level

On 9 May, the Cobalt Institute kicked off its 2023 Cobalt Congress in Istanbul, Türkiye. The first session of the Congress was an expert session on environmental and human rights due diligence, opened by Susannah McLaren, Head of Responsible Sourcing and Sustainability at the Cobalt Institute, and moderated by Anna Triponel, Founder and Advisor at Human Level.

The expert session delved into what environmental and human rights due diligence means in practice for the cobalt industry – building on learnings from other sectors. (A full recording is available here)

The session kicked off with opening remarks from Bart Devos, Vice President of Public Policy, Responsible Business Alliance (RBA), who provided an overview of the landscape framing of the regulatory and policy developments that apply to the cobalt industry and the road ahead for companies.

This was followed by lessons learned, insights and challenges from beyond the cobalt industry. Yann Wyss, Global Head, Social Impact & Human Rights, Nestlé provided an overview of how world's largest food & beverage company is seeing the connections between environmental and human rights areas with concrete examples of how these connections are manifesting and progressive ways in which the company is responding. (A description of Nestlé’s approach to these areas is available here).

Louise Herring, Executive Director, AIM-Progress delved into the role of industry efforts to look into the inter-connections and tackle systemic issues – and presented the specific example of how forum of leading Fast Moving Consumer Goods (FMCG) manufacturers and common suppliers is moving forward on bringing these two areas together under the framing of the just transition. (AIM-Progress’ recent report on this topic is available here). Nicci Bouwman, Senior Associate, Shift, delved into the road ahead for climate and human rights due diligence, and provided a number of takeaways and considerations for companies starting out on linking together their climate and human rights work. (Shift’s recent report on this topic is available here).

This was followed by a panel discussion, with remarks and inputs from Lisa Fleckenstein, Project Coordinator Human Rights, Sustainability, Supply Chains, Mercedes-Benz; Barbara Cooreman, Program Lead Responsible Sourcing, Umicore; Tom Fairlie, Senior Sustainability Manager, Cobalt Institute; and Bart Devos. The session concluded with a conversation with the audience – building on a number of questions, comments and observations from the room.

The following captures the key themes discussed at the expert session on what environmental and human rights due diligence means for the cobalt industry, and the road ahead.

The direction of travel of regulation is to consider these risks together in a holistic manner. For instance, the EU Corporate Sustainability Due Diligence Directive (CSDDD) entails having one same legal framework for human rights and the environment, with the same due diligence duty that applies to companies. The Directive asks that companies also look at environmental risks through the prism of risks to people: the risk-based approach that applies to human rights risks is also expected for environmental risks – to the extent that they impact people. This is in addition to the CSDDD’s coverage of environmental risks per se. The OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines) – a soft law instrument that echoes the expectations contained in the UN Guiding Principles on Business and Human Rights (UN Guiding Principles) – are currently undergoing a revision process. The text that relates to human rights due diligence, as well as environmental due diligence, is being expanded and strengthened. This is relevant for companies – as it demonstrates the direction of travel ahead.

Human rights due diligence (HRDD), as defined in the UN Guiding Principles, has typically been conducted separately from environmental due diligence within companies. The two have commonly been conducted by separate team members and functions, and using separate methodologies. The methodology for HRDD is clear – is it detailed in the UN Guiding Principles and the OECD MNE Guidelines. However, there is not one methodology for environmental due diligence. Furthermore, environmental due diligence includes a number of different areas: waste, pollution, soil degradation, water, land, biodiversity and greenhouse gas emissions, amongst others. Each of these typically have their own methodologies, so it can be a challenge to speak about ‘environmental due diligence’, and to bring human rights due diligence and environmental due diligence closer together.

Nonetheless, the connections between HRDD on the one hand, and environmental due diligence on the other, are increasingly present. Every year that goes by, we can see greater and greater connections between impacts on the planet, and impacts on the people. At one point, all impacts on the planet become impacts on people. Climate change isn’t only an environmental issue. This being said, it’s important not to lose the essence of environmental risks (risks to planet), which have value irrespective of whether or not they result in human rights risks (risks to people).

Legislation that brings the environment and human rights together will increase, and therefore companies are well advised to come back to the foundation of these laws: due diligence. If companies put the foundations of environmental and human rights due diligence in place – following the UN Guiding Principles and the OECD MNE Guidelines – then they will be well equipped for the full range of laws ahead.

Companies in the cobalt industry are progressing in considering the inter-connections between environmental and human rights risks, but this is still early days. Companies shared that a number of discussions were happening internally to bring environmental risk management and human rights risk management closer together. For instance, this has entailed changes to supplier questionnaires and risk assessments, and revisions to processes to make them more holistic, as well as new conversations taking place. That being said, there was recognition that there was a ‘learning by doing’ element to this, and there was still much more to do to bring these areas more closely together.

There is a need to ‘bridge the gap’, and ‘create bridges’ on these topics – both internally and externally. The way in which companies are set up typically do not enable consideration of environmental and human rights risks. This work therefore entails bringing colleagues together from various disciplines and having new conversations. This may also mean having new conversations with external stakeholders as well. The objective is to aim for directional alignment so that there is one single coherent system for companies to consider – where risks to human rights, risks to the environment, and connections between these risks are considered. This will also entail a role for policy makers, when it comes to creating the connections between due diligence as well as environmental due diligence.

There were a number of areas discussed that will be helpful to tackle head on to help companies accelerate progress on the road ahead:

  • We know that supplier audits, to embed this into supplier practice, will not work on their own. The focus should be on incentives and partnerships. We need to incorporate environmental issues into salient human rights issues and action plans, and vice versa. Some relevant rights include the right to water and sanitation; land rights; rights of Indigenous Peoples; and non-discrimination. Integration can start to happen when we start rewarding both social and environmental supplier performance together.
  • Collaboration will go a long way in helping companies advance. This includes work amongst peers, as well as active participation and involvement in industry initiatives and multi-stakeholder initiatives. At the same time, a sense remains in the industry that being sustainable provides a competitive advantage. To fully enable collaboration, we need to move to sustainability being a pre-competitive consideration
  • Governance is needed at senior levels that enable discussions to be hard on how environmental and human rights topics inter-connect. This entails having appropriate expertise and knowledge to feed into these discussions and decision-making.
  • Incentives, including KPIs, need to have dual aspects of considering risks to people and risks planet. For instance, this can capture when advancing on one (e.g. mitigating emissions, or advancing on deforestation) might come as a risk to the other (e.g. impacts on smallholder farmers, community members or Indigenous groups).
  • Finding out from people on the ground can help make the case for tackling these risks in a holistic manner. This active engagement - with suppliers and their workers – can help companies move beyond a compliance top-down approach.
  • Building visibility into the supply chain and gathering relevant data is key for this work. If we know where the hotspots are when it comes to the risks, we can then focus our efforts. To make progress, it will be important to identify the relevant data to gather, and take steps to gather it. The actual data gathered will need to be combined with a human lens. There will be blindspots, that companies can further tackle by gathering information, which includes building on information already gathered (e.g. through life-cycle assessments). At the same time, we need to recognise that there are limits to this, because of confidentiality around supply chain information. Are there ways in which this confidentiality can be overcome?
  • Transparency of efforts is important – but in reality this too can be hindered by commercial confidentiality. There is still high confidentiality in the industry that needs to be considered. At the same time, being open about the challenges faced will help all peer companies to advance and will accelerate progress.
  • Conducting due diligence early on in in relationships can help us find tangible measures that can help mitigate and remediate the risks. This being said, this can be a challenge if ESG considerations significantly delay the financing of projects and the time for projects to come onstream. This delay may hinder the buy-in of the business to conduct this work – hence, the importance of building this in early and being strategic with the due diligence conducted.
  • The policy infrastructure and enabling environment is key – and there could be a role for companies (or their representing industry associations) to play to ensure greater dialogue takes place between those countries that are passing due diligence laws, and those countries that these laws apply to. This in turn will help ensure that the legislation is meaningful and reaches its objectives, rather than becoming a straightjacket to follow.
  • There is a need to be realistic about the state of play and the current situation, while at the same time striving for progress and ambition. There are a number of areas that are viewed as a challenge to tackle – ranging from deforestation, to impacts of artisanal and small-scale mining (ASM) to a full range of impacts across the value chain. Meeting the expectations of environmental and human rights due diligence may be viewed as too high in some areas, depending on the operating context. There is a need to recognise the genuine challenges to overcome – while making progress at speed.

As the opening remarks from Bart Devos emphasized: “The time for companies to prepare is now.” We will be continuing this conversation as part of our Cobalt Learning Group 2023, convened by the Cobalt Institute with support from Human Level, and we thank all the speakers and participants for all of their insights, reflections, observations and questions.

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