“How can businesses work with third-party contractors to embed robust human rights due diligence (HRDD)?”
Yes, another excellent question!
There are of course a number of challenges for companies when trying to manage their contractor relationships in a responsible way.
The challenges
We’ve seen four challenges come up again and again for companies we work with:
- Lack of visibility: many companies, particularly those that have complex and global supply chains, lack visibility and oversight over their contractors and subcontractors. They can be a blindspot for businesses.
- Limited leverage: companies may find that they have limited influence over some contractors. In these circumstances, it may be difficult for companies to enforce their human rights due diligence (HRDD) expectations with these contractors.
- Higher costs: responsible contractor management can mean higher costs for businesses - at least, in the short-term. This can make responsible contractor management unattractive for companies.
- Not the right time in the relationship: embedding human rights expectations into relationships once business ties are already established can be more challenging.
So how then can companies advance in the face of these challenges?
The way forward
Here are some approaches companies have found helpful when looking at how to responsibly manage their contractor (and sub-contractor) relationships:
- Increasing visibility: Of course, it can be a challenge to identify and address risks when we still lack understanding of where contractors and subcontractors are. This step can entail mapping out at a general level the kinds of tasks that are traditionally performed by contractors - and then test this with management on the ground. For instance, construction, cleaning, canteen services and security all tend to be functions that are performed by contractors. Some contractor jobs are needed on an ad hoc basis (e.g., construction), whereas others are relied on continuously (e.g. canteen services).
- Setting expectations: Ask yourself whether there are clear expectations of these contractors - and if they are managed by another entity, how that entity should treat contractors. Companies may think they have clear expectations of business partners. But in practice, these expectations are framed as applying to suppliers - and not contractors. We have found through our HRIA work that contractors often do not feel concerned by the company’s human rights expectations - unless it’s been made explicitly clear that those expectations apply to them. To address this companies can update their expectations. For instance, we worked with Unilever to support its revision to its Responsible Sourcing Policy so that it became a Responsible Partner Policy. This shift enabled the company to more easily roll expectations out to its partners beyond suppliers - including contractors - and to frame the expectations in a way that resonated for contractors. There will be times where you can rely on contractor expectations that have been already shaped by peers (e.g. the Voluntary Principles on Security and Human Rights when it comes to expectations of security contractors).
- Establishing trust and partnership: Enter into meaningful conversations with contractors to understand their operational realities - and challenges they are likely to face in practice. This dialogue can help build mutual understanding and can identify areas where the company can provide support to help contractors meet human rights expectations.
- Creating phased milestone approaches: There may be a wide range of issues it is necessary for the contractor to start to address. It can be helpful to create a phased approach - with the contractor - to take steps to address issues in a way that prioritizes addressing the most severe issues first, and creates clear milestones for when certain practices are to be in place.
- Enabling worker voice and trade unions: If contractors are able to organise themselves and voice their needs and grievances, this will ensure we can hear about issues pro-actively, before they escalate. Finding ways to ensure collective bargaining, and trade union rights within contractor settings can be particularly powerful. For instance, one company recently told us that it had put in place a forward-looking practice of asking its local trade unions to vet contractors, which included ensuring that workers were provided the option to join a trade union.
- Using facts, data and stories: We see that it can be particularly impactful for company to use a combination of facts, data and stories to illustrate how human rights impacts can manifest for contractors in practice. These can be used with management internally, to help make the case for allocating greater resource to this area, as well as with contractors directly - to show what ‘good’ and ‘poor’ practice looks like. This can be coupled with ‘the business case’ for responsible contractor management.
- Facilitating knowledge-sharing: Facilitating knowledge-sharing sessions between contractors enables them to learn from each others’ experiences in conducting robust HRDD, driving collective improvement. These sharing sessions are often more powerful than stand-alone trainings - although trainings also have value.
- Conducting a deeper-dive human rights impact assessment: Where there is a particular concern or where there is an endemic human rights issue that is being faced, it can be particularly valuable to conduct a deeper dive, for instance by conducting a human rights impact assessment. This will enable you to have access to workers, and understand where issues may be salient across a specific operating context. This in turn can feed into meaningful actions that can be taken.
- Using your leverage when it matters: It is typically at the outset of a business relationship that you will have most leverage to request certain things. Integrating expectations into RFP and contracts can help you set relevant expectation at the outset. One company we worked with found a way to trigger a new RFP process with existing contractors, as the opportunity to set stronger expectations when it came to working conditions and dormitories.
- Creating responsible contracts: There is a lot of discussion related to responsible contracts in the field of human rights due diligence, and this is relevant also for contractors. One company we worked with revamped its master framework agreement with contractors so that the expectations were clearer, but also so that there was greater support provided to contractors to support their ability to conduct their own human rights due diligence. The roll-out of the revised master framework agreement was viewed as the opportunity to raise knowledge levels with contractors of what was expected in terms of due diligence processes to adopt, as well as human rights themes and topics to pay particular attention to.
- Paying for responsible contractors: Having contractors that respect human rights might ‘cost more’ on paper, in the short term. For instance, by not resorting to to excessive overtime, we may need to use more workers. Paying insurance and buying appropriate PPE may cost more money. We know that these costs pay off over the longer term (e.g. better safety and fewer accidents, better quality work, insurance kicks when needed). But in the short-term, it is particularly helpful to ensure we are not under-cutting responsible contractor practices by resorting to the cheapest contractor option. This could entail working with procurement to ensure the costs of responsible contractor are incorporated.
- Incentivising responsible practices: There are a number of ways in which to incentivize responsible practices by contractors. For instance, one company we worked with had offered longer-term contracts to its security contractor, had offered to cover the cost of uniform, and had agreed to pay a sufficient amount in the contract that would enable the contractor to pay its workers a living wage. The change it found in terms of working conditions of its security guards was significant. The security guards felt respected following these changes, which also led to them performing their security role more effectively. Ways to incentivise stronger practices include longer-term contracts, greater volumes of work, higher contract amounts, faster payment, and other rewards. Commercial teams can be a good ally to bring in to start to discuss what might be possible to incentivise stronger practices.
- Minimising risk at the source: This may mean hiring people directly for the roles previously performed by contractors. This means that the company has greater visibility and control over the working conditions, which in turn minimises the risks. This may mean reducing the reliance on a large number of contractors, so that we focus on a smaller number so that due diligence is more manageable. For instance, one company shared with us recently that they had put in place a new rule to enhance their visibility and decrease their risks: they had limited the number of sub-contractors that could be used by construction companies, pushing these companies to re-think their staffing arrangements.
- Equipping business leads to identify red flags: It can be helpful to consider how to bring the business that is inter-acting with contractors every day into human rights due diligence. For instance, we’ve seen in our work that, when equipped, business counter-parts can raise issues such as working conditions with migrant workers or safety issues.
- Providing appropriate grievance mechanisms: Some companies offer a grievance mechanism that can be used by contractors. Others opt for building the ability of the agency hiring the contractor (if applicable) to build a grievance mechanism. In practice, there will be limits to the effectiveness of a grievance mechanism, unless the contractor using it feels that they can use it without retaliation, and that there will be a positive (or at least, fair) outcome to the grievance raised. This tends not to be the case, so great attention needs to be paid to structuring the grievance mechanism. Better to start smaller, and see what works for contractors in one context, in a meaningful and effective way. And then roll this out to other contractors, so that the grievance channel is fit for purpose and effective.
- Collaborating with peers: At times, there will be multiple companies working with the same contractors. In this case, it can be helpful for companies to work together. It can also be helpful for the contractors to align and coordinate. Building Responsibly is a strong example of engineering and construction companies coming together to raise the bar in promoting the rights and welfare of workers across the industry.
- Building the right regulatory framework: In some instances, the root cause for the issues found in contractors lie elsewhere. Perhaps, the lack of a regulatory framework, or the lack of enforcement. It can be helpful to consider whether there is a role for the company to play alongside other peers in helping shape a stronger enabling environment which seeks to prevent issues at source. A number of companies we work with have done this - for instance by engaging with regulators on a one-on-one basis, sending letters and requests, or convening roundtables that bring government together with worker representatives and others to help shine a spotlight on issues to tackle.
