Integrating Responsible Business Conduct in Public Procurement

4. Conclusions and Recommendations

Abstract

This section consolidates conclusions and recommendations across the findings and analysis in this report. These conclusions and recommendations could serve as the basis for discussions among policy makers and stakeholders to prioritise actions to integrate RBC in public procurement going forward.

4.1. Take a comprehensive approach to integrating RBC into public procurement frameworks

Why is this important? A comprehensive approach to RBC objectives in line with international standards on RBC is gaining traction with business in their supply chain due diligence. Contracting authorities, including CPBs, are more likely to implement issues effectively on the basis of an overarching framework, accepted at the international level.

A majority of countries promote aspects of RBC, such as environmental issues, integrity, human and labour rights through public procurement, but comprehensive frameworks addressing RBC objectives along the entire supply chain are rare. For environmental RBC objectives, all countries have a form of framework in place. Over 90% of countries have a regulatory framework and over 80% have a strategic framework in place. Confirming previous studies, human rights in supply chains are less well-covered. Labour rights, people with disabilities, and integrity-related policy objectives are also typically included in regulatory and strategic frameworks, but RBC objectives such as gender, minorities, and long-term unemployed are covered less frequently. CPBs have their own organisation-specific frameworks that translate these national frameworks into their own work. These institutional frameworks include RBC objectives to a similar extent as national frameworks.

Regulatory or strategic frameworks on RBC objectives rarely apply to the full supply chain. The RBC objective with the largest extent of application is labour rights, where more than half of countries require application of regulatory or strategic frameworks in the entire supply chain at least in specific cases.

CPBs’ institutional policies and strategies cover the entire supply chain in only about a fifth to a quarter of certain RBC objectives such as the environment, human and labour rights and integrity. For other RBC objectives, such as minorities or disabled persons, many countries do not foresee binding requirements for subcontractors.

Across all RBC objectives, achieving policy coherence nationally and alignment with international obligations were the most important reasons to create a framework, named by around a third of the countries for both reasons.

4.1.1. Recommendations:

• Governments could promote RBC in public procurement in an increasingly comprehensive manner in terms of the objectives covered and the coverage of the entire supply chain, in line with the OECD Guidelines for Multinational Enterprises and other international standards on RBC.

• Governments could incentivise appropriate transparency in subcontracting relationships by requiring bidders to disclose RBC commitments throughout their sub-contractual arrangements and extend due diligence beyond main contractors to the full supply chain.

• Practitioners could leverage existing efforts to improve due diligence practices, tools and approaches to map the supply chain, identify priority actions and develop plans to prevent, mitigate and address risks.

4.2. Integrate stakeholder perspectives to develop more effective frameworks on RBC in public procurement

Why is this important? Regulatory and strategic frameworks are most successful where they reflect and utilise the comprehensive knowledge and perspectives of relevant stakeholders and experts.

Stakeholder feedback has shaped regulatory and policy frameworks, but further efforts could be undertaken to break silos between public procurement and RBC. About two-thirds of countries consult with both businesses and contracting authorities in the development of regulations or strategies. All countries consult with relevant policy makers beyond public procurement for specific topics. For strategic and regulatory frameworks relating to human rights, labour rights, unemployed and disabled people, workers organisations are often consulted. A little over a third of countries contact National Contact Points for Responsible Business Conduct (NCPs) when developing RBC frameworks.

Recommendations:

• Public procurement policymakers could strengthen links with institutions tasked with pursuing RBC objectives as policy makers and oversight bodies (notably NCPs) and incorporate their expertise when developing and updating frameworks on RBC objectives in public procurement, maintaining regular exchange to build capacity (see item 5.4).

• Further engagement with civil society, business and social partners in the development of frameworks should also be promoted to better understand risks in specific sectors, product categories, supply chains and regions.

4.3. Integrate RBC objectives throughout the public procurement cycle

Why is this important? Market engagement can provide the necessary knowledge to gain insight into RBC risks that might otherwise go unnoticed and incorporate RBC objectives in a meaningful and effective way. Adopting an RBC lens in the post-tender phase allows assurance that RBC objectives have been met, and creates an opportunity to gather data and insights for future purchases, and making improvements over time.

RBC objectives do not feature at all stages of the public procurement cycle to the same extent – and not all RBC objectives are pursued to the same extent A minority of CPBs consult with business always or often in the pre-tender phase across RBC objectives. 53% of CPBs always or often consult with businesses regarding environmental considerations. There is a lack of consultation with regards to the other considerations such as human rights, labour rights, minorities, long term unemployed, disabled people, minorities and integrity. A lack of market engagement was also cited by companies as one of the three most significant challenges in incorporating RBC criteria in contracts.

More than two thirds of CPBs incorporate environmental requirements into qualification requirements. Around 60% incorporate integrity and labour rights requirements. Social considerations, such as the inclusion of minorities, support for disabled persons or long-term unemployed, are incorporated considerably less. Uptake is even lower in award criteria, and reflects a similar picture: environmental and integrity considerations are considerably more frequently incorporated than social RBC objectives.

Verification of requirements focusses on the main contractor and on the same issues – environmental, integrity and labour rights: Around 70% of CPBs verify compliance of integrity-related contract terms prior to awarding a contract. Around half of CPBs verify compliance with integrity-related contract requirements in the supply chain in specific cases. Mandatory verification on the subcontractor level only takes places for integrity objectives and labour rights, and only in few countries.

4.3.1. Recommendations:

• Public procurement practitioners could aim to increasingly incorporate RBC objectives at all stages of the procurement cycle, from market engagement to contract management, with attention to contractual obligations.

• Public procurement practitioners could build on the experience of incorporating environmental and integrity objectives and expand practices to other RBC objectives.

• Public procurement practitioners could use market engagement in the pre-tender phase as widely as possible to communicate government priorities on RBC objectives in public procurement and to understand the market maturity well before the procurement is formally launched.

• Governments could increasingly ensure the public procurement system is equipped with sufficient capacity in terms of available skills and resources to integrate RBC objectives throughout the public procurement cycle (see recommendation 4).

4.4. Improve contracting authorities’ knowledge, capacity and ability to integrate RBC objectives into public procurement

Why is this important? Good implementation depends on the capacity of those who are tasked with implementing.

Contracting authorities have an increased need for resources to meet a broadened set of demands: 1) incorporating RBC objectives into tenders, 2) managing sustainability risks and 3) consulting diverse stakeholders. The top challenge named by policymakers across the eight RBC objectives is “a lack of understanding as to how to implement this policy through public procurement”. RBC objectives related to minorities were most frequently named, presenting a challenge for half of the responding countries followed by human rights (41%).

A minority of countries (30% and less) offer guidance or training on implementing RBC objectives like minorities or gender. Under a third offer training on human rights issues – one of the areas with the greatest lack of understanding, according to policy makers.

Providing a central contact point with expertise has proved effective in building the capacity of public procurement systems as a whole. To address the increased need for expertise, some countries have established knowledge and expertise centres that focus on sustainable development issues, including RBC objectives. This approach illustrates how focusing expertise and resources on particular topics can help disseminate knowledge throughout the public procurement system.

4.4.1. Recommendations:

• Governments could aim at providing contracting authorities and CPBs with adequate resources and expertise to support practical implementation of RBC objectives into procurement strategies as much as possible, for example by creating dedicated focal points in the form of expertise centres or helpdesks specifically on RBC and public procurement, develop a specific training action plan to train procurers on RBC, or to train and connect RBC champions in contracting authorities. The role of technology could also be considered to improve efficiencies.

• Policy makers and practitioners could convene an international platform to exchange on solutions in implementing RBC in public procurement. The platform could focus on exchanging tested approaches to increase uptake of RBC objectives in public procurement. Initial examples could focus on effective monitoring and existing training on risk-based due diligence in supply chains. The platform could leverage existing national knowledge centres and tools on due diligence (e.g. existing risk management strategies for mapping, detecting and mitigating risks throughout the public procurement cycle, follow-up tools, supplier self-assessments, etc.) to be shared with other public purchasing authorities. The platform could also convene and solicit input, feedback and sharing of due diligence tools, programmes and lessons learned in conducting due diligence from business, trade unions and worker representatives, as well as civil society.

• Practitioners on both public procurement and RBC could collaborate and exchange information on tools and good due diligence practices, including in planning, tendering and monitoring. This could include notably closer exchange with NCPs to leverage understanding of RBC and OECD recommendations on due diligence.

4.5. Improve monitoring and follow-up of the implementation of RBC objectives in public procurement

Why is this important? Citizens, businesses and governments (practitioners and policy makers) gain from monitoring in two ways: through the confirmation that RBC expectations have been met, and through performance data for future purchases. Higher levels of visibility on public spending throughout all levels of government would provide a clearer picture on what RBC objectives are in scope and what progress is being made towards achieving them.

Monitoring the implementation of RBC objectives faces challenges – limitations concern the coverage of RBC policy objectives, supply chain and consistent implementation across different governmental levels. Overall, monitoring and reporting of the uptake of RBC objectives is inconsistent. More than 80% of countries monitor the uptake of environmental considerations set by frameworks at least partially. This is followed by the monitoring of labour rights and disabled people (over 60%). The implementation of other RBC objectives set by frameworks (like inclusion of minorities) is monitored less. In addition, verification of requirements typically focuses on the main contractor. Almost all policy makers answered that they had no visibility on the procurement activities of sub-national governments. Some countries do not conduct standardised monitoring but rather seek ad-hoc reporting in the form of a survey, questionnaire or audit.

Countries draw on diverse tools, methodologies and stakeholders to enhance monitoring. Countries such as Canada have certification frameworks in place for human and labour rights that identify breaches in supply chains. They have developed a system that includes clauses in contracts to ensure that the main contractor is responsible for addressing any such breach. In Denmark, the NCP plays an important role in monitoring public procurement activity on relevant issues.

Follow up actions to monitoring can catalyse uptake of RBC objectives in public procurement. Half of the countries have frameworks that allow for actions to be taken against suppliers if their supply chain infringes RBC standards, and most of them include sanctions. Approximately 30% require changes to the supply chain.

4.5.1. Recommendations:

• Governments could undertake more comprehensive and systematic monitoring, and extend it to key points in the supply chain. In doing so, governments should co-ordinate efforts with the existing audit institutions or assessment programmes.

• Public procurement policy makers could develop effective and cost-efficient methods for follow-up during contract execution and monitoring that contracting authorities (including at the sub-national level, to the degree possible) can draw upon.

• Policy makers could consider including mandatory responses in case of serious violations or infringements.

• Governments could leverage existing RBC-focused networks, such as the NCP network or public procurement networks, or work with other stakeholders to help improve monitoring and tracking.

4.6. Integrate a risk-based due diligence approach to enhance strategic public procurement

Why is this important? A risk-based due diligence approach helps procurement practitioners understand the conditions under which goods are produced, manufactured and transformed. Due diligence is a key concept within international frameworks for RBC promulgated by the UN, the ILO and the OECD and is increasingly integrated into national legislation across many OECD countries. Risk management is also one of the 12 integrated principles of the OECD Recommendation on Public Procurement.

There are a number of public procurement practices that use a due diligence approach. Several countries, like Norway and the US, have developed risk-assessment tools to assist contracting authorities to identify and prioritise risks in their supply chains. Several provide contracting authorities with a practical approach by focusing on high-risk products and categories as a priority.

Almost 80% of CPBs have developed risk-management frameworks that include a subset of RBC objectives (notably environmental, labour right and integrity considerations). 85% of CPBs have identified high-risk purchasing categories in relation to their procurement activities. More than 50% of CPBs require in all or in specific cases suppliers to certify that they know their supply chain, but only a limited number of CPBs require suppliers to actually conduct due diligence. This was mainly in relation to the policy objectives of labour rights, integrity and human rights. For other RBC objectives, even fewer CPBs require suppliers to conduct due diligence.

4.6.1. Recommendations:

• Contracting authorities could integrate the risk-based due diligence framework recommended by the OECD into public procurement practices.

• Policy makers could explore how existing national risk-assessment strategies and tools, and existing business or multi-stakeholder approaches, can be adapted to reflect international standards on due diligence and best serve the needs of public procurers.