OECD-FAO Business Handbook on Deforestation and Due Diligence in Agricultural Supply Chains

Step 4: Verify due diligence of deforestation

Abstract

Step 4 of the OECD-FAO Guidance is about establishing systems to track and monitor due diligence actions to make sure they are effective.

Strategic questions for enterprises

• Do we conduct due diligence assessments at key points in the supply chain (i.e. at control or choke points)?

• Are our due diligence assessments internally led or carried out by external third-party assessors, or both? Have we used external audits for any gaps to ensure that the assessment is comprehensive and considers different ways that deforestation occurs (e.g. through outsourcing to different suppliers, etc.)? If so, have we checked the independence and quality of those audits and the information flowing from them, and layered on our own risk-based monitoring and verification activities?

• What role can technology play in assessments of our due diligence actions on deforestation?

• Are there opportunities to partner with others in sharing data and reducing costs?

• How have we responded to third parties’ complaints on deforestation risks?

• If we use third party commodity or product certification schemes, do we know if these schemes are aligned to the OECD-FAO Guidance and the risk-based due diligence framework? If not, what steps can we take to make sure they are more aligned?

• How do we monitor suppliers with whom we do not have a contract, in order to effect change?

Track the implementation and effectiveness of due diligence activities

Enterprises should take steps to verify that their due diligence practices are effective, i.e. that risks have been adequately identified and prevented and adverse impacts have been mitigated. This involves both monitoring of impacts to assess and document the extent to which actions, progress, performance and compliance are being carried out or achieved; and verification of compliance, performance, and/or actions relative to a stated commitment, standard or target.

This process should be proportionate to the risk; take into account the capacities of various enterprises, as such processes can be costly; and where necessary, generate recommendations to improve due diligence practices.

Monitoring of the effectiveness of the enterprise’s due diligence process can draw on the types of information listed in Chapter 5 on types and potential sources of information on commodities and products; and on sources of information on deforestation. This monitoring should consider the following:

• Levels of deforestation, and levels of the risk of deforestation, in the areas from which the enterprise is sourcing commodities and products change over time and need to be continually monitored. The elements listed in Box 2 (on types and potential sources of information on commodities and products) will help to deliver information on the products and commodities in the enterprise’s operations and supply chains.

• The sources listed in Box 3 can help to identify deforestation in the supply area during the monitored period: any change in tree cover in this area constitutes an alert for which the level of the enterprise’s responsibility must be assessed.

Verification of the effects of the enterprise’s due diligence procedure include reviews of documents and internal control mechanisms, verification via satellite data, third-party audits,1 on-site investigations, and consultations with local communities, civil society and government authorities. The frequency and intensity of verification efforts should themselves be risk-based, in line with Step 2 of the OECD-FAO Guidance (identifying risks).

The results of monitoring and verification efforts should be fed back into the design and functioning of the due diligence system, as due diligence is a dynamic process. Where the risk has been mitigated or prevented, the enterprise should conduct ongoing due diligence to ensure that the risk does not recur, or that new risks do not appear.

The enterprise should also monitor its own internal control mechanisms and ensure they are robust and working as intended. Consultation and engagement with external stakeholders such as Indigenous Peoples, local communities, civil society and international organisations can help to identify problems and is crucial to the impartial and efficient verification of due diligence processes.

Suggestions for SMEs

All SMEs:

• Identify local NGOs and communities or international organisations with knowledge of the agricultural sourcing communities in your focus commodity sectors; speak to them regularly to triangulate information you receive from suppliers.

• Understand from your customers or existing regulations the type and frequency of data needed. Seek ways in which data can be pooled across customers, or how technology can be used to increase efficiency and reduce costs.

• Consult existing platforms that can help you to identify deforestation alerts in your supply areas.

• Consider working with partners and suppliers to introduce joint complaints or whistleblowing systems. The OECD National Contact Points for RBC can also be a resource in this regard.

• Consider using tools and indicators from industry initiatives, certification schemes, or deforestation platforms that you may be part of, to support your verification of due diligence.

• Work together with peer companies and industry groups to increase your leverage when deforestation risks persist within your supply chains.

• Team up with other suppliers, business associations and NGOs, if your leverage over a business partner is insufficient to encourage change.

In addition, upstream SMEs can:

• Ensure that your customers know how you verify and collect information, including the type of data collected, frequency of collection and who you work with in obtaining that data.

• Be transparent in communicating what information you do not have, and why.

• Discuss with upstream buyers how they may support your data collection activities and use their leverage and capacity, which may be greater than your own.

• Identify and support existing forest monitoring systems for your areas of supply whether based on community monitoring or remote sensing surveys.

Note

← 1.  Where an audit is deemed appropriate, the independence and quality of audits are critical to their effectiveness. Auditors should be independent, competent and accountable. Enterprises may consider using an independent institution responsible for accrediting auditors, verifying audits, publishing audit reports, implementing modules to build capabilities of suppliers to conduct due diligence, and helping to follow up on grievances of interested parties.