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NB. This article was published as part of the VBDO thematic study, Towards a Responsible Value Chain – The role of investors and the CSDDD.
Approach to due diligence
First and foremost, it is key to have insight into your value chain. Currently, we are working on a report for the World Economic Forum (WEF) Good Work Alliance, from a value chain perspective, which will help us gain a better understanding of our value chains. One of the driving forces behind this report is incorporating the worker perspective. Working conditions, workers’ rights, and remuneration in Europe are very different to those in India, (South) Africa, and South America – the Global South. The current regulatory approach often attempts to fit diverse situations into a one-size-fits-all framework, which can overlook the unique complexities involved. In our approach, we want to highlight the contextual and regulatory requirements as well as the differences between our business models. This will help us identify where value is added, both to the business and to the (local) economy. In doing so, we are exploring the nuances of value chain workers within the on-demand platform business model.
How to address the value chains
As investors, we establish best-practice guidelines to help companies improve their practices. While companies may not initially meet these standards, we provide guidance and encourage them to adopt and build towards best practice over time. The company has to decide on the strategies and cascade those guiding principles further. We make sure they are regularly reporting data on topics such as minimum wage requirements and health and safety issues and that they are ensuring the voices of their workers are heard. In the first year of establishing these guidelines, a key outcome was assessing how many companies had adopted and tailored these guidelines to fit their specific context. We published these outcomes to ensure accountability and demonstrate our intentions and commitment. We continuously monitor the companies to see how they are doing. Companies remain cautious about sharing data publicly, fearing repercussions from regulators or customer groups for making bold claims. What we need is more engagement on best practice to allow development and learning.
Example from practice
In our extended value chain, we have a meaningful footprint of on-demand platform workers. This workforce demographic varies from traditional businesses, with regional and business model differences making it even more complex to apply simple definitions and categorisation. It is important to understand the nuances of the business models and their value chains to be able to engage and drive best practice. Our approach is to start with putting effort where we can have the most influence. For example, we can influence our subsidiaries, such as iFood in Brazil, more than a company, such as DoorDash, where we only have a small minority investment.
iFood has been a leader in our group in their approach to value chain workers. They started with understanding the worker perspective through focus groups to assess the experiences of the workers themselves. The focus groups and sample surveys enabled iFood to learn about some of the most critical issues their employees were facing: harassment, discrimination, and violence linked to racism and classism towards the delivery partner in some parts of the country. iFood also formed a permanent working group to discuss operational problems and improvements and created a channel for delivery partner leaders to submit collective demands. iFood also recently started up a women’s lab to identify demands specifically raised by women, which has met with over 60 women driver groups around Brazil. They also rigorously monitor safety and are working to establish additional rest stops with refreshment and toilet facilities. Furthermore, as part of its social impact strategy, iFood helps drivers obtain high school diplomas, to address Brazil’s high dropout rates. These drivers can then qualify for other employment opportunities. The goal is not to confine them to their delivery roles but to empower them with the skills to pursue the best possible livelihoods.
Within our Group we collaborate across businesses so we can make progress and learn together. For example, for the companies with a delivery footprint, we have two working groups that enable cross-learning and collaboration. One is focused on fleet electrification and the other on worker welfare. Creating a space for sharing and developing is key to growing understanding and improving practices. We can only get these insights when we go beyond the third-party provider for a deeper understanding of drivers’ experiences and then make improvements.
How regulation contributes to change
Legislation such as the CSDDD will likely have a significant impact on due diligence processes. These changes may be beneficial in the long term but are likely to create considerable stress within supply chains in the short and medium term, particularly outside of Europe, as many value chains extend into the Global South.
Some tech firms are engaging lower supply chain tiers, but there remains a gap in training and support, because it requires considerable investment to gather data on a consistent basis to facilitate due diligence processes. As an African company with roots in the Global South, we have a deep sense of justice for the Global South. Because we want our companies to succeed, we spend a lot of time with them to build capacity as fast as possible down our value chains. One way we would like to see capacity building being addressed is through industry collaboration. When companies adopt a unified methodology, suppliers can report their data through a single, streamlined process rather than via multiple formats. Such collaboration benefits both parties, so investors need to align their asks.
It comes down to who will bear the brunt of the resource burden. Capacity building is not inherent to the CSDDD and requires companies and investors to take action. When we apply these regulations, we need to think about what we want to achieve. We want to enforce uniform application of standards to ensure sustainability and put safeguards in place to avoid harm in the value chains. It is critical that the voices of the supply chain in the Global South are embedded in both legislation and in its implementation.
Some companies maintain a strict stance towards their suppliers: either you comply or you’re out. However, this means you’re then walking away from the opportunity to drive change. While engagement for improvement and facilitating progress is more challenging and time-consuming, it benefits society in the long run.
We are committed to actively engaging with our companies. When we acquire companies, they may still be building their ESG strategies. We implement a maturity plan to work with these companies and assess their progress annually. We will not solve their issues the very next day, so walking away is not the right strategy. Instead, continuous engagement is the key to unlocking a more sustainable and equitable future.
