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Monitoring of the implementation status of human rights due diligence by companies in Germany

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Importance and objectives of monitoring

Between 2018 and 2020, the Federal Government is conducting a survey in accordance with academic standards to assess the extent to which companies based in Germany comply with the due diligence obligation set forth in the NAP. For the NAP monitoring, the National Action Plan has set as a target to find out to what extent at least half of all companies in Germany with more than 500 employees will have integrated the core elements of human rights due diligence into their business processes by 2020. This group comprises a total of around 7,100 companies. The Federal Government will review the implementation status in two survey phases from July to October 2019 and spring 2020. The outcome will determine which steps the Federal Government will take in the area of business and human rights after 2020, including legislative measures.

The current coalition agreement has this to say: We are committed to the consistent implementation of the National Action Plan on Business and Human Rights (NAP), including in public procurement. If the effective and comprehensive review of the NAP 2020 concludes that the voluntary commitment of companies is not sufficient, we will take national legal action and work towards an EU-wide regulation. (p. 158)

Only if companies provide information as part of the monitoring process can meaningful results be achieved concerning the NAP implementation status. The Federal Government therefore asks all companies included in the samples to actively participate in the survey. It is also requested that the trade associations, chambers of commerce and industry and the social partners promote participation in the monitoring by their member companies. In November 2018, the Federal Minister for Foreign Affairs, the Federal Minister of Finance, the Federal Minister for Economic Affairs and Energy, the Federal Minister of Labour and Social Affairs and the Federal Minister of Economic Cooperation and Development wrote to all companies in Germany with more than 500 employees with information about the upcoming NAP monitoring process.

The Federal Government has commissioned the accounting company Ernst & Young, which won the EU-wide tender for the contract in May 2018, to do the surveys. Ernst & Young leads a consortium including Systain Consulting, Adelphi consult and Focusright.

The Federal Government considers it essential to ensure that the monitoring process is transparent and methodologically sound in accordance with academic standards. The contractor is to develop an evaluation methodology for the assessment of the implementation status of the core elements by the enterprises. The assessment system ensures that the requirements for the design and implementation of the core elements by the companies are appropriate. The analyses are to be carried out anonymously and in accordance with the applicable data processing legislation.

Within the Federal Government, the monitoring process receives guidance from the inter-ministerial committee on business and human rights (IMC), which comprises ten ministries and is led by the Federal Foreign Office.

The participation of the various stakeholder groups is ensured through the involvement of the business and human rights working group. This involvement includes both setting up the monitoring system and participation in the key stages of the process. The working group is a multi-stakeholder body of the Federal Government's National CSR Forum in which associations, trade unions and civil society groups take part. It actively gives input on the design and implementation of the monitoring. In addition to this, the contracting authority, the Federal Foreign Office, and the implementation consortium around Ernst & Young presented the approach and interim results of the monitoring to a broader public in a dialogue event.

Interim report: initial results and further procedure

Initial interviews were held with 30 companies in the fall of 2018 ("explorative phase"). Statistically representative results were not sought in this phase. There were also discussions with nine representatives of stakeholder groups, i.e. social partners, business associations and non-governmental organisations. The so-called "Inception Report" of September 2018 served as the working basis for the procedure in this phase.

The interviews provided valuable insights into how the comprehensive company surveys of 2019 and 2020 should be structured. The first interim report on the NAP monitoring of July 2019 presents the findings and methodology for the quantitative surveys in detail. This also includes the questionnaire. A summary at the beginning of the interim report provides a quick overview. After intensive consultations, all ten ministries on the Interministerial Committee (IMC) for Business and Human Rights approved the interim report. The Business and Human Rights Working Group of the National CSR Forum was involved in the drafting phase of the interim report.

Survey phases 2019-2020 of the NAP-Monitoring - active participation as the foundation

In the years 2019 and 2020, representative samples of companies with 500 or more employees based in Germany will form the basis of the surveys. By the end of the period for the first survey on 31 October 2019, more than 400 companies had participated. This means that the minimum number of valid company responses as defined by the Federal Government on the basis of an established statistical methodology has been reached - representative results are possible. The data will now be evaluated in accordance with the procedure explained in the interim report (link). The aim is to publish a report on the results of the 2019 survey at the beginning of 2020.

The Federal Government will repeat the survey in spring 2020. The final report will be published in summer 2020. Then, the sample will be redefined and will therefore not be identical to the 2019 survey. The contractor for the NAP monitoring, the accounting company Ernst & Young, will write to the sample companies and, as a first step, provide them with an online questionnaire. In addition, the contractor will use publicly available information to check the plausibility of the implementation status information and, if necessary, supplement the evaluation by surveying external company stakeholders (such as NGOs and multi-stakeholder initiatives).

Federal Foreign Minister Maas said in July 2019 before the start of the first survey: Companies in Germany are now called upon to report on how they ensure respect for human rights in their business processes - and the challenges they face in doing so. The companies surveyed must now seize the opportunity and respond in large numbers.

The human rights due diligence requirements anchored in the NAP will be deemed to have been implemented if a company has adequately introduced all five core elements of human rights due diligence. Monitoring will also take into account the possibility that a company may have good reasons to think specific risks are not applicable to it or that it cannot (yet) implement certain procedures and measures. The questionnaire will provide an opportunity to give an explanation for these cases ("comply or explain mechanism"). This explanation will be included in the review of the NAP implementation status and can be evaluated positively if presented in a comprehensible manner. In the questionnaire, companies can show implementation planning for individual NAP requirements through the end of 2020. This planning must be credible, concrete and relevant to the situation. Starting at the beginning of 2021, the actual implementation of the planning by the companies concerned will be verified. Until then, such companies will not be considered compliant or non-compliant. The final report, to be presented in summer 2020, will then be added to in the light of the retroactive validation. Companies that do not provide information cannot be considered as having met the NAP requirements; in particular, they cannot be counted in the group of companies meeting the requirements of the NAP. Companies that do not respond are nevertheless to be included in the overall evaluation of the NAP monitoring. The report on the results of the monitoring will analyse the extent to which certain structures of failure to provide information that are not statistically random can be identified in the behaviour of the sampled firms.

Evaluation of the monitoring and handling of the results

The evaluation of the results will be strictly anonymous and will take place separately for each survey phase. The results will be summarised and evaluated in terms of degree of implementation, challenges and expense for companies. The aggregated results will be presented to the business and human rights working group of the National CSR Forum of Germany’s Federal Government and subsequently made available to the public.

The result of the 2020 survey will be decisive for assessing whether the implementation status has reached the target set down in the NAP. In 2020 when the current NAP period ends, the Federal Government will prepare an updated status report, which will include both the results of the NAP monitoring effort and information on the implementation of the approximately 50 measures to which the Federal Government has committed itself in the NAP.