Workshop 1 on the use of digital tools in the due diligence process

The first company workshop on 3 December 2024 in Leipzig focused on the use of digital tools for transparent supply chains. Below you will find the key results of the workshop:

Opportunities – efficiency and scalability, streamlined processes, simplified documentation and mobile apps for grievance mechanisms

• IT tools enable the automated collection and analysis of large datasets and help to identify risks in a more systematic way. They also help to meet regulatory requirements more efficiently, including through automated reporting systems.
• Digital solutions can simplify the traceability of products and raw materials.
• Mobile apps for grievance mechanisms can provide an easy and accessible way to report issues to affected parties.

Fields of application – mapping, supply chain transparency, risk analysis

• Most tools assist companies with the risk analysis. By analysing publicly available data, some tools allow companies to create a ‘heat map’ for an abstract risk assessment.
• For the concrete risk analysis, tools might facilitate self-disclosure inquiries (e.g. through questionnaires) and support document uploads (e.g. codes of conduct). However, it is important to follow a risk-based approach and ensure data quality. Rather than asking all suppliers about everything, companies should focus on specific topics with selected suppliers.
• It is important to note that these tools should be integrated into a company’s due diligence process rather than fully replacing it.

Challenges – data quality, lack of interoperability and standardisation

• While many tools increase transparency in supply chains, they often cover only the first tier. Reliable data for high-risk suppliers, especially in the deeper supply chain, may be lacking.
• The wide variety of IT solutions can result in incompatible and non-interoperable data formats and evaluation methods.
• Processing sensitive supply chain information carries data protection risks, especially when data is handled by third parties or platform providers. Companies should aim for minimal data collection and follow a risk-based approach.
• Self-disclosed information should be corroborated through additional steps.
• IT tools typically provide raw data only. It remains the company’s responsibility to take action based on this data.

Tips for tool selection

• Ensure that data sources are transparent and traceable.
• Verify the origin and quality of the data sources.
• Design questionnaires that focus on procedures and processes for identifying and mitigating risks. Instead of asking direct questions like “Do you use child labour?” consider more insightful questions such as “Is the minimum hiring age verified?”
• Choose IT applications that are interoperable and integrate smoothly with existing management systems. (Note: Standards for data exchange and compatibility between different systems can enhance interoperability. Open-source tools or cooperative platforms may also facilitate collaboration among companies.)
• Opt for tools that offer flexible use without promising misleading compliance guarantees.
• Costs should not be disproportionately passed on solely to suppliers.