What is an adverse impact, and when is it severe?
An adverse impact is an impact that your company has, or potentially has on human rights, the
environment or key elements of economic sustainability, i.e., anti-corruption, -competition or tax.
An adverse impact occurs when a business activity removes or reduces the ability of a rights holder to enjoy a human right, burdens the environment, or involves practices such as corruption, anti-trust behaviors, or unethical tax avoidance.
The severity of an impact is determined by evaluating three key parameters:
- Scale: This refers to the gravity or seriousness of the impact for the affected party or parties. For example, it considers how significant the impact is on stakeholders, such as exploitative child labor, or the environment, such as groundwater pollution.
- Scope: This relates to the number of stakeholders affected or the extent to which the impact is widespread. It considers how many people are affected by the impact or the size of the omission. For instance, adverse impacts on the right to health due to the sale of expired food may affect numerous customers, or pollution may affect a large geographical area.
- Irremediability: This parameter assesses the potential for remediation, i.e., the ability to make the impact right again for all parties involved. It considers whether it is possible to fully restore the situation for those affected. For example, if a person loses their life, the impact is severe because it is irremediable.
It is important to evaluate all impact risks individually, using the three parameters. While management of all adverse impacts is necessary, these parameters can guide prioritization, if necessary, of actions to address impacts.
Typically, business relationships can and should address all risks of adverse impacts that they cause or contribute to. It shall be noted that prioritization may become necessary when acting in relation to risks of impacts that the company is merely ‘linked to’, through business relationships. Prioritization and immediate action are particularly important, when delays may result in the impact becoming more severe.
Who should we inform if we cause, contribute to, or are linked to severe adverse impacts?
You should immediately contact your reference person in ICL and inform them of the impact(s) and how you plan to manage them if you have not publicly communicated about this. Through dialogue, we evaluate sufficiency of (planned) efforts.
If ICL learns, that you have not immediately communicated about or informed us of severe adverse impacts, this will constitute a material breach of contract.
When is my company causing, contributing to, or linked to an adverse impact?
Causing an adverse impact on human rights, the environment, or economic sustainability refers to situations where your company's activities or omissions (may) result in negative effects without the involvement of a third party. For instance, if your company engages in discriminatory practices during hiring procedures.
To contribute to an adverse impact on human rights, the environment, or principles of anti-
corruption means that your company’s activities or omissions, in combination with a third-party’s activities or omissions, lead to (risks of) adverse impacts. When your company contributes to an adverse impact, there is a causality between your activities and the negative consequences. Further, you should to a reasonable extent have been able to foresee (i.e., expect or predict) that the adverse impact could occur. For example, if you ask a small supplier to deliver the double amount at half the time, you should be able to predict that such an action may lead to adverse impacts on the supplier’s employees’ right to rest and leisure and right to safe and healthy working conditions.
Being linked to an adverse impact on human rights, the environment, or economic sustainability means that there is a direct link between a third-party causing or contributing to an adverse impact, and your products, services, or operations. When you are linked to an adverse impact, there is no causality between your company’s actions or omissions and the adverse impact, but your company is in a business relationship to the third-party. For instance, if you have a supplier that fails to responsibly manage its wastewater, it can result in the pollution of the local water supply.
What requirements do you have in relation to conducting regular impact assessments?
We expect you to conduct regular impact assessments by identifying your potential and actual adverse impacts on the social (human rights), environmental and economic sustainability areas.
We further expect a description of your prevention and mitigation efforts regarding adverse impacts, as well as your actions taken to provide affected parties with access to remedy in the event of an actual adverse impacts. It is important to keep track of how effective your actions are and involve those affected by the adverse impacts in decision-making. Whenever possible or necessary, dialogue with public authorities should also be pursued.
Finally, we expect that you describe what grievance mechanisms you have in place to ensure access to remedy to affected stakeholders.
Where can I access additional information and receive guidance to align with the expectations outlined in your CoCBR?
ICL’s CoCBR reflects the globally agreed minimum standard for responsible conduct concerning business impacts on human rights, including labor rights. Additionally, it reflects the standard agreed upon by OECD countries regarding business impacts on the environment and risks associated with economic sustainability, including corruption. You can find the standards here: https://www.ohchr.org/documents/publications/GuidingprinciplesBusinesshr_en.pdf,
The standards cover the requirements for responsible business conduct reflected in our CoCBR on all three bottom lines: 1) Social, 2) Environmental, and 3) Economic sustainability. You can read more about the international requirements through UN publications and interpretive guides.
- UN FAQ on the UNGPs: https://www.ohchr.org/documents/publications/faq_principlesbussinesshr.pdf; and
- The UN Interpretive Guide on the UNGPs: https://www.ohchr.org/Documents/Publications/HR.PUB.12.2_En.pdf.
Small and medium-sized enterprises can further acquire information on implementation through the EU Guide for Small and Medium sized Enterprises. This Primer on the International Minimum Standard also provides for a good overview.
 UN FAQ on the UNGPs: https://www.ohchr.org/documents/publications/faq_principlesbussinesshr.pdf; and The UN Interpretive Guide on the UNGPs: https://www.ohchr.org/Documents/Publications/HR.PUB.12.2_En.pdf
Where can I access the guidelines for human rights, labor rights, environmental and economic sustainability, that you are referring to?
All our business relationships must manage their adverse impacts on all three bottom lines referenced in our CoCBR. The specific areas are included in the following declarations and conventions:
- Human rights including the core labor rights: The UN’s International Bill of Human Rights (IBHR) For an overview, see https://csrcloud.com
- Environment and climate: The Rio Declaration on environment and development and the Paris Agreement For an overview, see https://csrcloud.com
- Economic: UN Convention Against Corruption and the OECD Guidelines For an overview, see: https://csrcloud.com/
This Primer on the International Minimum Standard in Annex II provides for a full overview of the areas.
What does the implementation of a management system in compliance with ICL’s CoCBR involve?
Our CoCBR is based on the international standards (UNGPs/OECD) for responsible business conduct.
To ensure responsible practices, it is necessary to implement a management system that regularly identifies and manages risks associated with adverse impacts on all three aspects of sustainability: human rights (including labor rights), the environment (including climate), and the economy (including anti-corruption measures).
To establish this management system in compliance with the standard referenced by our CoCBR, you should implement the three following procedural elements in your company:
- Policy Commitment: You need a policy commitment that is:
- Approved at the most senior level in the company.
- Informed by relevant internal/external expertise.
- Stipulates the businesses expectations of stakeholders, at minimum employees and business relationships.
- Publicly available and communicated internally and externally to relevant
stakeholders, including your employees and business relationships.
- Reflected in operational policies and procedures to integrate it throughout
the entire business.
- Sustainability due diligence : You shall continuously: Identify your actual and potential adverse impacts on all three bottom lines, Prevent or mitigate the impacts that you may cause or contribute to, and Measure the effectiveness of your actions and communicate your work.
- Access to remedy:
- Should you identify or be informed of the fact that you are causing or contributing to actual adverse impacts, you must ensure access to remedy for the affected parties through effective grievance mechanisms. These mechanisms should be directed towards those individuals and groups who could be affected negatively by the activities of your company. In relation to actual significant impacts in the areas of environment and economic sustainability, you may need to contact the appropriate authorities.
It is your responsibility to establish a management system by implementing these three procedural requirements. If ICL has sufficient resources to engage, collaborative implementation can be carried out in coordination with us.
It is important to remember that all businesses always will have potential adverse impacts. It is your responsibility to establish the process of identifying, preventing, mitigating, remediating, and communicating about these adverse impacts that are central for your compliance with our CoCBR and thereby the international minimum standard.
Since our CoCBR represents the minimum to be expected from any business relationship, it is a requirement from the international standard that you raise similar requirements to your business relationships.
I operate a small business – do I really have to comply with all the above?
The international requirements for responsible business conduct, which are reflected in our CoCBR, apply to all companies, whether large or small, and, therefore, form an international minimum standard. The UN and the EU, in addition to business organizations, trade unions and civil society, all support these requirements.
All businesses are subject to these requirements because all businesses risk having
adverse impacts on human rights, environmental, and economic sustainability.
Small and medium-sized enterprises usually have smaller capacities and more informal processes and management structures to manage these risks compared to larger businesses. Hence, the processes of small and medium-sized enterprises may often appear different and less complex. Our expectations regarding documentation will also be less stringent. However, we expect all our business relationships to demonstrate how they have established appropriate policies and processes and that these policies and processes reflect the company size, sector, and context.
How fast does ICL expect that our company can implement a management system that complies with ICL’s CoCBR?
The implementation of a management system is a continuous process. Our business relationships are required to account for implementation of the management system in compliance with UNGPs/OECD within 2 years from when they were first introduced to these requirements in our CoCBR.
This includes the adoption of a policy commitment, the implementation of a sustainability due diligence process (including documentation of the latest impact assessments from the part of your business that is directly linked to ICL) and the establishment of complaint (or ‘tell us’) mechanisms that provide access to remediation in the three areas of human rights, environmental, and economic sustainability, see also section 7. In addition, you should be able to document that you expect your business relationships to meet the standard, i.e., the UNGPs/OECD.
How frequently can we expect visits, comprehensive questions, or self-evaluation requirements from ICL?
ICL can send comprehensive questions, requirements of self-evaluations and in some cases
visit selected business relationships. The frequency of our contact will depend on ICL’s risk
assessment of the business relationship in question.
Business relationships that are open and transparent about what measures they take to live up to the minimum standard as referenced in our CoCBR, will be met with fewer questions and requirements.
Should a specific situation occur, such as a journalist’s inquiry into questionable actions, you will have to expect an increase in elaborate questions, self-evaluation requirements and/or possible visits.
Through this, ICL aims at increased cooperation, where ICL will be able to help and guide you in the implementation of a proper management system. If your company causes, contributes to, or is linked to severe adverse impacts on any of the three pillars of sustainability, and you are unable to demonstrate proper management of such impacts, the communication between you and ICL will likely intensify. We will work towards ensuring that you effectively manage the risks of the adverse impacts.
What does ICL expect of us in relation to our business relationships’ work regarding ESG/CSR/RBC?
We expect that you state to your business relationships that they are obligated to meet the international minimum standard outlined in the UNGPs/OECD. When we require you to establish the mentioned management system, it includes that you as a minimum set corresponding requirements to your own business relationships.
We do not expect you or your business relationships to adhere to self-imposed standards or arbitrary requirements. Our expectation is that you meet the internationally recognized minimum standard for responsible business conduct—nothing more, nothing less.
We expect that you cooperate and engage in a dialogue with business relationships about establishing the management system. This, however, does not mean that you will be held accountable for the actual establishment of your business relationships’ management systems; however, you will be held accountable for raising those expectations with your business relationships.
If any deficiencies are identified within your business relationships, it is expected that you utilize your leverage to ensure they effectively manage their own adverse impacts, in accordance with the UNGPs/OECD.
Could ICL terminate our contract because we have not implemented the CoCBR?
We may terminate our contract on this ground. However, it is more likely that ICL will not end the relationship before there has been more dialogue on upcoming initiatives, which clearly show
improvements towards compliance with our CoCBR. We may even commit to develop capacity in collaboration with you and enter a dialogue about an implementation plan for the next steps of full implementation of the CoCBR.
Should we not be able to see any real commitment or actions from our business relationships, and possibly a lack of willingness towards collaboration, ICL would need to consider whether the business relationship should end.
Should you cause, contribute to, or be linked to severe adverse impacts, and do not publicly communicate about this or make us aware of these impacts and how you are managing them, this will also constitute a material breach of our contract and may lead to a termination of the contract.
Why did ICL opt to base their responsibility in business relationships on the UNGPs/OECD?
We have chosen to base our approach to responsibility in business relationships on the
UNGPs/OECD, because they provide an authoritative international reference point to responsible business conduct.
From our own experience, we find the implementation can improve performance and help in avoidance of risks.
By following the international minimum standard, we make sure that ICL’s approach to responsibility in business relationships adheres to the international development within responsible business conduct. The international minimum standard has achieved a historic consensus in all parts of the world and in all business areas.
Furthermore, the utilization of the UNGPs/OECD as a risk management tool helps identify and address reputational risks, thereby mitigating potential financial risks. The standard forms the basis for setting legal requirements on responsible business conduct by governments, both directly and in areas such as public procurement, business financing, and corporate reporting. Consequently, we ensure that ICL's business relationships effectively address social, environmental, and economic sustainability concerns.
Considering the international development and the international and authoritative character of the UNGPs/OECD, it would undermine such authority, if ICL were to manage our responsibility in business relationships through any other means than the UNGPs/OECD.
Why doesn't ICL have any specific performance requirements in certain areas, such as "the right to safe and healthy working conditions"?
The UNGPs/OECD focus on establishing a management system, that also enables our business
relationships to manage their risks in relation to also the right to safe and healthy working conditions; how our business relationships intend to deal with such risks shall not be prescribed by us. You will have to come up with the actions most appropriate for your situation and context to effectively prevent risks of adverse impacts on this human right as well; should you assess that you are at risk.
Establishing predefined performance requirements on all human rights would make it impossible
for you to come up with innovative solutions fit for your operations and context. With the UNGPs/OECD, the traditional global approaches to responsibility in business relationships are shifting from specific performance measurements (monitoring and auditing) to the expectation that business relationships establish a management system to manage their adverse impacts on all the three bottom lines – and become transparent about such management.
The management system must include all rights when assessing your potential adverse impacts on human rights (that includes the core labor rights), and all the key areas of environmental and economic sustainability.
Setting specific requirements for business relationships to address specific risks of adverse impacts is challenging due to varying contexts and factors. Imposing such requirements could lead to inadequate impact management and reputational risks. By adopting the internationally agreed management system, we aim to promote sustainable development without the limitations of prescriptive performance requirements.
Specifically, our approach to responsibility in business relationships aims to make this objective achievable and practical, even for smaller partnerships. This approach also ensures that we minimize intrusive interactions, such as audits, and instead foster mutual transparency in sustainability due diligence. Our interactions are intended to facilitate capacity development within both your company and ours.