Due diligence guidance

The parties contractually commit to work together to uphold human rights and environmental standards. Responsibilities are allocated based on each party’s size and circumstances, e.g., sector, geopolitical context, influence in the supply chain.

The contract clauses do not contain explicit provisions on shared responsibility between the contracting organisation and the supplier. In essence, the principle however means that not only suppliers but also contracting organisations are responsible for prioritising purhasing categories and identifying and assessing risks – work that underpins procurement design and contract management. The Swedisch Regions and Adda Central Purchasing Body already work in this way, and the principle is therefore integrated into the guidance.

In relation to remediation, shared responsibility must be understood in light of the frameworks governing the use of public funds and public accountability. The focus is therefore on relational and procedural aspects, such as cooperating with suppliers on corrective actions, using leverage to influence the party causing or contributing to adverse impacts to remediate it, and, where relevant, reviewing the procurement design if it may have contributed to the risks identified.

Buyers commit to responsible purchasing practices that support positive human rights and environmental outcomes, e.g., fair prices, reasonable deadlines, and adequate assistance.

The contract clauses do not contain explicit provisions on the contracting organisation’s responsibility for its purchasing practices vis-à-vis the supplier, while the supplier is required to promote purchasing practices that do not hinder sub-suppliers from complying with the commitments.

For contracting organisations, this concerns the concrete choices made before, during and after procurement. Key factors include pricing, delivery times, volume predictability (e.g. framework agreements compared to contracts), payment terms, the scope of monitoring and information requests, as well as adequate support. These factors are not neutral. Low prices, short timeframes or unpredictable ordering patterns can create commercial conditions that increase the risk of adverse impacts in the supply chain.

This also means that the design of technical specifications, the use of exclusion grounds, selection criteria and award criteria, and the proper handling of abnormally low tenders are decisive for preventing and mitigating adverse impacts – together with the due diligence contract clauses. When applied in a coordinated manner, these tools enable contracting organisations to influence the conditions under which suppliers manage their supply chains. The guidance focuses on the contract clauses but contracting organisations are encouraged to take these other aspects into account. The guidance is also part of the support contracting organisations provide to suppliers.

If harm occurs, remediation to victims is prioritized ahead of traditional contract remedies, e.g., order cancellations, suspension of payments, penalties.

The contract clauses include elements aligned with the principle of remediation first. Remediation forms part of the supplier’s due diligence, and deviation management is focused on corrective action and improvement. At the same time, the possibility of immediate termination in the event of severe deviations constitutes a departure from the principle.

The principle requires contracting organisations to engage in dialogue with suppliers to understand underlying causes, as well as to assess whether their own purchasing practices may have contributed to the issue. This approach is integrated into the guidance.

For contracting organisations, this approach also enables the continued delivery of goods and services while corrective actions are being implemented. Sanctions and termination are not excluded, but are regarded as measures of last resort rather than first-line responses.

Contract termination can be pursued only as a last resort and must be done responsibly, after taking steps to assess and address the impacts of exit.

The contract clauses’ stepwise approach to managing deviations, with a focus on improvement, is aligned with the principle of responsible exit as a last resort. However, the clauses do not require the contracting organisation to assess and manage the consequences of termination.

The Swedish Regions have, nevertheless, established processes to assess and manage the consequences of termination for people, the environment and society. This approach is integrated into the guidance.

In practice, this means that termination becomes relevant when breaches are either persistent – if the supplier does not engage in monitoring or address deviations – or severe. The decision is based on an overall assessment of risks, measures and consequences.