Human rights & environmental due diligence (HREDD)
Human rights & environmental due diligence (HREDD) is a comprehensive risk management process that businesses use to identify, prevent, mitigate, and account for adverse impacts on both people and the planet. While traditional due diligence often treats social and environmental issues separately, HREDD recognises their deep interconnection. This holistic framework requires organisations to scrutinise their operations and supply chains for risks ranging from forced labour and unsafe working conditions to pollution, deforestation, and climate change impacts.
Why it matters
For procurement leaders, HREDD represents the next evolution in sustainable sourcing. As global legislation shifts from voluntary guidelines to mandatory requirements, treating human rights and environmental standards as isolated pillars is no longer sufficient.
Implementing a robust HREDD strategy is essential for several reasons:
- Meeting regulatory requirements: New and emerging laws, such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and the German Supply Chain Due Diligence Act (LkSG), explicitly require companies to address environmental risks alongside human rights violations. HREDD ensures your organisation remains compliant and avoids costly penalties.
- Managing interconnected risks: Environmental damage often leads to human rights abuses. For example, water pollution from a factory can destroy the livelihoods of local communities. HREDD allows you to identify these compounding risks early, providing a more accurate picture of your supply chain vulnerabilities.
- Enhancing supply chain resilience: Climate change and environmental degradation are major disruptors of supply chains. By integrating environmental due diligence, you can foresee resource scarcity and operational disruptions, allowing you to build a more resilient procurement strategy.
- Driving cost efficiencies: Proactively managing environmental performance—such as energy use and waste management—often reveals opportunities for cost reduction while simultaneously lowering your Scope 3 emissions.
How it works / key points
The process begins with mapping your supply chain to gain full visibility. Procurement teams must analyse risks not just based on geography or sector, but through a dual lens. This involves assessing suppliers for human rights risks while simultaneously evaluating their environmental footprint, such as water usage, waste disposal practices, and carbon emissions.
Once risks are prioritised, you must implement controls to reduce the likelihood of harm. This might involve updating Supplier Codes of Conduct to include specific environmental standards, such as zero-deforestation policies or chemical management protocols. Mitigation strategies should address root causes, often requiring collaboration with suppliers to upgrade machinery or change production processes to be safer for both workers and the environment.
Effective HREDD relies on data. You need to track the effectiveness of your interventions over time. This involves collecting verifiable data on key performance indicators (KPIs) like injury rates, hourly wages, CO2 emissions, and water consumption. Regular audits and worker voice surveys help verify that improvements are genuine and sustained.
Transparency is the final critical step. Stakeholders—including investors, customers, and regulators—expect clear reporting on how you manage HREDD. This means publicly disclosing your most salient risks, the actions you have taken to address them, and the tangible outcomes achieved in both social and environmental areas.
Examples
A food manufacturer sourcing palm oil uses satellite data to monitor deforestation risks (environmental). Simultaneously, they engage with local NGOs to ensure that land acquisition for farming has not displaced indigenous communities (human rights).
A fashion retailer discovers that a dye house is releasing untreated wastewater into local rivers. This is an environmental violation that also poses a health risk to the local community (human right to health). The retailer works with the supplier to install a water treatment plant, solving both issues at once.
A logistics company invests in a modern fleet of vehicles for its distributors. This investment reduces carbon emissions (environmental) while providing drivers with vehicles that have better safety features, reducing the risk of road accidents (human rights/worker safety).
About Sedex
Sedex is a global technology company that specialises in data, insights and professional services to empower supply chain sustainability. Our platform, tools and services enable businesses to easily manage and improve their environmental, social and governance (ESG) performance to meet their supply chain sustainability goals.
