REVISED GUIDELINES ON COOPERATION BETWEEN UNDP AND THE PRIVATE SECTOR RISK ASSESSMENT TOOL

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REVISED GUIDELINES ON COOPERATION BETWEEN UNDP AND THE PRIVATE SECTOR RISK ASSESSMENT TOOL

1. Summary overview of the Risk Assessment Tool

1.1. Purpose

This tool is designed to:

 Be a step by step guide to the actions required by UNDP staff when assessing the risks and benefits regarding engaging with the private sector;

 Assess performance of companies on their environmental, social and governance performance (using the principles of the Global Compact as a basis). This process is called due-diligence;

 As far as possible allow local (CO) judgment about the benefits arising from engagement with business compared to the risks that are being taken, using criteria that are relevant to the local context and to the nature of the potential project;

 Be appropriate to the level of expertise and resources available within COs;

 Complement UNDP’s Policy for Enterprise Risk Management, addressing the specific risks of collaboration with private sector;

 Be available as a paper tool, but with the potential to be easily adapted for an interactive, online application.

The tool complements Guidelines on Cooperation between UNDP and the Private Sector: Policy and Procedures.

Risk corresponds to a future event that may impact the achievement of UNDP's objectives. Simply put, risks can be measured on a scale of impact vs. probability. Since future impacts can be both positive and negative, risks can take the form of either threats that would prevent UNDP from achieving its objectives, or opportunities that would enhance the organization’s ability to achieve its objectives.

There are particular risks that arise from engaging with the private sector that are not addressed by other UNDP risk management tools. This Risk Assessment Tool helps UNDP staff to assess the risks of engaging in a particular way with the private sector against the benefits from doing so. Benefits in this context are the positive outcomes that arise specifically from engagement between UNDP and the private sector.

The UNDP process for developing an engagement with the private sector distinguishes between the partner risk and the benefits and risks of the collaboration itself. The sources of these risks are described in Guidelines on Cooperation between UNDP and the Private Sector: Procedures, section:

Managing the risk of engaging with the private sector.

It is essential to keep in mind throughout this process that the assessment of the benefits and risks that arise from the nature of the collaboration with the private sector are not the same as the overall project risk. This overall project risk comprises environmental, financial, organizational, political, operational, regulatory and strategic risks, and will also need to be assessed in the normal way as for any UNDP project and recorded in the Project Risk Log. The output of the Risk Assessment Tool on cooperation with the private sector may also provide risks that need to be recorded in the Project Risk Log and managed alongside the other risks that have been identified.

The tool replaces the ‘Screening Worksheet’ from the previous Guidelines (2001).

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2. The process to follow

2.1. Overview

STEP 1: Gather basic facts

Process to follow

 Establish whether UNDP or any other members of the UN family that share information with UNDP, currently have, or previously had, any relations with the business. This can be done by a search on the UNDP database of business partners. Contact the relevant UN(DP) unit and/or staff member concerned in a previous engagement and ask for further details about the collaboration – it may save your time for additional search and you may also find information that may have been too sensitive to log on the database. Record the results for further research and for comment by the business.

 Perform preliminary research on the business and its public profile by seeking readily available information from source such as the company’s website, civil society organisations, watchdogs that monitor the activities of business, and by using Google or other search engines to search STEP 1:

Gather basic facts about the company and verify compliance with the minimum standards

(‘exclusionary criteria’).

If the company does not comply, withdraw from the engagement at this point.

STEP 2:

Undertake detailed due diligence to establish how the company meets the Global Compact principles (‘context specific /eligibility criteria’)

STEP 3:

Assess whether benefits of engaging with the company outweighs the residual risks after appropriate risk mitigation strategies have been designed.

STEP 4:

Make a decision as to whether UNDP should engage with the company.

If the risks are assessed as too high, withdraw from the engagement at this point.

Gather basic facts about the company and verify compliance with the minimum standards (‘exclusionary criteria’).

If the company does not comply, withdraw from the engagement at this point.

Key outputs:

Evidence report

Responsible Authority:

For preparing evidence:

Programme/Project Manager

For decision making:

RC/RR or a

designated person for CO

Regional Director or a designated person for RB

Key outputs:

Evidence report

Key outputs:Inputs from PRG if needed Risk-benefit analysis report

Key outputs:

Consolidated reports from previous steps Final decision

For consolidation of the report:

For decision: RC/RR or a designated person for CO

Regional Director or a designated person for RB

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the internet. Any significant negative press and criticism of the business should be logged for further research and for comment by the business.

 Refer to Annex 1 for useful websites.

 If needed, you may also collect information from the company itself (making a disclosure).

Previous UNDP experiences show this might be an effective and simple approach. This can be done in a meeting with a representative of a company where UNDP requests a business to share basic information using a written questionnaire. The purpose is to map the full extent of the company, including mother and daughter companies, the industries and businesses that they are involved in and uncover any issues that may be of concern to UNDP.

 A template to use for self-disclosure/ questionnaire is provided in Annex 2.

What to assess

From this information, assess against exclusionary criteria¹ listed below. These represent the minimum standard of practice for any company that UNDP seeks to engage with.

Exclusionary Criteria for which compliance is mandatory (minimum standard for engagement)

No evidence of complicity in human rights abuses*

No evidence of tolerating forced or compulsory labour No evidence of the use of the worst forms of child labour**

No involvement sale or manufacture of armaments and /or weapons or their components No violation of UN Sanctions and relevant conventions treaties and resolutions

*Refer to Annex 6 on Human Rights

** Refer to Annex 3 for further information on the definition of the worst forms of child labour

Mandatory! Respond with research / record evidence on ALL criteria from the annex on Human Rights

Decision point at this stage If the due diligence research identifies evidence of non-compliance with any of these criteria then UNDP may not engage in any way with this business. UNDP should

therefore withdraw at this stage if any such evidence emerges. It will not then be necessary to expend further time and resources completing the remaining risk assessment.

STEP 2: Undertake due diligence on eligibility criteria

1 UN entities may establish additional eligibility and exclusionary criteria for screening companies appropriate to their specific mission and advocacy role. This is negative screening which defines with what companies UN/UNDP cannot form partnerships defined in the Secretary Generals’ Guidelines on Cooperation between the United Nations and the Private Sector, 2009

Undertake detailed due diligence research to establish how the company meets the Global Compact principles (‘context specific /eligibility criteria’)

Your findings will allow mapping potential risks, deciding on mitigation strategy for these risks and hence providing input for final decision making

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Follow one of the below processes depending on the nature of the company:

What to assess

There are three key factors that drive the amount of due diligence that UNDP should perform on a company and the standard of social and environmental practice that is expected of the business:

 The nature of the engagement

 High risk industry sectors are those with a potentially high susceptibility to, or risk of, negative impact on people or the environment. In these cases UNDP should undertake more due diligence on the company’s activities that may have a negative impact on human development and achievement of the MDGs.

 Refer to Annex 5 for guidance on potentially high risk industry sectors.

 UNDP’s risk tolerance is the amount of risk that UNDP unit (CO) is willing to take in order to realize potential benefits. If UNDP has a low risk tolerance then due diligence will have to be more thorough in order to ensure that there are few risks arising engagement with this business.

 Refer to Annex 4 for guidance on UNDP risk tolerance

In case of trans- national businesses, and/or a national business with activities in developed markets, information sent to the (PSD)

PSD sends tailored request research on the company’s performance to the commercial company that is contracted to provide data. Data is requested with respect to:

 The exclusionary criteria (see ‘Step 1: what to assess’ - above)

 The context specific criteria (see

‘Step 2: what to assess’ - below)

CO staff make any

supplementary investigations necessary if there are gaps in the data provided by PSD PSD sends

data provided by the commercial provider back to the requesting member of staff Due diligence research can be performed by CO staff or by a third-party consultant commissioned to undertake the investigation.

The exclusionary criteria (see ‘Step 1: what to assess’ - above) and the context specific criteria (see ‘Step 2: what to assess’ – below) form the terms of reference for the investigation.

Information can be found from a variety of sources:

 Detailed web-searches using the resources identified in Annex 1

 Review of reports and literature provided by the business in Step 1

 Informal questioning of contacts within UNDP’s partners and network about the business

 Interviews with interested parties and stakeholders within the business environment (customers, suppliers, employees, representatives of civil society such as consumer groups and issue-driven campaigning groups)

 Formal requests for responses to potential issues from the businesses themselves

In case of national companies that are not active in developed markets where there is unlikely to be any data accessible to Private Sector Division (PSD)

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The following table shows the level of due diligence that should be performed on a company in respect of the three key factors above:

Nature of the engagement: Low risk industry and high UNDP risk tolerance:

High risk industry sector or low UNDP risk tolerance:

Advocacy engagements

Limited due diligence (exclusionary criteria only)

Normal level of due diligence

Social investments: cash donations

Limited due diligence (exclusionary criteria only)

Normal level of due diligence

Pro-bono contribution of goods and / or services

Normal level of due diligence Comprehensive due diligence

Core business operations and value chains

Comprehensive due diligence – all companies and situations

At this stage, you have already done research on exclusionary criteria which were mandatory. At this step you should choose from a given set - your choice being tailored to the particular company, national context and type of partnership that is being planned:

 Screen the company’s performance against a given set of criteria on labour, environment, anti-corruption and Indigenous Peoples issues;

 Set criteria that are verifiable indicators against which it is possible to produce evidence when they are met (for example, a documented process, a report or records of data);

 Record evidence with regard to the reasons why particular context specific criteria were adopted.

For guidance on specific criteria that reflect the Global Compacts principles Refer to Annexes 6-11

Note on recording data of a sensitive nature: Whilst it is necessary to keep notes on all of the information that is discovered in the due diligence process, care should be taken when recording information of a possibly sensitive nature. It is a good practice to write notes in a way that would be acceptable if read by a representative of the business, even if there is no intention of sharing the record with the business. This is because, if these notes were inadvertently to be put into the public domain, there could be potential embarrassment, reputational damage or even legal redress if unsubstantiated allegations are found to be on record. Where possible use terminology such at ‘it is alleged…’ or ‘it has been perceived that….’. notwithstanding, notes need to clearly describe the findings so that the facts are accurately stated and documented and kept in UNDP records for the use of UNDP colleagues in the future.

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STEP 3: Assess benefits of engaging against the risks

Assess whether benefits of engaging with the company outweighs the residual risks after appropriate risk mitigation strategies have been designed.

Action 1:

Brainstorm the particular benefits that are expected to arise as a result of the nature of the collaboration. Assess whether these are significant benefits in comparison with alternative ways of achieving the same outcomes.

Action 2:

Assess risks and

countermeasure strategies that could reduce this risk, by changing the nature of the engagement.

Action 3:

Compare the benefits and risks with each other and decide how to manage any residual risks (below) by developing

countermeasures.

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The following is a list of potential benefits from engagement with the private sector to use as a prompt for the brainstorm:

 Increased impact from access to the many different kinds of private sector resource that may enable UNDP to scale up its work

 Increased impact from improvements to project design arising from the co- definition of programmes and projects by UNDP and the private sector partner(s)

 Increased impact from use of private sector skills, competencies and/or technologies otherwise not readily available to UNDP in the delivery of projects to address poverty

 Breakthroughs in methodologies for addressing intractable sustainable development challenges that result from the combination of business and UNDP competencies and assets

 Transformation of systems and practices at organisational, institutional or systemic levels

 Development benefits from a new or extended application of a business’s supply and/or distribution value-chain

 Opportunities for a valuable approach to development to go to scale through wide spread replication and/or integration within business core activities

 Wider awareness of, and support for, UNDP and its causes from positive exposure and publicity around the collaboration

The following is a list of potential risks arising from engagement with the private sector to use as a prompt for the brainstorm:

 The partnership outcomes deviate from core UNDP mission/planning

 The company scores poorly on eligibility criteria: you have identified past and /or present ethical issues that pose potential reputational risks to UNDP

 UNDP’s strengths that depend on impartiality are damaged through giving unfair advantage, or being perceived to give advantage, to one or few businesses within an industry, sector or market

 UNDP’s impartiality is damaged through being perceived to have endorsed a particular business, product or service

 Negative unintended consequences of a project through distortion of a market by giving one business or group of businesses an unfair advantage and/or by crowding out of other economic actors

 UNDP ends up inadvertently in an exclusive collaboration with one or few businesses because the barriers to entry by any other business are very high, or for some other reason

 Private sector partner’s benefit from the collaboration is disproportionately high compared to the public benefits/benefits to UNDP

 UNDP future procurement processes are disrupted because of an inadvertent dependency

 Negative publicity for UNDP because of an action by a business partner

What to assess

Once a list of benefits arising from collaboration has been brainstormed using the above lists for guidance the task in Action 3 is to assess whether these are potentially significant benefits in

comparison with the risks incurred. You can use the following template (optional) that would guide the assessment:

 Cluster benefits against risks

 Identify and expose issues within the engagement that are causing UNDP a high level of risk but where the benefits are only medium or low

 If yes, then try to review the engagement to either reduce the risk or to increase the relative benefit. This is an active process that may well require further discussions with the private sector partners in order to agree changes to the collaboration that address UNDP’s concerns.

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 For each of these residual risks a strategy must then be identified as to how the risk will be managed and mitigated if it should occur – please take a look at the table below. You can assess the level of risk by associating the level from 1 – low to 5 –high.

Risks Level of Risk (Impact and Probability)

Countermeasures Review and Update

Present Status

The risks that are apparent after the assessment of the partnership benefits and risks can then be added to the Project Risk Log and, if considered to be sufficiently critical and have relevance beyond the particular project, to the Unit Risk Log depending on the potential impact of the risks that have been identified.

Escalation does not automatically mean withdrawal from a partnership, but requires consultation and clearance from a higher unit.

 Please refer to the Escalating a Risk section of the Enterprise Risk Management Cycle document

STEP 4: Make a decision

The information obtained from either the commercial provider or from the CO investigation should be compiled into a report. This report will form the basis for the decision on whether UNDP should work with the business and will also form the audit trail for the decision. The report should contain a recommendation as to whether UNDP should work with the business.

It is essential that this process has a separation between the staff that is directly involved in

developing the relationship, researching the business and making a recommendation as to whether to proceed, and the member(s) of staff who make the final decision. The final decision about whether UNDP should continue working with this business should be determined by the RC/RR for CO and Regional Director in case of RBx or designated persons with adequate authority.

Make a decision as to whether UNDP should engage with the company.

If the risks are assessed as too high, withdraw from the engagement at this point.

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To achieve this separation and/or to engage a broader range of views in decision making, or in difficult calls, the concerned UNDP unit may chose to set up internal committee composed of a selection of UNDP staff from different functional areas that seek advice from colleagues with relevant technical expertise including programmatic, communication and operations. All the participants should receive appropriate background documents and the meeting should be recorded.

The committee may be called to collectively resolve issues, and:

 to get relevant technical inputs;

 to assist with decision making in cases when engagement might have significant environmental, social and governance impacts that are potentially adverse;

 where there are complex internal issues to navigate.

The CO may seek the advice and support of PSD as required. When making this submission, include the draft agreement, analysis arising from use of the Risk Assessment Tool and the report compiled as specified in this step of the tool. There will be acknowledgement upon receipt of the relevant information and notification as to whether or not comments will be forthcoming. Should PSD feel it necessary to review the proposed partnership activity, comments and suggestions will be sent back as quickly as possible. Please note that PSD advice is informal consultation and full

accountability for the decision resides with the RC/RR (COs) and Regional Directors (RBx) or designated persons with adequate authority.

What to assess

This recommendation should take account of the level of compliance with the context specific criteria and also the balance between benefits and risks arising from the partnership. Evidence of non- compliance with the exclusionary criteria should result in a recommendation not to engage with the business.

Other important factors that can be considered in making this recommendation are that:

 The data represents a ‘snap shot’ in time but in reality a business may be in the process of changing and improving its behaviour. UNDP may identify that a business is making serious attempts to address an issues of concern to UNDP. Whilst the overall judgment should still be made on the risk to UNDP, there may be cases where UNDP feels that there are benefits from recognising the desire by a business to improve its performance that outweigh the risk to UNDP of being associated with the original bad practice.

 Small enterprises may not have the capacity to address poor performance as quickly or exhaustively as larger ones. UNDP staff may therefore decide to set different standards with regard to some criteria for smaller businesses compared to large ones.

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ANNEX 1: Useful websites for basic research on companies

Websites that have specific information and opinions on social responsibility issues include:

www.corporatewatch.org - free searchable database of press articles and comment on social responsibility issues and industry sector profiles

www.multinationalmonitor.org - free searchable database of articles and comment on social responsibility issues

www.business-humanrights.org/Home - website covering over 4000 companies, in 180 countries. Topics include discrimination, environment, poverty and development, labour, access to medicines, health and safety, security, and trade

www.transnationale.org – subscriber-based information on businesses, with free-to-view index showing alleged human rights and other violations

www.corporateeurope.org – articles on European big-business lobbying activities

www.moles.org – reports available from campaigning organization ‘supporting the human rights of communities resisting mining and oil exploitation’

www.ethicalconsumer.org– free consumer-based research on ethical issues. Low cost database of the ethical and environmental records of over 50,000 companies worldwide.

www.mcspotlight.org/beyond/index.html - campaigning group free in-depth studies on a small number of high-profile global businesses

www.accountabilityrating.com/ - publishes top-100 companies rated by accountability based on published documents

http://www.business-humanrights.org/Home http://www.earthrights.org/

http://www.hrw.org/ Human rights watch www.Oxfam.org Oxfam

http://www.csrwatch.com/^CSRwatch

For free searchable database of general commercial information try one of the following:

www.hoovers.com/free www.reuters.com www.bloomberg.com

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ANNEX 2: Basic data for self-disclosure by the company

Provide information on the following:

a. Contact information

Name of UNDP’s main contact(s) in the business:

Job title and brief description of role:

Contact details:

Name of the person providing the information for Part I:

Job title and brief description of role:

Contact details:

b. The business itself

This is business that UNDP is potentially collaborating with and will probably be the legal entity that UNDP would sign an agreement with in cases where such an agreement is required.

Name:

Registered office addresses and contact details:

Website:

Legal status in the country of registration:

For example, private company, limited liability company, public company Date of registration:

Countries where the business has operations or interests:

Main business activities:

Approximate annual turnover in US Dollar terms:

Approximate number of employees:

c. The ultimate owner/controlling interest in business

This is in cases where the business with which UNDP is potentially collaborating with is part of a larger group of businesses

Name:

Registered office addresses and contact details:

Website:

Legal status in the country of registration:

For example, private company, limited liability company, public company Date of registration:

Countries where the business has operations or interest:

Main business activities in each country:

d. Available data sources

These should be easily available reports and published relevant documents

If available, obtain copies of any of the following basic data sources:

 Annual reports

Useful general information about the business

 Audited financial statements and statements from the auditors

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These demonstrate that the business is viable and financially sustainable

 Policy statements and/or reports pertaining to any of the following: environment and sustainability; social investment; human rights; treatment of employees; supply chain ethics

These will help to address the following section on ‘core issues’ but also indicate areas where further research will be useful into both positive and negative aspects of the business.

 Any other useful readily available sources of data about the business e. Key questions for the company

These are sample questions for the company to answer; you can also add your own

 Is the business legally constituted?

 It is financially viable and likely to remain so for the period of the anticipated collaboration?

 Are there are no major reputational issues within the public domain that may cause embarrassment to any of UNDP’s development partners or that could be perceived to undermine UNDP’s mission and mandate?

 Is the business a signatory to the Global Compact or any other CSR initiative? If not, is the business considering commitment towards one of them?

 Are there any relevant legal cases in process against the business in respect of any issues around human rights, employment and discrimination issues or the environment?

 Have there been any concerns raised by an NGO against the business?

 Is the business aware of human rights abuses within the industry sector in which it operates (including its supply chain) and has it taken steps to address these?

 Does the business, or any business under the same ownership and/or control as this business, sell or manufacture armaments and /or weapons or their components?

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ANNEX 3: The ILO conventions on child labour

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ILO conventions (Minimum Age Convention No. 138 and the Worst Forms of Child Labour Convention No. 182) provide the framework for national law to prescribe a minimum age for admission to

employment or work that must not be less than the age for completing compulsory schooling, and in any case not less than 15 years. Lower ages are permitted for transitional periods - generally in countries where economic and educational facilities are less well-developed the minimum age is 14 years and 13 years for 'light work'. On the other hand the minimum age for hazardous work is higher at 18 years.

Developed countries Developing countries

Light Work 13 Years Light Work 12 Years

Regular Work 15 Years Regular Work 14 Years

Hazardous Work 18 Years Hazardous Work 18 Years

ILO Convention No. 182 requires governments to give priority to eliminating the worst forms of child labour which are defined as:

 all forms of slavery - this includes the trafficking of children, debt bondage, forced and compulsory labour, and the use of children in armed conflict;

 the use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic purposes;

 the use, procuring or offering of a child for illicit activities, in particular the production and trafficking of drugs; and

 work which is likely to harm the health, safety or morals of the child as a consequence of its nature or the circumstances under which it is carried out.

2 Extracted from http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle5.html

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ANNEX 4: UNDP risk tolerance in private sector engagement

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UNDP’s risk tolerance embraces the level of exposure which is considered tolerable and justifiable and should it be realized. In this sense it is about comparing the cost (financial, reputational or otherwise) of constraining the risk with the cost of the exposure should the exposure become reality and finding an acceptable balance. Beyond a certain level of residual risk UNDP should disengage from a particular activity.

The level of risk tolerance will vary depending on the potential benefits that are expected from the engagement. In general UNDP may be prepared to bear higher risks if:

 there are significant potential gains in terms of achieving one or more of UNDP’s strategic priorities within the UNDP Strategic Plan and Private Sector Strategy;

 in a small or fragile economy where there are relatively few suitable private sector partners;

 if there is high potential for long term engagement with the business that has significant scale of resources and the engagement may have significant human development results that can be achieved through the partnership;

 there is a potential for achievement of immediate results in the well being of communities that are facing high rates of poverty and low Human Development Index (particularly in areas where the partnership with company can make a significant difference);

 the risk is arising from the engagement of a small business which does not have the resources to invest in complex and sophisticated risk mitigation activities;

 it is difficult to achieve the same Human Development impact by any other methods;

 UNDP operates in countries with weak governance structures with challenging environment for the private sector to adopt the highest standards, e.g. of anti-corruption measures;

 Companies are operating in high risk sectors and display features of ‘best – in – class’

Ultimately, the RC/RR’s decision to accept a certain level of risk will often be a judgment-call. In making this decision, the RC/RR should refer to relevant UNDP Regulations and Rules, policies and procedures, statements of delegated authority, the Internal Control Framework and other documents as appropriate. Risks should be escalated to the attention of the Regional Bureaux when the following conditions apply:

1. Addressing the risk requires actions that are beyond the authority levels of the Unit.

2. The risk cuts across multiple COs/units (e.g. it affects a number of Country Offices/Regions ) and/or addressing the risk requires action by multiple Units.

3. Addressing the risk requires corporate changes (e.g. changes to corporate policies).

4. The risk could impact the rest of the organization (e.g. a risk that could negatively affect the reputation of UNDP).

5. Managing the risk entails financial/human resources beyond the existing capacity of the Unit.

3 Please note that risk tolerance for private sector engagement is an evolving concept launched as part of UNDP evolving work to establish a framework for more consistent assessment of risks across the organization. This will include a more clear description of UNDP’s risk tolerance with regards to different circumstances, with an overall objective to ensure that UNDP operates with increasingly consistent risk tolerance in various locations around the world, and recognizing that different circumstances involves different levels of risk.

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ANNEX 5: Potentially high risk industry sectors

As a general rule, for UNDP social development projects the following sectors should be treated with particular caution and therefore require a higher degree of due diligence.

Tobacco and alcohol.

Potential High Risk Sectors Agriculture

Air Transport Airports

Building Materials (includes Quarrying) Chemicals and Pharmaceuticals Construction

Gambling

Major Systems Engineering Fast Food Chains

Food, Beverages and Tobacco Forestry and Paper

Mining & Metals Oil and Gas Nuclear Energy Power Generation

Road Distribution and Shipping Supermarkets

Vehicle Manufacture Waste

Water Pest Control

Potential High Risk Sectors, Supply chain

Agricultural & Crops (sugar cane, cotton, coffee, tea, cocoa, tropical fruits, fresh vegetables, flowers) Consumer goods: Apparel and toys

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ANNEX 6: Human Rights criteria

Suggested Human Rights Checklist for engaging the private sector in UNDP Programmingⁱ Human Rights are critical to all of the UN’s work. The assessment of the role of the private sector and the response to human rights issues is obviously context specific, but must always be grounded in applicable national and international norms and standards. The following questions will help determine whether a potential private sector partner of UNDP adheres to the minimum expected standards of practice in human rights

1. Has the company taken all necessary measures to ensure that it does not participate in, or benefit from any form of forced labour (this can include bonded labour, forced prison labour, slavery, servitude or human trafficking)?

Yes No

Further attention needed

No Information

2. Is the company refraining from retaining the identity cards, travel documents, and other important personal papers of its employees?

Yes No

No Information

3. Does the company ensure that its compensation, benefit plans, and employment-related decisions are based on relevant and objective criteria?

Yes No

No Information

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4. Does the company ensure that its workers are afforded safe, suitable and sanitary work facilities?

Yes No

No Information

5. Does the company take specific measures to protect workers from acts of physical, verbal, sexual or psychological harassment, abuse or threats in the workplace, including when determining and implementing disciplinary measures?

Yes No

No Information

6. Does the company have mechanisms for hearing, processing and settling grievances of employees?

Yes No

No Information

7. Does the company ensure that it does not participate in, or benefit from, improper forced relocations, and adequately compensates inhabitants in voluntary relocations?

Yes No

No Information

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8. Does the company honour the land, passage, and usage rights of local or indigenous peoples on company-controlled land?

Yes No

No Information

9. Does the company consult with the local inhabitants and take measures to address and mitigate any disruptive effects that its operations may have on company land, the local community, and the natural resources in the area?

Yes No

No Information

10. Does the company have a functional mechanism for hearing, processing and settling the grievances of the local community?

Yes No

No Information

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ANNEX 7: Indigenous peoples

Suggested Checklist on indigenous peoples’ issues before engaging the private sector in UNDP Programming

UNDP and the UN system have a specific role in promoting the provisions of the UN Declaration on the Rights of Indigenous Peoples as provided in this Declaration⁴. The UN Declaration on the Rights of Indigenous Peoples calls upon States to consult with indigenous peoples to obtain their free, prior and informed consent prior to approval of any project affecting their lands and resources. ILO Convention No. 169 underlines the right of indigenous peoples to be consulted in relation to developments that may affect them.

Within the national context for this business sector, in the business’s industry sector and with respect to UNDP’s potential project activity, what would be the expected standard of practice that the business should be adhering to? What additional positive criteria would be useful to investigate in terms of this business being a particularly attractive partner for UNDP? The following questions will help determine whether a potential private sector partner of UNDP adheres to the minimum expected standards of practice in the area of indigenous peoples’ issues

1. Has the company a specific policy on indigenous peoples to respect international standards, particularly the principle of self-determination, right to lands and natural resources, and right to free prior and informed consent (regardless of a host government’s lack of

acknowledgment/respect of these rights)?

Yes No

Further attention needed

No Information

2. Has the company set insurance levels and establish insurance funds in agreement with indigenous peoples and at a level appropriate for the risks involved and the duration of any impact of the company beyond the term of the project itself?

Yes No

No Information

4 UNDP also promotes democratic governance and human rights, including the rights contained in ILO Convention 169. The UNDG Guidelines on Indigenous Peoples Issues (at http://www.undg.org/index.cfm?P=270 ) were approved in February 2008 to integrate indigenous peoples’ issues in UN programmes, projects, policies and processes. UNDP Policy of Engagement with Indigenous Peoples was adopted in 2001 and describes the nature and scope of UNDP’s work with indigenous peoples (at http://www.undp.org/partners/cso/indigenous.shtml )

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3. Has the company accounted for damages resulting from its past activities that affected indigenous lands and livelihoods and provided compensation, restitution and the rehabilitation of degraded environments?

Yes No

Further attention needed

No Information

4. In instances where indigenous peoples consent to business activities in their land, does the company set up benefit sharing arrangements and mechanisms that are conducive to dialogue and participation of indigenous peoples in decision-making processes?

Yes No

No Information

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ANNEX 8: Labour, employment and discrimination

The exclusionary criteria address elimination of all forms of forced and compulsory labour and the effective abolition of child labour. The Global Compact principles that pertain to labour also include freedom of association and the effective recognition of the right to collective bargaining, and the elimination of discrimination in respect of employment and occupation.

The following are some criteria that may be used:

As far as possible the criteria set should be verifiable indicators to which it is possible to produce evidence when they are met (for example, a documented process, a report or records of data).

1. There are systems to ensure respect for freedom of association, including:

 recognising that all workers are free to form and/or join a trade union of their choice without prior authorization;

 ensuring that company policies, procedures and practices do not discriminate against individuals because of their views on trade unions or for their trade union activities;

 refraining from interfering in the activities of workers’ representatives while they are carrying out their functions, provided that those activities are lawful and not disruptive to regular company operations;

 ensuring that the company does not take any action which has the effect of bringing a workers’ organizations under the control or domination of the company or any other entity;

and

 providing facilities if possible for representatives to carry out their work.

Yes No

No Information

2. The company respects the right to bargain collectively, including:

 engaging in collective bargaining with the workers through their freely chosen representatives;

in case of multiple unions, bargaining with the most representative union or unions;

bargaining in good faith; and

 providing information necessary for meaningful negotiations.

Yes No

No Information

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3. The company provides evidence of equal opportunities systems, for example:

 a clear policy of non-discrimination which prohibits distinctions made on the basis of

race/colour, sex, religion, political opinion, trade union membership, national extraction, social origin, disability, age, sexual orientation, HIV status or any other characteristics that are not related to the person’s competencies or the inherent requirements of the job.

 flexible working arrangements and family benefits.

 review of company practices to ensure that they are more inclusive;

 a training programme on non-discrimination for management and workers;

 on-going sensitization programmes; and

 monitoring of progress in eliminating discrimination.

Yes No

No Information

4. The company takes efforts and there are systems in place against child labour, for example:

 in industry sectors where forced labour is known to be a problem, support efforts across the sector to reduce prevalence;

 use adequate and verifiable mechanisms for age verification;

 remove children below the legal age that are found in the workforce and seek viable alternatives with other partners for the children and their families;

 influence other actors in the supply chain to combat child labour.

Yes No

No Information

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ANNEX 9: The environment

The environment is an area in which there is intensive scrutiny of the private sector in many countries.

For UNDP, the nature of the proposed project may have a bearing on the extent to which a business’s environmental performance needs to be investigated.

Within the national context for this business sector, in the business’s industry sector and with respect to UNDP’s potential project activity, what would be the expected standard of practice that the business should be adhering to with respect to the environment?

The following are some criteria that may be used:

Issue/criteria for investigation

1. Does the company have an environmental policy?

Yes No

No Information

2. Does the environmental policy address the key environmental issues and risks the company may pose to the environment? These could include:

 Materials (e.g. raw materials consumed, % of materials that are recycled)

 Energy consumption

 Water consumption

 Biodiversity (e.g. impacts from operations)

 Emissions, effluents, and waste (e.g. GHGs, ozone depleting substances, NOx, SOx and other air emissions, water emissions, waste by type, spills, hazardous waste and other chemicals)

 Products and services

 Compliance with environmental legislation

 Environmental impacts from transportation

 Investments in environmental management

Yes No

No Information

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3. Does the company have an environmental management system in place? Has this environmental management system been externally certified?

Yes No

No Information

4. Does the company report on the implementation of its environmental policy? Has the company issued a publically available environmental or sustainability report?

Yes No

No Information

5. Does the company engage and work with environmental NGOs?

Yes No

No Information

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ANNEX 10: Good governance and anti-corruption

UNDP would prefer to collaborate with businesses that are with businesses that are committed for and adhered to the principles of good governance and which are prepared to work against corruption in all of its forms.

Within the national context for this business sector and with respect to UNDP’s potential project activity, what would be the expected standard of practice that the business should be adhering to? The following are some criteria that may be used as a screening tool for finding businesses as potential UNDP partners:

1. Does the company have an anti-corruption policy in place?

Yes No

No Information

1.1 Does the company have detailed policies on company-specific bribery issues both within the Private-Public and Private-Private Spheres? These issues may include complicity in and/or administration/ arbitration of kickbacks, extortion, protection money, facilitation payments, conflicts of interest, gifts and hospitality, fraud and money laundering, and political and charitable contributions.

Yes

If yes, which bribery issues?

No

No Information

1.2. Does the company have good management systems and effective procedures outlining frameworks for risk assessment, training, sanctions, whistle-blowing, continuous internal self-review and external reporting?

Yes

No

No Information

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2. Does the company ensure that the Staff is adequately selected and trained on the risks posed by corruption?

Yes No

No Information

3. Does the company have in place appropriate codes of conduct and disciplinary measures in case of non-compliance of such codes?

Yes No

No Information

3.1 If yes, how often appropriate codes of conduct and disciplinary measures have been applied in case of non-compliance of such codes?

Yes No

No Information

4. Does the company have in place measures and systems in place for disclosure of assets of senior management and their family members?

Yes No

No Information

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4.1 If yes, are those measures effective and regularly practiced?

Yes No

No Information

5. Has the company, in the past, refused or resisted cooperation with national and foreign law enforcement authorities conducting corruption-related investigations?

Yes No

No Information

6. Does the company encourage staff to report cases of corruption that they witness in conjunction with the performance of their duties?

Yes No

No Information

7. In the event of a case reported, has the company followed the processes outlined in the Codes of Conduct?

Yes No

No Information

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8. Does the company have in place measures to protect witnesses and whistleblowers from potential retaliation?

Yes No

No Information

9. Does the company have a policy in place with regards to abstaining from recruitment of former public officials, whose functions related directly to employment or activities to be performed or supervised in the private sector?

Yes No

No Information

10. Does the company include a clause in its contracts whereby a stipulation is annulled or rescinded if the other party engages in corrupt practices?

Yes No

No Information

11. Does the company have policies and procedures regarding external reporting and informing people (reporting to media and the public on corruption cases)?

Yes No

No Information

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ANNEX 11 : The Global Compact Principles

The UN Global Compact's ten principles in the areas of human rights, labour, the environment and anti-corruption enjoy universal consensus and are derived from:

The Universal Declaration of Human Rights

The International Labour Organization's Declaration on Fundamental Principles and Rights at Work The Rio Declaration on Environment and Development

The United Nations Convention Against Corruption

The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti- corruption:

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Labour Standards

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

 ⁱ The list as provided is a subjective summary of questions based on the “Human Rights Compliance Assessment (HRCA) Quick Check as developed by the Danish Institute for Human Rights and the Human Rights & Business Project. The proposed list should furthermore be taken together with the fundamental criteria highlighted in the annexes pertaining to Labour Standards and the Environment

REVISED GUIDELINES ON COOPERATION BETWEEN UNDP AND THE PRIVATE SECTOR RISK ASSESSMENT TOOL

Contents

1. Summary overview of the Risk Assessment Tool

2. The process to follow

ANNEX 1: Useful websites for basic research on companies

ANNEX 2: Basic data for self-disclosure by the company

ANNEX 3: The ILO conventions on child labour

ANNEX 4: UNDP risk tolerance in private sector engagement

ANNEX 5: Potentially high risk industry sectors

ANNEX 6: Human Rights criteria

ANNEX 7: Indigenous peoples

ANNEX 8: Labour, employment and discrimination

ANNEX 9: The environment

ANNEX 10: Good governance and anti-corruption

ANNEX 11 : The Global Compact Principles