‘Regulation through litigation’ is making downstream supply chain due diligence more important

The majority of recent domestic mandatory due diligence laws passed by countries around the world focus on upstream relationships. They ban companies from purchasing goods or services from suppliers with links to forced labour, conflict or other human rights abuses.

The EU is currently debating whether companies should also be held accountable for the conduct of their downstream relationships. But whether the Corporate Sustainability Mandatory Due Diligence Directive (CSMDD) is passed into law or not, it is becoming increasingly common for lawsuits to be brought against companies that fail to conduct downstream due diligence, producing what is referred to as ‘regulation through litigation’.

• In the UK last year, the Court of Appeals for England and Wales ruled that a UK broker acting on behalf of a ship owner could potentially be liable for the death of a worker at a shipyard in Bangladesh.

• An Ohio court recently awarded $650 million in damages to two US counties who argued that several national pharmacy chains, arguing that the companies recklessly distributed large amounts of opioids.

• Two class actions were filed against US financial institutions for allegedly participating in and financially benefitting from Jeffrey Epstein’s sex trafficking activities.

There are many more such examples. They demonstrate how important it is to be aware of exactly who you are in business with, upstream and down. In the past, this might have been prohibitively difficult, but, with Xapien, carrying out detailed supply chain due diligence can be done in minutes by simply typing a name and hitting search. It automates the process of looking for patterns of risk by reading every internet site, media article or blog about a company or person and their associates. Risks and patterns are extracted and summarised, giving you up and downstream supply chain clarity.

To find out more about how Xapien can help you, get in touch.