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Responsible Disengagement – When Practice Misinterprets Theory

How do you address human rights risks in your business if you are operating in or supplying from an area affected by conflict, political turmoil or systematic human rights violations?

We understand the dilemma: stay and tackle where leverage is limited, systemic issues prevail, and stakeholders across the supply chain must be engaged; or leave and avoid potential human rights issues, bad press, and fines. One could conclude that finding new sourcing destinations with fewer known human rights risks could be a solution.

But leaving a territory or supplier is not always the responsible measure. We observe that the purpose behind responsible disengagement is often misunderstood, leading to exits and end of business relationships that result in weaker human rights conditions.

In this blog post, we explore the concept of responsible disengagement and illustrate how it has been misinterpreted in practice. To do so, we use an example from the mica supply chain in India and Madagascar, where a group of companies faced the dilemma of whether to continue or disengage from working with mica suppliers.

Understanding Responsible Disengagement

At CORE, we recognize the challenges companies experience when engaging upstream suppliers on tackling systemic human rights issues, especially in distant or difficult territories, where corporations may also have limited leverage. We understand that taking the decision to terminate a business relationship is a tough one.

That decision is highly dependent on the specific facts surrounding the company’s involvement in the region and sometimes, there may not be an immediate and straightforward answer to a company’s concerns.  The company may need to inform its decision, for example by engaging with relevant stakeholders.[1]

The 4-Factor Human Rights Due Diligence Approach to Decide if You Should Exit a Territory or Business Relationship

The human rights due diligence (HRDD) approach can guide companies in deciding whether to terminate a business relationship, considering at least the following four key aspects:

  1. Leverage over the entity in question.
  2. Criticality of the business relationship to the company.
  3. Severity of the abuse.
  4. Likelihood of adverse human rights impacts from termination.[2]
Kyle Glenn (Unsplash)

Responsible Disengagement as a Legal Requirement

Corporate sustainability regulations such as the German Supply Chain Act (LkSG) or the EU Corporate Sustainability Due Diligence Directive (CSDDD) stipulate responsible disengagement as a last resort option for businesses.

The CSDDD, for instance, incorporates the spirit of international standards, such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines, by stating that disengagement should happen only as a last resort and in a responsible manner, thus helping to prevent a cut-and-run approach.[3]  

Under the CSDDD, before ending a business relationship, companies are also required to evaluate whether the negative effects of termination would be significantly worse than the harm that could not be prevented, mitigated, ended or minimized. If so, companies are not required to terminate the relationship and must describe the reasons that justify the decision to remain in the territory or continue the business relationship as part of their sustainability reporting.

Misinterpretations of Disengagement

Many companies mistakenly believe that operating in challenging contexts or in difficult business relationships justifies disengagement from those situations. They tend to view sustainability due diligence as a matter of strict compliance, focusing on legal obligations rather than broader human rights implications.

Corporate sustainability laws certainly do not intend to worsen human rights conditions, which may be the result when a business leaves a supplier or a territory.  The spirit of sustainability due diligence is not about retreating from difficult situations but rather about actively engaging in the issue and seeking solutions. It is about demonstrating that a company has taken appropriate measures and made the necessary efforts to tackle the identified human rights risks and impacts.

Therefore, companies that implement corporate sustainability standards must understand and correctly implement the spirit of responsible business, including when deciding to disengage from a supplier or an entire territory.

Case Illustration: Mica Supply Chain in India and Madagascar

We had the opportunity to work with the Responsible Mica Initiative, a multistakeholder initiative spearheading a global coalition committed to establishing fair, responsible and sustainable mica supply chains in India and Madagascar. Their work aims to eliminate exploitative working conditions and eradicate child labor. RMI’s efforts are manifold including supply chain mapping, community empowerment and legal advocacy, performed through close collaboration with various actors in the mica supply chain and local partners.[4]  

We consider RMI’s approach a good practice example of meaningful multistakeholder engagement, particularly when engaging with key actors along raw material supply chains. We refer to it when companies ask us for examples of appropriate mitigation measures.

Despite RMI’s meaningful results, some member companies are contemplating leaving India and Madagascar. RMI’s Director Fanny Fremont describes such decisions as follows:

“Companies feel the pressure from increasing corporate sustainability regulations that require them to address human rights risks and impacts in their supply chains. They interpret these regulations with a sense of urgency and a need for absolute compliance, yet they are unprepared for the time these changes may take. They also receive conflicting instructions, for example, they are asked to implement best practices (which inevitably have cost implications), but also reduce costs year on year.”

Applying the 4-Factor HRDD Approach to the Mica Example

Let’s apply the four-factor HRDD approach to the case of RMI member companies contemplating disengagement from India and Madagascar and consider the four factors in their decision: leverage, criticality of the business relationship, severity of abuse and likelihood of adverse impacts from disengagement.

High-risk supply chain:

The mica supply chain is high-risk from a human rights perspective, where exploitative working conditions and child labour are highly present.

Scarcity of viable alternatives:

Viable alternatives are scarce, and other mica mining regions may present similar human rights risks.

Increased leverage:

Supporting RMI’s efforts in India and Madagascar increases leverage over business partners and addresses these risks appropriately. The question for a company to considering moving to another territory then becomes whether it can effectively address human rights risks in other mica mining regions without the collective strength and increased leverage provided by a multistakeholder collaboration.

Negative impacts of disengagement:

Disengaging from India and Madagascar’s mica supply chain risks exacerbating negative impacts on workers and communities.

Given these factors, disengagement does not appear to be a reasonable course of action in this case. Companies that decide to disengage despite an evaluation based on this four-factor approach may compromise alignment with legal requirements such as the EU’s CSDDD and other due diligence regulations.

Engagement before Disengagement

Misinterpreting these legal requirements can lead companies to prioritize risks to themselves over risks to people. The essence of human rights due diligence, however, is to place people at the core of these efforts.  

As evident in the mica example, effective due diligence requires engaging with challenging contexts and seeking collaborative solutions. To achieve effective outcomes and positive impacts on people throughout global value chains, it is crucial to ensure that sustainability regulations do not become mere compliance tools. Otherwise, a decision to disengage based on a misinterpretation of due diligence could easily result not in compliance but in a failure to meet due diligence requirements.

If your company is confronted with having to make decisions on complex matters concerning human rights due diligence, reach out to us. We act as trusted advisors, allies and challengers depending on what is needed. With our long-standing practical experience, we support our clients in navigating complex scenarios and ultimately, creating positive impact.

Cecilia and Theresa for the CORE team


[1] See Art. 13 (3) of the CSDDD. The CSDDD also mandates meaningful stakeholder engagement when deciding to terminate or suspend a business relationship.

[2] See UNGPs, Principle 19. See also, the UNOHR, Business and Human Rights in Challenging Contexts Considerations for Remaining and Exiting (Guidance Note 2023), where these factors are spelled out.    

[3] The CSDDD requires that disengagement occur only where there is no reasonable expectation that efforts to use or increase leverage would succeed, or where the implementation of an action plan with a clear timeline failed to prevent, mitigate, end or minimize the adverse impact and such impact is severe. See Art. 10 (6) and Art. 11(7) of the CSDDD.

[4] The RMI simultaneously implements measures on three levels: mapping of supply chains and workplace standards across all tiers of the mica supply chain, empowering communities linked to mica supply chain by employing local civil society organizations as program partners and advocating for legal frameworks at national levels. For more information about RMI’s work and impact, please visit: https://responsible-mica-initiative.com/

Meet the CORE team!

The members of the CORE team have been working together for almost a decade, helping companies navigate the intersection of business and human rights. Now under the umbrella of CORE, they deliver sustainable and ethical solutions for clients.

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