Human Rights
As part of our social responsibility, we regard respect for human rights as fundamental for our business activities. Covestro is committed to respecting and safeguarding human rights on the basis of the United Nations (UN) Universal Declaration of Human Rights, the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy of the International Labour Organization (ILO), and the UN Guiding Principles on Business and Human Rights. Covestro is a member of the United Nations Global Compact and actively supports the National Action Plans and applicable national legislation governing human rights due diligence by companies. For this reason, Covestro is committed to applying due diligence to respect human rights.
Governance
Organizational Responsibility for Human Rights Risk Management
In the reporting year, the Board of Management appointed the head of the Group Quality department within the Group Innovation & Sustainability function as Group Human Rights Officer. The Group Human Rights Officer reports directly to the Board of Management and is responsible for monitoring Covestro’s human rights risk management processes. In addition, the respective heads of the corporate functions who are responsible for the relevant, prioritized human rights focus areas are appointed as Human Rights Risk Owners.
To support the Board of Management, the Group Human Rights Officer, and the Human Rights Risk Owners, Covestro has established a cross-functional working group (Human Rights Office), which is responsible for fully integrating human rights requirements into the Group’s activities. The Human Rights Office, which works under the guidance of the Group Human Rights Officer, consists of permanent members from the corporate Group Innovation & Sustainability; Group Health, Safety and Environment; Group Procurement; Human Resources; and Law, Intellectual Property & Compliance functions. The human rights responsibilities of the Human Rights Office include developing and implementing the comprehensive management approach, systematically assessing risks, prioritizing and monitoring the implementation of individual measures, planning and conducting trainings, preparing reports for the Board of Management, and communicating about this issue in general. The involved corporate functions are responsible for, among other things, identifying and assessing risks as well as developing measures and monitoring their effectiveness. These measures are designed and implemented in the departments in consultation with the Human Rights Office.
Comprehensive Human Rights Due Diligence Process
Covestro has established a comprehensive due diligence process to safeguard human rights in our business activities. The overarching management approach is based on the UN’s Guiding Principles on Business and Human Rights, the core elements of the German Act on Corporate Due Diligence Obligations for the Prevention of Human Rights Violations in Supply Chains, which entered into force in 2023, and the French law on human rights due diligence. We regularly monitor other national and international laws and legislative initiatives such as the proposed European Union (EU) Corporate Due Diligence Directive.
This overarching management approach is a continual process comprising the six core elements described below.
Human rights due diligence process
Policy and Commitment
The principles of our human rights due diligence are delineated in our Human Rights Policy Statement, various corporate policies, Group regulations, and in our own and our Supplier Code of Conduct. In these documents, we have specified key international conventions and principles as the basis of our conduct and our expectations of business partners worldwide. These documents are published either on Covestro’s website or on our internal intranet to ensure accessibility for the relevant stakeholders.
Our corporate commitment to safeguarding human rights (human rights policy statement), which describes Covestro’s human rights strategy to exercise proper regard for its due diligence obligations, is anchored in the necessary operational policies and procedures and has been published on our website. Our human rights policy statement was updated, adopted by the full Board of Management, subsequently communicated via a global intranet article, and presented to the General Works Council Committee in the year 2023. A key component of our commitment is zero tolerance toward child labor, forced labor, modern slavery, and human trafficking. In the reporting year, we once again made a public statement on slavery and human trafficking (Corporate Commitment against Slavery and Human Trafficking) to underline our position.
Within the supply chain, Covestro regards adherence to sustainability standards as a fundamental factor in value creation and an important lever for minimizing risks. Both current and new Covestro suppliers must meet not only economic standards but also social, ethical, and environmental standards as well as those related to corporate responsibility. Our standards, also in regard to human rights, are defined in Covestro’s Supplier Code of Conduct.
- See “Sustainability in Sourcing.”
- Additional information is available at: www.covestro.com/en/sustainability/service-downloads/policies-commitments
Risk Analysis
The starting point for our human rights due diligence is a risk analysis that identifies and assesses actual or potential negative impacts on human rights that Covestro could cause, contribute to, or which it could be directly linked to, as a result of its business activities. The due diligence covers all of Covestro’s own sites, the supply chain, as well as the use phase and end-of-life of our products. The comprehensive risk analysis, which is performed every three to four years, considers all potential human rights risk areas in which Covestro’s employees, contractors, suppliers, customers, consumers, or neighboring communities may be affected. The relevant risks are then discussed with the respective business entities and corporate functions on an annual and ad hoc basis and prioritized for further management, depending on the gross assessment of the severity of a potential human rights violation and its likelihood of occurrence. Potential human rights violations assigned the highest degree of severity, based on the scale, scope, and irremediability of the potential violation, always take top priority. Findings from this risk analysis are continually updated by the Human Rights Office, taking relevant information obtained from internal and external sources into account, such as from Covestro’s grievance mechanism.
In the reporting year, Covestro again performed the comprehensive risk analysis in combination with the materiality analysis and identified human rights focus areas along the value chain. No grievances were reported in the previous year that could have been analyzed in the human rights-related risks analysis conducted in the year 2023. In addition, there was no need to perform an ad hoc risk analysis, e.g., due to a material change in Covestro’s business activities.
Our identified human rights focus areas in the context of our own business activities and at the sites of our direct suppliers include the worst forms of human rights violations, working conditions, health and safety impacts on employees and contractors, and potential environmental impacts on surrounding communities at our own sites or those of our suppliers. Other focus areas in our own business activities include water resources, the diversity, equity, and inclusion of our workforce, and the safety of our products. Our focus in the use phase and at the end of life of our products includes their use in sensitive applications. Compared with the previous year, the potential environmental impact of our suppliers’ business activities on their surrounding communities came into focus while the potential impact of collecting and processing waste from our products in the downstream value chain fell out of focus.
On a yearly and on an ad-hoc basis, Covestro’s Human Rights Risk Owners assess and prioritize the human rights risks in their focus areas. For our suppliers, we analyze and prioritize human rights risks using a combination of country and industry or sector risks based on recognized external sources. In a second step, we considered our ability to influence our suppliers to further prioritize these risks.
For our own business activities, the human rights risks of forced labor, child labor, environmental emissions, the disposal of (hazardous) waste, the occupational health and safety of our workers, as well as product stewardship were globally prioritized in the reporting period and local human rights-related risks of our water consumption in India were prioritized for further management as part of the human rights management system. Additionally, the material risks of forced and child labor were prioritized for certain supplier industry and country combinations.
Actions
Preventive and Remedial Measures
Covestro’s Human Rights Risk Owners assess the suitability of existing preventive measures in accordance with the risk-based approach recommended in the UN Guiding Principles and, if necessary, implement appropriate new measures to prevent or mitigate adverse impacts on human rights for the prioritized human rights risks. Many measures in the areas of health and safety, product safety, compliance, human resources, and sustainable supplier management have long been implemented at Covestro and aim to prevent or mitigate negative impacts on human rights. Most of these measures are already integrated into Covestro’s existing Group-wide management systems, including the integrated Health, Safety, Environment, Energy, and Quality (HSEQ) management system, the compliance management system, the human resources process landscape, and other corporate governance frameworks.
- See “Business Conduct (Compliance).”
- See “Employees.”
- See “Health and Safety.”
- See “Product Stewardship.”
- See “Sustainability in Sourcing.”
The cross-functional Human Rights Office organizes trainings on human rights aspects that are relevant to the activities of the Group and its value chain. In addition, the Human Rights Office provides regular information about human rights in the company and advises corporate functions on how to fully integrate the human rights requirements into Covestro’s management systems. In the reporting year, the Human Rights Office published two global intranet articles and set up an internal SharePoint page with information for employees on Covestro’s approach to human rights. In addition, a web-based training on Covestro’s approach to human rights was developed and rolled out worldwide as part of the Expedition C learning initiative.
If there are reasonable grounds for suspicion or concrete indications of human rights violations within Covestro, the local Compliance Officer investigates the facts based on Group-wide standards which are outlined in a local procedure. If Covestro has directly caused a human rights violation, Covestro is committed to work quickly to stop or change the responsible business activities in order to end the violation. Any human rights violation caused by a Covestro employee is evaluated and organizational or disciplinary measures may be taken if necessary. There were no concrete indications of human rights violations within the Covestro organization in the reporting year.
Numerous measures are implemented with regard to suppliers in order to support sustainability in sourcing and the protection of human rights in the supply chain. These include the Group-wide integration of the Supplier Code of Conduct into the electronic ordering systems, Covestro’s membership in Together for Sustainability, and the provision of opportunities for training and dialog.
In addition, further actions were defined for suppliers where a concrete human rights risk was identified. These include targeted human rights trainings, supplier dialogues, contractual obligations, and online assessments or on-site audits. In the year 2023, these actions were published in a guidebook for supplier managers and, together with other support materials, made available on the human rights SharePoint page. Moreover, training was conducted for supplier managers on human rights in the supply chain.
If there are reasonable grounds for suspicion or concrete indications of human rights violations in Covestro’s supply chain, it investigates them carefully and consistently. Covestro expects its business partners to cooperate in clarifying the surrounding facts within a reasonable timeframe. If Covestro determines that its business activities have contributed to or are indirectly linked to human rights violations through one of its direct or indirect suppliers, Covestro is prepared to take measures to address the violation. Depending on the severity of the violation, Covestro reserves the right to respond appropriately in connection with its business partners. Inadequate working conditions, especially in relation to compensation and occupational health and safety, were found at one of our suppliers. Covestro supported this supplier on the recommended remedial actions in the reporting year.
Grievance Mechanism
Covestro expressly encourages reporting of suspected human rights violations in the Group as well as at suppliers’ companies. Suspected human rights violations can be reported using a whistleblower system consisting of a global hotline and an online tool. Covestro therefore enables employees and third parties to anonymously inform us of any potential violations at our direct or indirect suppliers. We investigate cases of suspected human rights violations by following a defined process based on the involvement of (potentially) affected stakeholders. To enhance the transparency of how reported complaints are handled, an operating procedure for the Group’s grievance mechanism is published on our website. The accessibility of the grievance mechanism was further improved in the reporting year by optimizing its placement on our website and expanding the available languages of our grievance procedure. No confirmed human rights violations were reported through the Group-wide grievance mechanism in fiscal 2023.
Effectiveness Monitoring
Appropriate qualitative and quantitative indicators along with internal and external sources are used to assess the effectiveness of Covestro’s human rights measures, in the existing management processes, at preventing negative impacts on human rights. In the year 2023, the corporate functions represented in the Human Rights Office reported on the implemented measures and potential findings regarding their effectiveness. Additionally, the effectiveness of the complaints procedure and remedial actions are reviewed annually and on and ad hoc basis. The appropriateness and effectiveness of the human rights risk management systems is reviewed with the Group Human Rights Officer. In addition, the Corporate Audit function complements the monitoring process with process-independent monitoring. The human rights risk management system was reviewed by Corporate Audit in the year 2023.
Reporting
Every year, Covestro communicates its human rights activities to the public in its Group Management Report. Moreover, the Group Human Rights Officer and the Human Rights Office report regularly (no less than once a year) to the Board of Management on the results of the risk analysis, the status of human rights due diligence, and the systematic integration of these requirements into Covestro’s management systems. The Sustainability Committee of the Supervisory Board was also updated on the management system in the year under review. In accordance with the requirements of the German Act on Corporate Due Diligence Obligations for the Prevention of Human Rights Violations in Supply Chains, a report on Covestro’s compliance with its due diligence obligations for the prior fiscal year will be published on the website in fiscal 2024.