The right to an effective remedy is a core tenet of a human rights system[1] and indispensable to enforce corporate due diligence commitments. Therefore, ensuring a formalised process to report grievances along the entire supply chain is the foundational element of the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, hereinafter referred to as LkSG).
A Grievance Mechanism serves as a source of information on potential human rights and environmental risks or violations related to a company's economic activities and is crucial to support effective due diligence and achieving business success. Why is it so crucial? What is the value of the mechanism, and the information derived from it? We take a look at the factors that make Grievance Mechanisms a game-changer for businesses in reaching their goals and achieving success.
1. Enhancing Employee Satisfaction and Performance
A grievance mechanism, as an accessible channel for communication to everyone, seeks to empower employees to express work- and company-related dissatisfaction and thus enter into a constructive, transparent and, if necessary, public dialogue with decision-makers for a joint problem-solving procedure. The mechanism demonstrates trust between workers and companies and helps to enhance employee engagement.
Good communication and collaboration lead to increased satisfaction and a more harmonious work environment, which has a positive impact on employee loyalty, commitment and productivity, reduces absenteeism, work refusal and undisciplined behaviour, and thus improves the overall organization of the company2. Therefore, constructive feedback from workers can help decision-makers continuously improve working conditions while advancing their business goals.
2. Proactive Approach
An effective Grievance Mechanism operates as an early warning system to identify and address social and environmental risks proactively before they escalate.3 By having a platform to directly communicate their issues, impacted or concerned parties are given a fair voice and opportunity to seek resolution early on.
Grievance mechanisms appear to take care of worker engagement as well as business risks as exclusive parts of due diligence systems. However, they are not mutually exclusive in nature. Through the information obtained from grievance mechanisms, companies can implement measures to prevent litigations, worker strikes, and disruptions in the supply chain that may lead to curtailed revenue and damaged reputation. This proactive approach can minimise interruptions in business activity, allowing smooth and seamless operations; and paving the way for success.
3. Ensure Responsible Conduct
The German Supply Chain Due Diligence Act mandates that companies take all means reasonably available to ensure due diligence in their respective contexts. It is an obligation of conduct, not an obligation of result.
Accordingly, corporate responsibility is not limited to ticking boxes of individual measures but is a continuous learning and improvement process that intends to dynamically adapt to changing risk exposures and social, political and legal expectations, including those of consumers, investors and contractual partners. Grievance Mechanisms, as a source of feedback and data, support the continuous learning and innovation of an organisation over time, helping to keep up with the expectations of stakeholders.
As illustrated above, an effective (accessible, confidential and protects against discrimination, § 8(4) LkSG) Grievance Mechanism is not only a legal or contractual obligation, but also of corporate interest, possibly even a competitive advantage4, and justifies the initial investment of time and finances required, making it a game-changing solution for success.
The Indo-German Chamber of Commerce in cooperation with Alliance for Integrity is offering companies the chance to trial an Inter-Company Grievance Mechanism and reap these benefits!
FairVoice, developed in line with German regulations, connects companies and their suppliers to one all-encompassing complaints and whistleblowing mechanism. If you would like to participate, please register below.
[1] Enhancing the accessibility, dissemination and implementation of the Accountability and Remedy Project, A/HRC/50/45, S. 3.
2 Onyebuchi Obiekwe, N. Uchechi Eke: Impact of Employee Grievance Management on Organizational Performance, IIARD International Journal of Economics and Business Management, 2019, p 2.
3 Christian Stemberg: Die drei „Schlüsselkriterien“ des Beschwerdeverfahrens nach § Lieferkettensorgfaltspflichtengesetz, CCZ 2022, 92 (92).
4 Vedant Vengsarkar, Karishma Desai: Impact of effective grievance redressal mechanism on employee morale, IJIRT, September 2022.