An adverse impact is an impact that your company has, or potentially has on human rights, the
environment or key elements of economic sustainability, i.e., anti-corruption, -competition or tax.
An adverse impact occurs when a business activity removes or reduces the ability of a rights holder to enjoy a human right, burdens the environment, or involves practices such as corruption, anti-trust behaviors, or unethical tax avoidance.
The severity of an impact is determined by evaluating three key parameters:
- Scale: This refers to the gravity or seriousness of the impact for the affected party or parties. For example, it considers how significant the impact is on stakeholders, such as exploitative child labor, or the environment, such as groundwater pollution.
- Scope: This relates to the number of stakeholders affected or the extent to which the impact is widespread. It considers how many people are affected by the impact or the size of the omission. For instance, adverse impacts on the right to health due to the sale of expired food may affect numerous customers, or pollution may affect a large geographical area.
- Irremediability: This parameter assesses the potential for remediation, i.e., the ability to make the impact right again for all parties involved. It considers whether it is possible to fully restore the situation for those affected. For example, if a person loses their life, the impact is severe because it is irremediable.
It is important to evaluate all impact risks individually, using the three parameters. While management of all adverse impacts is necessary, these parameters can guide prioritization, if necessary, of actions to address impacts.
Typically, business relationships can and should address all risks of adverse impacts that they cause or contribute to. It shall be noted that prioritization may become necessary when acting in relation to risks of impacts that the company is merely ‘linked to’, through business relationships. Prioritization and immediate action are particularly important, when delays may result in the impact becoming more severe.
An adverse impact is an impact that your company has, or potentially has on human rights, the
environment or key elements of economic sustainability, i.e., anti-corruption, -competition or tax.
An adverse impact occurs when a business activity removes or reduces the ability of a rights holder to enjoy a human right, burdens the environment, or involves practices such as corruption, anti-trust behaviors, or unethical tax avoidance.
The severity of an impact is determined by evaluating three key parameters:
- Scale: This refers to the gravity or seriousness of the impact for the affected party or parties. For example, it considers how significant the impact is on stakeholders, such as exploitative child labor, or the environment, such as groundwater pollution.
- Scope: This relates to the number of stakeholders affected or the extent to which the impact is widespread. It considers how many people are affected by the impact or the size of the omission. For instance, adverse impacts on the right to health due to the sale of expired food may affect numerous customers, or pollution may affect a large geographical area.
- Irremediability: This parameter assesses the potential for remediation, i.e., the ability to make the impact right again for all parties involved. It considers whether it is possible to fully restore the situation for those affected. For example, if a person loses their life, the impact is severe because it is irremediable.
It is important to evaluate all impact risks individually, using the three parameters. While management of all adverse impacts is necessary, these parameters can guide prioritization, if necessary, of actions to address impacts.
Typically, business relationships can and should address all risks of adverse impacts that they cause or contribute to. It shall be noted that prioritization may become necessary when acting in relation to risks of impacts that the company is merely ‘linked to’, through business relationships. Prioritization and immediate action are particularly important, when delays may result in the impact becoming more severe.