Business entity TIP risk assessments

This indicator provides one way of measuring business entity commitments to effective TIP risk assessment. The involvement of CSOs in business entity TIP risk assessment processes may be used as a sign of commitment business entities have to detecting TIP and TIP risk in their supply chains. Involvement of CSOs demonstrates that business entities are willing to recruit external support and oversight to increase the effectiveness of their TIP risk assessments.

Calculation Method:

Step 1. Define indicator criteria:  

• Define CSO support in terms of specific types of activity e.g., ‘CSO accompanies visual inspection of business entity site(s)’ or ‘CSO co-develops risk categories that the business entity uses in risk assessment procedures’.  ​​​​
• Select / adapt one of the following supply tier options according to project or program priorities:  
  • (a) Tier 1 suppliers only, where Tier 1 suppliers sell finished products directly to customers
  • (b) Tier 1 and tier 2 suppliers only, where Tier 2 suppliers purchase raw materials from Tier 3 suppliers, process materials and sell resulting product to Tier 1 supplier.   
  • (c)  Tier 1, 2, and 3 Suppliers, where Tier 3 Supplier produces and sells raw materials/commodities to Tier 2 suppliers.                                                                                                                                                               

Step 2. Count the number of business entities targeted by the project or program that work with CSOs on risk assessments according to the criteria defined in Step 1 and note this alongside the total number of targeted business entities. 

Data Collection and analysis: 

This indicator is intended for use by CSOs that are engaging with business entities directly on risk assessment processes and uses engagement records with those entities for assessment.  

Engagement records should be kept for each business entity engaged with including these details:  

• which business entity units or departments the CSO engaged with  
• which risk assessment areas the CSO engaged on with business entities  
•  the engagement activities (e.g., CSO meetings with the business entity, work on key risk assessment documents by the CSO, interviews with business entity staff or workers, or business entity personnel on site visits) and  
• information related to business entity risks assessment activity for each supplier tier and which tiers business entities have engaged with CSOs on for risk assessment.  

From these records, CSOs can determine whether a business entity has engaged with the CSO according to the criteria defined in the indicator. 

Using the information collected in Project or program engagement records, the number of business entities that meet the terms of this indicator may be counted. 

• Business entity size (e.g., # employees and / or annual turnover) 

• Sector (e.g., construction, fishing, agriculture, fashion, ICT and others) 

• Suppliers / buyers 

The indicator can also be adapted for qualitative monitoring and reporting on small numbers of business entities (e.g. 2 or 3). In this case, instead of counting the number of business entities, CSOs may simply use engagement records to describe for each business entity how the business entity has engaged with the CSO on risk assessment activities and for which tiers. 

Definitions  

Target business entities:  The term “business entity” is used in a general sense to denote legally recognized organizations formed for the purpose of engaging in economic transactions, provide goods or services, and generate profits, engaged by the project or program. This may range from small businesses, for example a local restaurant chain that employs less than 50 people, to a multinational company with thousands of employees. 

Supply chain tiers: these are groups of supplier business entities that share the same level in the production chain leading to production of the final product that is sold to customers. For example, Tier 3 suppliers provide products to Tier 2 suppliers who process them in some way, then provide the products to Tier 1 suppliers who sell goods directly to customers. Some business entities may take control of multiple stages of the supply chain, from harvesting raw materials all the way through to selling the finished product to customers. This is known as a vertically integrated business entity, consisting of internal supply tiers.  

Assessing the presence or risk of TIP: This refers to a structured procedure for identifying presence or risk of TIP in business entities’ business activities according to clearly defied criteria.