Due Diligence

At ChangemakerXchange we aim to ensure all partnerships are fully in line with our mission and values and do not in any way compromise them. To ensure we embody our values in practice and that we preserve our ethical integrity and community ownership, it is vital that we select partners and partnerships very carefully. As a charitable entity, we accept grants from corporates, foundations, and individuals to further the mission of CXC. Each potential partner is assessed from an ethical perspective according to the procedure outlined below.

 

PRE-DUE-DILIGENCE TOOL ACTIONS

▪ Before investing significant time into the process (e.g. submitting a formal proposal / concept note), the ChangemakerXchange Partnerships Keeper (the member of the core team who is the overall lead on partnerships processes) consults and gets an initial feeling from fellow core team members before deciding themselves on whether to continue the process and conversations.

▪ The Partnerships Keeper completes a ‘Decision Tool’ to test strategic alignment in general and to look more deeply at theory of change and target group fit, team capacity and financial / non-financial benefits.

▪ If the partnership shows a high chance of being taken further and above 50% probability of being realised (e.g. following submission of a draft concept note, we are invited to submit a full proposal), the Partnerships Keeper completes the 7-step CXC Due Diligence Process and fills out a document for any foundation or company which falls in the high-risk sectors as defined by UNDP, which include metals and mining, alcohol, timber, agriculture (particularly palm oil and monocultures), utilities, metals and mining, clothing and consumer electronics (due to supply chain issues), fast food, high-sugar drinks, finance.)

▪ The due diligence process consists of the below steps.

 

THE DUE DILIGENCE PROCESS

Step 1: Industry Risk

Excluded and high-risk sectors

⛔ We are aware that the complex dynamics and inter-connected systemic issues of value chains, shareholders, finance, etc. make it difficult to assess a partner according to a standardized set of criteria and for any partner to be ‘100% clean’. However, some clear red lines and excluded sectors where we would not pursue any kind of direct partnership are outlined below:

▪ Weapons / armaments (sale, distribution and manufacturing)

▪ Tobacco (manufacture, sales or distribution)

▪ Gambling (casinos, betting companies, excluding charitable-focused national lotteries)

▪ Fossil fuels

▪ Pornography

▪ Any company involved in or complicit in human rights violations.

▪ Use or toleration of forced / child labour

If the company indirectly interacts with one of these industries e.g. through investment / service provision / affiliate companies, it should be treated on a case-by-case basis and needs close scrutiny.

 

Step 2: Assess Company Behaviour & Reputation (Qualitative)

We do qualitative research on the company / foundation's history, major controversies and positive / negative organisational behaviour. Some usual sources for this research include Business & Human Rights Resource Centre, CorpWatch, Know The Chain, Ethical Consumer, Multinational Monitor, World Benchmarking Alliance and many others depending on sector (e.g. Influence Map for those engaged in lobbying, Fossil banks for the finance sector, Ranking Digital Rights for tech sector).

We will also treat with special sensitivity high-risk sectors as defined by UNDP, which include metals and mining, alcohol, timber, agriculture (particularly palm oil and monocultures), utilities, metals and mining, clothing and consumer electronics, fast food, FMCG, high-sugar drinks, finance.

 

Step 3: Assess Company Rankings (Quantitive)

We check the company / foundation's performance on the key and reputable ratings around sustainability performance and corporate human rights issues. Sources include a wide range of open source data at Wikirate, MSCI ESG ratings (noting the limitations of them), MSCI Implied Temperature Rise, Violation Tracker, Company Response Mechanism (showing the company’s response to key human rights issues).

 

Step 4: Risk-Benefit Analysis

We then look at any risks posed to CXC's NGO status / existing partnerships & resources or reputation and compare these to the strategic benefit and impact the partnership would bring.

 

Step 5: Potential Partner Consultation

We speak to the partner themselves and ascertain the below

▪ Clarity Do we have complete clarity on everything we need to do our due diligence, which might not be available publicly (e.g. the relationship between the foundation and its parent company)

▪ Engagement • Is the partner willing to engage in the conversation and generally receptive to our feedback and questions on the key issues raised in the due diligence process?

▪ Partner Stance on Company Controversies / Controversial Practises • What is the individual representative / their department's (e.g. corporate foundation / CSR department) stance on key company controversies or corporate practices? Are they taking action to try to catalyze change? is there any potential to leverage the partnership to improve the company’s behaviour?

 

Step 6: Community Consultation

Partnerships defined by the CXC core team as high risk require a community consultation (in-depth conversations with young changemakers working on the relevant issue)

▪ The detailed due diligence tool and findings will be presented to a Community Jury, selected from our global community of young changemakers, activists and social entrepreneurs, either consulted collectively or individually. They will ideally consist of people from different regions and also some who have experience in the sector the potential partner works in.

▪ After the case has been presented the following questions must be discussed:

   ▫ Values • Does the acceptance of this donation and partnership go against the ChangemakerXchange values?

   ▫ Reputation • May the partnership cause reputational damage to ChangemakerXchange?

   ▫ Effect on future donations • Will the donation encourage or discourage future donations?

   ▫ Overall question • Is the impact worth the risks and any potential transgression of values?

   ▫ The Community Jury then votes based on the levels of consent on the question: Do you think ChangemakerXchange should partner with this organisation? Their scores and comments are used to inform our decision.

1  Agreement without reservation •  I agree 100% and fully support the decision and implementation.

2 Slight concerns •  I have slight concerns, but I support the decision and implementation.

3 Undecided •  I cannot decide but I still support the decision and implementation.

4 Serious concerns •  I have serious concerns, but I still trust the team and support the decision and/or implementation.

5 Contradicts Values •  I do not agree, this partnership would fundamentally contradict my values and I do not support the decision.

 

Step 7: Team decision

▪ Presentation • The Partnerships Keeper or the LRP presents the case so far (due diligence Tool, community consultation).

▪  Discussion • After the presentation, the CXC core team will discuss the situation, and may decide to use the same framing questions as the community jury group:

   ▫ Values • Does the acceptance of this donation and partnership go against the ChangemakerXchange and/or universal ethical values?

   ▫ Reputation • May the partnership cause reputational damage to ChangemakerXchange?

   ▫ Effect on future donations • Will the donation encourage or discourage future donations?

   ▫ Overall question • Is the impact worth the risks and any potential transgression of values?

▪ Decision • At this point, the CXC core team members have a vote on whether to go ahead with the partnership based on the 5 levels of consensus model outlined in our Team Manifesto. Each team member has the right to veto.

1 Agreement without reservation • I agree 100% and fully support the decision and implementation.

2 Slight concerns • I have slight concerns, but I support the decision and implementation.

3 Undecided • I cannot decide but I still support the decision and implementation.

4 Serious concerns • I have serious concerns, but I still support the decision and/or implementation.

5 Veto • I do not agree, and I do not support the decision and implementation.

If one core team member vetoes the partnership, it cannot go ahead. If there is no veto from the CXC core team, but a significant number of 3-4 scores, there will likely be further rounds of discussion.

 

Note: Individuals Due Diligence

For individuals, there are some extra steps (follow tab 2 of the due diligence tool), which include background research on which organisations the individual is affiliated with, research on both the individual and affiliated organisations and a reference check.

 

Evolution of the tool and process

The tool and process is reviewed, evaluated, and potentially refined on an annual basis by the Partnerships Keeper.