Ensuring that practices such as modern slavery and child labour don’t find their way into supply chains is a serious challenge for modern businesses. As this article points out, few companies have visibility beyond their first tier of suppliers, and many commodities are sourced from countries where human rights risks are substantial, but mapping your supply chain, as well as improving its ethical and sustainability credentials, will reduce its vulnerability to disruption, litigation and negative publicity. Human rights issues can occur at many different levels in the supply chain – from Tier 1 direct suppliers, all the way down through various other suppliers and subcontractors to those providing raw material inputs at the beginning of the chain, so companies need to understand the human rights issues at all levels of their supply chain, and not just the first tier.
Mapping the supply chain
Modern supply chains can contain thousands or tens of thousands of suppliers, and their dynamic, diverse nature can make it impossible for one actor to conduct effective due diligence across their entirety. How then can consumer facing businesses best exert influence on the various members of their supply chain to encourage robust due diligence practices and buy-in for their responsible sourcing agenda?
Mapping a long and complex supply chain in order to identify any potential human rights issues and risks requires cooperation from suppliers in order to identify subsequent tiers in the chain. This in itself presents a challenge, since suppliers are often reluctant to disclose detailed information about their own supply chains – either for commercial reasons or as an attempt to avoid the necessity of complying with the buyer’s human rights requirements. Developing external buy-in and genuine engagement from suppliers for supply chain mapping requires an emphasis on cooperation, rather than simply compliance. According to a report by the SHIFT PROJECT, conveying the potential commercial benefit to the supplier can help – for instance, conveying the importance of quality, commercial efficiencies, or brand protection may provide the buyer with more leverage, and the supplier with more incentive, than simply contractually obliging suppliers to disclose their supply chains.
Leverage
When a company has identified a human rights risk in its supply chain, what tools does it have at its disposal to maximise its leverage over the supplier(s) in question, in order to address the problem as quickly and effectively as possible?
Sometimes a buyer will have sufficient leverage through its purchasing power alone, in which case embedding robust due diligence practices and human rights requirements early on in purchasing decisions can help to improve supplier conduct and increase transparency. Where the buyer has less purchasing power, for example when the continuation of the relationship is more important to the buyer than it is to the supplier, leverage can be maximised through relationships with other actors, such as governments or NGOs. Companies can also create leverage through collaborative platforms for action. The Fair Labour Association, for example, provides a platform for companies to pursue common labour standards and practices related to supplier assessment. The SHIFT PROJECT report points out that “In various examples, industry collaboration has enabled companies to address systemic issues collectively, where any one company lacked the leverage to address the issue on its own. Some companies related experiences of multi-stakeholder action in which leverage was increased by partnering with civil society organizations, which can bring increased credibility, capacity-building, or public pressure to a particular situation”.
Dialogue and relationship building
Perhaps more important than looking to apply pressure, however, is fostering trust and cooperative relationships over time. Leverage can be slowly increased in a bilateral way as credibility and collaboration are built into the relationship.
Alternatively, companies can increase their leverage through dialogue at the contracting stage. It is common to build expectations regarding human rights standards into contracts with suppliers, but less common that this takes place in a collaborative way that considers the mutual expectations and challenges being faced, and how they can best be addressed. This dialogue as opposed to monologue approach is identified by the SHIFT report as an opportunity to create a shared sense of purpose between buyer and supplier, and if it is embedded in the bidding process allows the buyer to make the most of the moment when their leverage is likely to be at its highest point.