How to improve supply chain sustainability and ethics
Every supply chain around the world relies, to some extent, on human labour. How can companies work with their suppliers to first understand the risks inherent in their chains around human capital and, second, to improve their ethical approaches to human labour?
From forced labour to debt bondage, stifling back-street sweat shops to hazardous, unsafe construction sites, modern slavery is a very 21st century problem.
A startling 40 million people live in slavery according to the organisation Anti-Slavery; that’s one in every 200 people on the planet. Around 25 million of these are trapped in forced labour, with 60% in supply chains, a situation exacerbated by Covid and labour shortages.
It’s a tragic state of affairs that has helped to focus minds, says Matt Friedman, CEO of the Hong Kong based Mekong Club, which works with companies across banking, hospitality, retail and manufacturing to help bring action to their modern slavery statements.
The demand for companies to operate with more social responsibility is growing, from fund managers under pressure from investors who want to know that their pensions aren’t supporting modern slavery, to consumers who want to buy guilt-free clothes.
“It used to be that companies focused on profits, prestige and growth but now the expectation is that they also have to do good,” says Friedman.
The Ethical Trade Initiative (ETI) is another membership organisation, bringing together a mix of private companies, NGOs and trade unions, to improve the rights of workers in supply chains. “Modern slavery is a just a piece of paper… unless it is embedded in organisational plans,” says head of membership Kate Lewis.
The ETI encourages its members to map their supply chain from top to bottom: “because often the biggest risk you are carrying is at the end of your supply chain,” adds Lewis. Debt, excessive overtime, a lack of freedom of movement, and whether accommodation is offered, are all potential signs that workers are possibly being coerced.
Companies need to understand their vulnerability and their risk. There are a growing number of reports and metrics, such as the Slavery Index, the annual Trafficking in Persons (TIP) report, as well as statistics about the vulnerability of individual countries and products, that can help companies assess risk.
By identifying salient issues, says Lewis, setting objectives and tackling the most concerning human rights issues first, companies can bring more dynamism to their modern slavery policies. And with the growth of social media, and ever more vigilant NGOs and media organisations, managing the risk of reputational damage has never been more important.
Traditionally, audits have been a staple of supply chain monitoring, but this is changing. Language issues and intimidation often mean that employees asked to give feedback to auditors are too scared to speak, says Friedman.
Unilever, for instance, now supplement audits with human rights impact assessments, carried out by independent organisations, as well as anonymous worker surveys. Confidential grievance mechanisms such as phone lines and apps are another way of ensuring workers have a way of speaking out about any issues.
Food and agri-business Olam sees collaboration as central to its policies around modern slavery. The company deals with a vast range of commodities, all of which have intricate supply chains, including cocoa, which has long been linked with issues around child labour.
Access to education, and rules about when children should attend school, differ widely between countries, says Andrew Brooks, the company’s head of cocoa sustainability, which leads to a grey area about the lawfulness of children working on a family farm.
In the Cote d’Ivoire, the world’s largest cocoa producer, Olam is working with the Government to fund the Child Learning Educational Facility (CLEF). In a partnership including cocoa processors, chocolate manufacturers and the World Bank, the scheme will provide education for five million children and the construction of 2,500 classrooms. Olam is also working with communities to help collect information such as birth certificates, which will help to identify children that are at risk of missing out on their education.
Industry collaboration though initiatives such as the International Cocoa Initiative, is a well-established way of monitoring human rights in cocoa and is now taking on greater relevance in other sectors.
“I think the multistakeholder, collaborative approach is essential,” says Friedman, as it creates: “peer pressure that moves everybody at the same rate.”
Members of the Mekong Club meet on a quarterly basis, he adds. “They may compete on everything else but in that room, they recognise that if any one of those organisations gets in trouble…everyone else is in the same boat. None of them want that to happen so they will collaborate, work together and share information on this particular topic in a way that you won’t see with anything else.”
Covid has also heightened the vulnerability of supply chains and the ETI has established a team to look into logistics, particularly shipping and the issue of crews marooned on boats that can’t dock.
The pandemic also shone a light on the trading relationships that big companies have with their suppliers, as demand for goods dropped off. But for every company that looked carefully at their payment terms and honoured contracts, says Lewis, plenty more just walked away, ignoring the knock-on effect their actions would have on whole communities.
“If you rip out sales, what happens to workers in that supply chain?” she asks. “Being prepared and being able to carry that risk with suppliers is key…Anyone trading, selling or making anything that has workers in the supply chain, should be addressing this.”
But many weren’t prepared, leading to a growth in indebtedness, which Friedman anticipates is going to result in a significant increase in modern slavery. Indebtedness grows when individuals borrow money from agents, in order to pave their way to a better paid job, often in a foreign country. But people sign up unaware of the huge interest rates and fees they will have to pay. When the new job actually pays far less than was promised, people end up working for years just to pay back the initial loan.
The closure of factories due to order cancelled because of Covid made the problem worse, says Friedman, with stories of lenders asking people to offer up a family member to go and work in a factory for a year in order to clear their debt.
There are ways to break the chain, he says, such as identifying honest, local recruitment agencies and using blockchain to manage contracts. When people arrive at their new jobs, they are often forced to sign a second contract, in a language they don’t know, and this is when fees and costs for accommodation start to be deducted from wages. “The transparency (of blockchain) ensures people don’t get cheated,” he says.
Modern slavery remains a global problem, too. “There can be a perception that anything sourced inside Europe is fine,” says Lewis. “(But) there shouldn’t be any assumption that any sourcing country is okay.” To address this, the EU is set to bring in new due diligence legislation which places the burden of evidence to prove there have been no human rights violations along the supply chain on the importer.
Friedman supports the idea of the ‘buycott,’ which urges people to actively support good companies that are trying to make a difference, rather than boycott those that aren’t. “There are a lot of companies that desperately want to do the right thing,” he says, and by rewarding them: “the incentive is for companies to step up and do more.”