Concerns about ethical and environmentally conscious sourcing are top of mind today for companies sourcing internationally. They’re motivated by the increasing number of countries that are implementing environmental and social “due diligence” legislation.
Start mapping your supply chain, from tier 1 through to the raw commodity level. U.S. WROs require strict adherence to due diligence measures, and the number of WROs applying to products from a specified country or region has increased dramatically in recent years. As those that source cotton, tomatoes and solar panels know all too well, China’s Xinjiang province, a top producing region, is now on the WRO list. In addition, the UFLPA will come into effect by mid-2022, which bans all products made wholly or in part in Xinjiang unless there is sufficient due diligence and “clear and convincing” evidence to demonstrate that the goods weren’t produced with forced labor. For home goods, apparel and medical supply companies particularly, tracing the supply chain to the farm-level is imperative, as 84% of Chinese cotton is grown in this region.
Brands impacted by the WROs and UFLPA can take a page from the Responsible Business Alliance’s (RBA’s) book. In response to the requirements of Special Disclosure 1502 of the Dodd-Frank Act regarding conflict minerals originating in the Democratic Republic of the Congo, technology companies that use these minerals in their products founded the Responsible Minerals Initiative (RMI), which coordinates due diligence efforts in their products through to the mine level. RMI is now managing due diligence assessments of smelters and refiners for tin, tungsten, tantalum, gold, mica and cobalt, and have begun develop processes for other high-risk minerals.
YESS: Yarn Ethically & Sustainably Sourced is the flagship initiative recently developed by Responsible Sourcing Network (RSN), which follows the lead of RMI. YESS is designed to identify and address forced labor involved in cotton production at farm level, by building capacity and checking the conformance of spinning, weaving and knitting mills. RSN is wrapping up its pilot, and cotton-sourcing brands can learn more at sourcingnetwork.org/yess.
Publish as much information about your supply chain as you can. Brands and their suppliers might be hesitant to publish their sourcing and other information publicly. But while it might feel like you’re opening up your supply chain — and therefore your brand — to risk, you’re actually increasing your compliance with international due diligence requirements, and therefore reducing your risk of non-compliance. EU due diligence measures require in-scope companies to publicly communicate on due diligence, and U.S. regulations state that importers should have “a comprehensive and transparent social compliance system” in place.
The Open Apparel Registry (OAR) is an open-source data platform upon which facilities, brands, and civil society organizations in the apparel sector can upload data. It’s used by these stakeholders and others to understand the connections between brands and facilities, thereby encouraging responsible sourcing. While the OAR today is mostly about sourcing relationships, it will soon include social and environmental efforts associated with manufacturing facilities. This is a great example of how brands can show their commitment to transparency and compliance.
Fund initiatives that can ensure these measures are taken industry-wide. Tracing your supply chain can be a daunting task, with numerous layers between manufacturing and raw commodity production. The good news is you don’t have to do this alone. Dozens of tools and initiatives in every industry have been established to help brands achieve transparency in their supply chains. When determining which solution to support or implement, lean toward industry-wide initiatives that will streamline processes by leveraging the entire industry, and ensure that efforts aren’t duplicated. A few examples are the RBA, Textile Exchange, and Social Labor Convergence Program (SLCP). The STREAMS project, managed by Verité and funded by the U.S. Department of Labor, was created to provide information on tools for supply chain tracing, and demonstrate how the tools support implementing due diligence.
Encourage your suppliers at every tier to also identify and address risks. The best way to ensure that your company complies with due diligence and anti-slavery legislation is to encourage your suppliers and sub-suppliers to conduct due diligence of their own supply chains. EU Due Diligence legislation requires that companies integrate the practice into their policies. US import regulations require a standard of reasonable care to ensure your product isn’t made with forced labor, with more detailed evidence required for countries and regions under WROs. Import authorities are looking to ensure that your brand holds its suppliers accountable for anti-slavery policies and ethical management practices, addressing environmental and social risks with them, and maintaining a strong, accurate and verifiable data management system.
The YESS Initiative trains spinning and textile mills on how to develop strong management and data systems, and conduct due diligence of their own suppliers. Once risks are identified, a key component of any due diligence system is implementing a risk mitigation plan. YESS will assess the mills annually to ensure they adhere to the YESS Standards and implement risk-mitigation plans. (To nominate a mill for a YESS training and assessment, email firstname.lastname@example.org.)
Coordinate efforts with other brands — and ensure that your facilities aren’t overwhelmed. As many supply chains are endlessly expansive, due diligence efforts don’t have to be done alone. Coordinating with a close network of brands whose products have similar inputs can be vital to reducing the burden on your company, your suppliers and sub-suppliers. As mentioned above, uploading suppliers to OAR’s database will help identify where they overlap with other brands, and will in turn grant you access to other companies and organizations that might be open to collaboration. In addition, many industry-wide initiatives, like the SLCP, minimize the burden on suppliers by conducting one larger social audit to disseminate among multiple brands and initiatives.
While the majority of examples in this article are from the electronics and apparel sectors, it’s imperative that brands in every industry take steps to map their supply chains and implement due diligence measures to remain compliant with an ever-growing list of ESG requirements around the world. By following these five steps, you’ll be on your way to minimizing risk and getting closer to compliance with all legislation.
Jamie Fortin is senior program associate at Responsible Sourcing Network.
Read more of SupplyChainBrain's 2022 Supply Chain ESG Guide here.
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