Although the international community has generally acknowledged that business globalization reduced poverty in many regions, there is another scourge that is still thriving across sprawling corporate supply chains. Despite increased global attention, resources and regulations, 10 million more people were living in slavery conditions in 2021 compared to 2016, according to International Labour Organization (ILO) estimates. Of the 50 million people worldwide living in slavery — owned by another human being — in 2021, 28 million are trapped in forced labor.
Moreover, it often surprises many that forced labor is highly present in developed countries: More than 52% of all forced labor can be found in upper-middle-income or high-income countries.
Procurement in the Risk Spotlight — Again
The ILO stresses the importance of supply chain due diligence to reverse this trend. With over 86% of forced labor occurring in the private sector, the spotlight is clearly on corporate procurement and supply chain teams, who are faced with a daunting due-diligence task and urgent moral imperative.
Although labor rights abuses in industries such as textiles or seafood have high consumer visibility, these conditions are present in construction, electronics, minerals/mining and many others. Companies seeking to manage these risks urgently need to start incorporating labor rights due diligence and protections into procurement actions throughout their supply chain. The challenge is to do so while visibility and leverage over labor practices decrease with each additional tier. Some organizations can have tens of thousands of suppliers, and identifying the higher-risk suppliers can be challenging. In identified high-risk categories and regions, it’s crucial that those suppliers also have their own policies and actions to cascade these practices down, especially for actions like outsourced labor recruitment.
Insights from the sixth edition of EcoVadis’ Business Sustainability Risk & Performance Index give a glimpse into the depth of this challenge across global value chains: Just 11% of companies in the EcoVadis Network conducted supplier environmental and social risk assessments, and only 5% performed child and forced labor internal risk assessments in 2021.
In addition to the moral urgency of safeguarding against human rights abuses, businesses face a range of risks from inaction on supply chain due diligence including legal (court injunctions, product import bans, civil liability claims), reputational (loss of customer loyalty and trust), and financial (interruption of supply and related revenue losses, and ultimately their “license to operate” in a region or industry).
Further, with new and evolving regulations, like the German Supply Chain Act and the EU’s directive on corporate due diligence, it will soon become a legal requirement for organizations to include strategies to ensure human rights due diligence adequately identifies and mitigates risk in their operations and supply chains.
But companies shouldn’t wait to deploy their due diligence strategies until legislation impacts them. Companies across all industries can start or accelerate their efforts, building internal understanding and a capacity to implement a foundation for monitoring and managing risks. A great starting point is international policy frameworks and guidelines such as the UN Guiding Principles on Business and Human Rights.
These strong frameworks for addressing human rights due diligence require investment but can help organizations comply with new and evolving regulations. The elements of this framework include:
Start With a Holistic Approach
Modern slavery and human rights due diligence should be integrated as part of a broader sustainable procurement program that encompasses environmental and ethical topics, as well. This creates efficiencies not only for your organization — avoiding silos, getting data to flow more easily, and increasing understanding of correlated risks — but also for suppliers, which increases the incentive to participate.
Joining an industry or multi-stakeholder initiative can be a great accelerator: Allow them to benefit from other companies' collective experiences as well as increase leverage, to get suppliers to participate in a single unified program.
It won’t happen overnight: Adopting a sustainable procurement program requires time, diligence and a significant amount of upfront investment. It’s a journey, never an endgame.
With the right tools and approaches, and by starting with a solid due diligence foundation, companies can not only be prepared to meet current standards and new regulations but can more reliably and consistently go further, and move beyond compliance to drive performance, and thus realize value and lasting impact.
Valerie Touchon is chief impact officer at EcoVadis.
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