The global value chain has opened up enormous opportunities for retailers and manufacturers to source and produce high quality goods that are affordable for customers. But while bringing huge benefits, managing highly complex supply chains while ensuring goods are produced in a way that does not infringe the human rights of others still proves difficult.
In only the past three months, Nestle, Marks & Spencer, Next, Zara and Ferrero have all found that out to their cost. As we move into a new regulatory environment, with the UK Modern Slavery Act, France’s Devoir de Vigilance and similar legislation in California shaping the future of corporate responsibility, failure doesn’t just mean a threat to reputation, but increasingly, litigation as well.
The problem that all European companies outsourcing to Asia and Africa face, and let’s not forget that both European retailers and manufacturers are equally reliant on non-EU production, is that we are up against huge geopolitical challenges that no-one can really control.
The world is witness to mass movements of people across borders due to conflict and warfare, and this trend will not abate, particularly when you factor in the impact of climate change in these regions. Combine that with the fact that beyond Tier 1 and 2 suppliers, any company will struggle to have complete visibility over their supply chain.
This is a problem for everyone, as it is the workers further down the chain who are really at risk. A recent front page splash in UK’s Sun newspaper recently described six year old children working on Kinder egg production in Romania. There are some doubts as to whether or not the story is true, but we all know it could be, which says a lot in itself.
For even the largest companies, end producers may not know who their subcontractors are or approve of their business practices. But even where a contractual relationship exists, it can be impossible to make sure applicable standards are properly complied with.
Many companies have found themselves in similar positions to Ferrero in Romania. You have confidence in your supplier, have audited them on many occasions, but can do nothing when they choose to outsource your order outside of their own operations. An added problem is that governments in many of these regions are either weak, do not fund enforcement sufficiently, or are sometimes complicit in poor supply chain practices themselves.
So really addressing the problem will require a greater focus on the root causes. While most companies have systems in place to monitor and react to forced labor and human trafficking in their supply chain, companies will need to go further than that, and start seriously considering the underlying causes of exploitation.
A good starting point is to put in place grievance mechanisms for your suppliers’ workforce, as this can significantly help identify, resolve, and prevent labor abuses, when usual monitoring systems are unable to do so.
Adidas provides a good example of how to work in partnership with Tier 1 suppliers, the company uses programmes to support training for Tier 2 and has gone even further, developing models to address risk of forced labour in Tier 3.
But the challenge is not just for one company to request their suppliers to change their practices. It takes an entire sector to do it, and not just in Europe or the US, but worldwide. European and US companies are not necessarily the biggest or most influential buyers anymore. Asian consumers are purchasing from Asian companies directly, and these companies or consumers may not place the same value on responsible sourcing. So getting sufficient critical mass behind an initiative is really important. If you do that, you can create long-lasting change.
EDRA is currently working on exactly that with a core group of our largest members. We are looking at how collaboration in DIY can contribute to wider change in the supply chain, in a way that benefits all players.
Author: Alisdair Gray, International Analyst for the Global DIY Summit