Based on a number of recent conversations I’ve had with various CSR practitioners, many companies are wrestling with how to effectively approach disclosure requirements related to human trafficking and supply chain slavery, including those of the UK Modern Slavery Act and California Transparency in Supply Chains Act. The companies generally fall into one of two groups.
Supply Chain Risk Management Program Types
The first group is made up of companies with relatively immature supply chain risk management systems, as it relates to identifying and mitigating human rights risks in the supply chain. Often, these companies are in industries that have not been a significant target of NGO/media attention toward supply chain abuses. In some cases, these industries have focused on other risks (e.g. food safety, quality, etc). In others, their products may require higher-skilled labor, which may decrease the overall risk of employing a more at-risk workforce. In general, this group often consists of companies who may be SMEs to billion-dollar multinational companies, but may not be a recognizable consumer brand, as they may sell primarily through B2B channels.
The second group consists of companies with mature supply chain due diligence practices. They may have a supplier Code of Conduct, a robust supplier audit program, training, stakeholder engagement, etc. Yet even with a large-scale responsible sourcing program, these companies are still often challenged with how to incorporate practices that provide the needed visibility to identify and mitigate the risk of human trafficking and slavery in their supply chains.
For this second group, the challenge stems from the fact that these programs have been designed with an eye toward understanding direct suppliers. This makes sense from a feasibility standpoint, as these are the business partners the buying company knows and over which influence can be exerted. That said, it doesn’t get at the entirety of the risk. In a similar vein, multinational companies with well-established CSR programs have never really solved the problem of identifying when and where undisclosed subcontractors are being used in the manufacture of their products. Trafficked labor is analogous, as that particular input – people – are often provided to the manufacturer through a labor broker. Similar to the relationship between a manufacturer and subcontractor, the labor broker isn’t dealing directly with the multinational brand, and thus will remain hidden without additional effort made by the brand. That cost - time, resources, variations in a scalable process, etc. – on top of an already taxing effort to understand a dynamic and complex direct supplier base, is just one more hurdle to clear in establishing systematic ways to identify and mitigate supply chain slavery risks. For some products of complex composition, each tier beyond the direct supplier holds the potential to splinter into dozens, hundreds or thousands of possibilities.
Taking a Risk-Based Approach to Managing Supply Chain Slavery Threats
Our work related to supply chain slavery has been focused in a few areas:
- Assess controls to identify and mitigate the risk of slavery that a company has in place in relation to geographic risk, materiality, strategic importance, impact, feasibility and relational proximity.
- Guidance on designing and deploying systems to close gaps that are uncovered
- Development of the BSI Trafficking Supply Chain Slavery Patterns Index. This is a tool that leverages years of proprietary intelligence and analysis captured in our SCREEN platform, in order to enable our clients to identify and predict migration patterns and their impact on global supply chains.
What approaches have you taken with your own organization to tackle the problem?
Supply Chain topics
