In today’s global economy, the demand for sustainable business practices is rising, particularly in the retail industry. Consumers are increasingly aware and conscious of the social, environmental and human rights impacts of their purchases, prompting retailers to rethink their supply chain strategies.
The recent EU-wide legislative changes also are affecting companies worldwide that trade with the EU. Making retail supply chains more socially sustainable involves addressing issues around well-known fair labour practices, ethical sourcing and other environmental impacts.
What are Your Industry-Specific Risks?
While we can agree that labour and working conditions are universal issues – not only in retail supply chains — there is no denying that there are industry specific social risks. For instance, fashion retailers might have to think more about land rights of indigenous communities and farmers because they rely on the cotton for their fabrics.
Retail supply chains tend to be more complex and often span multiple countries and continents. Sustainability, whether we look at the sustainability of the business or social sustainability, has received a lot of attention over the years, with buzzwords around ethics, transparency and responsible business practices.
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Let’s take a look how to convert the buzzwords into actionable tasks:
1. Supply chain mapping and assessment.
Do you know your suppliers? And their track record of human rights and environmental violations? Mapping your supply chain can support the assessment of regional, raw material- or industry-specific risks. So, how can you do this?
- Identify all suppliers, manufacturers, distributors and vendors involved at every tier. If every tier isn’t assessed, clearly explain your reasoning for this.
- Ascertain the geographic locations of facilities and operations – map them!
- Understand the flow of materials, products, services and data across the supply chain.
- Encourage suppliers to obtain additional information about their own suppliers (sub-tiers) and their company-level supply chain management systems.
- Use technology as it does wonders to consolidate this data and help you visualise it.
Once you have mapped your supply chain, you can conduct risk assessments to identify potential social (and environmental) risks. This risk assessment is often desk-based only or uses questionnaires that are filled out by the suppliers. My pro tip is to engage reputable third-party consultants to help you with on-site assessments.
Many companies have amazing policies, but when it comes to the implementation, they have significant gaps! Supplier code of conducts and traceability are other common practices that are widely implemented. My advice is to follow up on how the code of conduct is implemented: ask for a sample file to see how they assess their sub-suppliers!
2. Labour, working conditions and the rest.
Labour is a huge area with several subtopics. Why include it as one item? Because the recommendations follow the same structure, and it is most likely your dedicated procurement/supply chain teams who will have to address these, with some support from HR.
- Child labour
Most companies will have a dedicated policy or a few lines in their HR policy. Lead by example and set up a procedure for worker ID and age verification, and report on that. You might face challenges in countries where IDs are not free or there are no digitised records of people, but you can be creative and confirm graduation dates, etc. to verify the age of workers. You might find that your suppliers follow their national legislation that often allow for children to be engaged in light work – find out the company’s policies and take action!
- Modern slavery
Modern slavery is a complex term that includes forced labour, debt bondage and human trafficking for labour exploitation. Obviously, you don’t want to be associated with this, so a logical step is to set up a policy to prohibit modern slavery and make sure your suppliers are contractually required to adhere to it. Does that give you peace of mind? I hope not! My pro tip is to engage social performance or labour consultants to undertake labour audits, especially if you work in a high-risk region or sector. These audit reports might uncover uncomfortable findings, and you will be able to address them with your suppliers. The UK legislation requires companies to make an annual statement on your efforts to combat modern slavery in your supply chains.
- Inadequate working conditions
Here I combine poor working conditions, lack of fair wages, occupational health and safety risks, issues around labour unions, discrimination and lack of benefits. The biggest problem is the lack of credible assessment as to whether your suppliers engage in any activities that would constitute inadequate working conditions. My guess is that they tell you they follow national legislation, they have policies, they have contracts with workers, and they pay them the agreed wage. They might even admit that it is customary to have verbal agreements with workers as they want to avoid taxes. Other stories I’ve heard include the lack of health and safety culture where workers don’t care and sell the protective equipment provided by the company. While some of these may be true, let me highlight a few things for you:
- Supplier national legislation might differ from your company policies or legislation in your HQ jurisdiction – better to find out from your HR/legal team than from the news.
- Ask for employee complaint mechanisms to be set up by your supplier and ask for a copy of their log. If you face resistance, set up a channel for a supplier’s workforce to go directly to you.
- Engage with local NGOs – they often give voice to workers who don’t want to speak openly. I’ve had several instances where an NGO approached us about issues with a client or supplier.
- Do a labour audit – as mentioned before, this provides you with the right information in detail from a credible, qualified and independent source. Worth the investment!
- Set up an alert for your suppliers’ name – you might not know ongoing legal cases mentioned in their local news, but you can find out from the internet.
- Ask for annual reports that include workplace injuries, accidents and incidents, and look at their root cause analysis. The way they record and manage these issues, together with potential trends, will give you a good idea of their health and safety practices.
I could talk endlessly about recommendations and what should go into a labour audit, but the main takeaway for you is to find a qualified expert and invest in on-site assessments for high-risk suppliers.
3. Human rights violations.
While labour issues might come under human rights violations, here I would focus on land rights and ethical purchasing/practicing/trading. Land rights are especially sensitive when they overlap with indigenous areas. Accessing natural resources and the impact on livelihoods are serious issues that can have adverse impacts on locals. Ethical trading practices are responding to aggressive pricing, short lead times and unfair trading practices that put pressure on suppliers and cost-cutting environments that result in underpaid labour. Human rights impact assessments are trendy, but they are most effective when they include assessing supplier performance, aka how the policies are translated into actions.
Ildiko Almasi Simsic is a social development specialist and Founder of E&S Solutions, which has developed one of the world’s first environmental and social-specific research assistants – myESRA™.
