Labour standards are primary supply chain risk in Latin America

Will Green is news editor of Supply Management
17 February 2014

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17 February 2014 | Will Green

A lack of systems to meet local laws and ethical standards is the number one supply chain issue in Latin America, according to a report.

The Sedex Latin America briefing said inadequate working conditions and forced and child labour are the key threats in the region, with the countries of Mexico, Brazil, Colombia and Peru rated the highest risk.

The report, based on 19,653 audits at firms across the region, found non-compliance around health and safety inspections was the second most common issue, followed by inadequate management of chemicals at number three.

The report said: “Institutions for labour rights enforcement and monitoring have failed to keep pace with economic growth, and are particularly weak outside capital cities.

“Legislation in key countries is shifting towards greater investor liability for sub-contractor infringements of labour standards. Therefore, there are political risks for foreign companies who invest or operate in the region.”

The sectors at greatest risk are mining, agro-commodities, manufacturing and construction, according to the report.

Sedex said the impact of industry and agriculture on water supply and biodiversity had become a “central political and reputational risk issues for companies”, with enforcement of environmental regulations and supplier adherence to certification regimes varying nationally and regionally.

Top five non-compliance issues in Latin America:

1. Lack of proper system implementation to meet local laws and Ethical Trading Initiative standards.

2. Lack of or inadequate health and safety inspections.

3. Inadequate storage, labelling, training and spill kits for chemicals.

4. Lack of compliance with local and international environmental laws and regulations.

5. Working hours exceeding legal maximum.

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