Companies failing to address climate change and child labour in their supply chains

Global businesses are failing to adequately address issues including climate change and child labour in their supply chains, according to The Economist Intelligence Unit (EIU).

The EIU study, No more excuses: responsible supply chains in a globalised world, sponsored by Standard Chartered Bank, found that only 22% of companies are addressing child labour, 23% climate change and 28% gender inequality.

Despite this, four in five of the 800 executives surveyed said they believe their companies have a responsible supply chain. Almost all respondents said their companies’ standards were compliant with or more stringent than government (94%) or industry regulator (97%) requirements.

In terms of what companies are addressing in their supply chains, the study found the focus is on areas that are easier to quantify in the short-term, such as health and safety (60%) and waste reduction and recycling (50%). “There is a huge distance from the ideal situation in which 100% of firms would ensure strong standards in their supply chains,” the report said.

The study also found that 30% of firms have decreased their focus on supply chain responsibility over the past five years, although it has moved up the agenda in China and the US.

Firms are unwilling to collaborate to address supply chain responsibility issues, according to the study. Just over a quarter (27%) were willing to cooperate with non-competitor firms and only 23% said they would collaborate with their competitors.

As reported in Supply Management recently, sustainability issues are encouraging some businesses to collaborate with their rivals. Martin Chilcott, CEO of 2degrees, told SM: “Meeting the challenges of a rapidly changing climate, switching to a circular economy and adopting new technologies and practices to make the most of our finite natural resources…create massive risk to business and markets.

“They affect supply chains above all and because these are often challenges that are common across whole industries and regions, the only way they can be addressed is through greater collaboration.”

In a video recorded by EIU to accompany the report, Richard M Locke, provost and professor of political science and international and public affairs at Brown University said: “The major obstacle for industries and businesses to raise standards in global supply chains is a collective action problem. Good companies want to enforce these actions, but if in doing so they raise their costs, while others don’t…. it may be a race to the bottom.”

Gerard Manley, managing director and CEO for cocoa at agri-business Olam International, said businesses needed to collaborate to increase supply chain responsibility. “You have to live your values,” he added. “If you don’t as a leader, how can you expect anyone to follow you?” 

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