The last thing one expects to read about in 2015 is slavery, but it continues to be a prominent issue for organisations.
According to the International Labour Organization, there are currently around 21 million people around the world who are being exploited as slaves – a higher figure than at any other point in history.
Modern slavery takes many forms, but perhaps one of the most prominent is the use of forced labour in global supply chains. And this risk affects nearly every industry.
It recently came to light that certain global confectioners were sourcing chocolate from cocoa farms in the Ivory Coast which, unbeknown to the companies, were using child labour. So this begs the question, how well do businesses actually know their supply chain? It has been estimated, on average, that supply chains for a single, final product are made up of 15 subcontractors. Are firms aware of all of these? And do they really need to be?
Continuing the example of forced labour, organisations found to be sourcing from suppliers that use exploitative labour, even if they are unaware of this, run the risk of damaging their reputation. Reputational damage stemming from corporate social responsibility breaches have recently been named as one of the top 10 business risks for international companies. From a purely ethical perspective, then, it seems imperative businesses know what is happening in their supply chains.
But from whichever angle you look at it, it is apparent that transparency in the supply chain is key. If this is not the case, a company can suffer commercial losses. Ignorance can also have legal consequences.
So what can businesses do? The first step to effectively managing supply chain risk is to carry out a vigorous assessment of every link in the supply chain. By considering innate risk (such as the supplier’s country, the product and the sector profile), alongside supplier risk based on insights gleaned from self-assessment questionnaires, companies can understand where the risks lie and effectively focus their efforts and prioritise resources accordingly.
Auditing suppliers and internal sites of employment is another constructive way of verifying compliance and identifying any potential issues. But this can often be a time-consuming and resource-heavy process, and throws up even more issues such as how far back should I be auditing? And should I be auditing just my direct suppliers, or do their suppliers need to be included as well? It is for this reason that the engagement of independent firms – specialists in auditing and compliance – can be hugely beneficial for firms looking to take full control of their supply chains, as they can offer impartial and objective solutions.
Such companies can offer further assistance by way of advice and training in how to improve working conditions, and can even aid in creating codes of conduct to be implemented throughout the company and their subcontractors. These will help businesses operate in more efficient and sustainable ways, and avoid the commercial, ethical and legal consequences of hidden malpractice within the supply chain.
☛ Charlotte Eaton is a consultant at Procuring