Responsible procurement faces 'perfect storm'

13 October 2021

Businesses sourcing from Asian supply hubs face increasing exposure to human rights violations as modern slavery risks are escalating, according to research.

Verisk Maplecroft's Human Rights Outlook 2021 revealed a decline in labour rights issues across key sourcing locations, including Bangladesh, Cambodia, China, India, Indonesia, Malaysia, Mexico, Pakistan, the Philippines, Sri Lanka and Vietnam.

Myanmar, Bangladesh, Vietnam and Cambodia have all dropped into the “extreme risk” category of the research firm’s Modern Slavery Index, meaning the number of countries in the highest risk category has jumped to 30 from 25 since 2017.

Vietnam and Cambodia have fallen most in the rankings due to an intensification in violations and a deterioration in the enforcement of labour laws, the study said.

Some “high risk” countries have pockets of “extreme risk” and many key Asian manufacturing hubs, including China, India, Vietnam, Indonesia, Cambodia and Bangladesh, have the riskiest sub-regions.

A combination of health crises, natural disasters, conflict and widespread human rights violations in the world’s major sourcing countries are making the challenges of maintaining responsible supply chains more difficult than ever, the study concluded.

According to the study Xinjiang in China is now a “no-go” area for responsible sourcing, with widespread reports of human rights violations against the Uighur population turning public opinion against Beijing.

“Pressure on brands sourcing from the region is building, not least from US sanctions targeting raw materials and products produced there, but also from a range of international sanctions on Chinese officials and companies,” said Sofia Nazalya, human rights analyst at Verisk Maplecroft.

The research concluded that the situation in Xinjiang had opened a Pandora’s box for companies trying to balance remaining in the country while meeting their responsible sourcing obligations.

Businesses should expect more potential bans on products made in the region, such as footwear, cell phones, and agricultural and food items, the research said.

The reputational risk of being linked to Xinjiang, alongside greater investment in corporate environmental, social and governance (ESG) strategies, have made many companies seek alternative suppliers to avoid greater scrutiny, the study said.

It found the Covid-19 pandemic had exacerbated declining occupational health and safety for workers, while slow vaccine rollouts and ongoing restrictions would continue to hinder manufacturing. Asia is likely to see intermittent lockdowns to combat virus variants, making work insecure and putting livelihoods at risk.

Bangladesh garment industry workers have not been prioritised for inoculation, while virus outbreaks in garment factories in Indonesia, Sri Lanka and Cambodia have been reported. The prospect of improved health and safety in Asia “remains dire” the report said.

It also said high-profile disasters such as the Rana Plaza factory collapse in Bangladesh had failed to trigger more robust enforcement.

Nazalya said: “The pandemic has not only upended traditional human rights due diligence, it has forced companies to rethink the fundamentals of sourcing low-cost labour from countries that have been devastated by the ensuing socioeconomic fallout. Add to the mix a political and human rights decline in key sourcing locations and a perfect storm arises for responsible procurement.” 

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