Globally companies have started to recognize their role in addressing various issues around social impact of their operations and labor conditions within their supply chains. As gradually the awareness around these issues has increased due to the commitment towards doing ethical business and pressure from various stakeholders, so have the limitations around conventional approach to tackle these issues. Despite several thousand of social compliance audits are conducted each year to ensure minimum workplace conditions in supply chains, issues around human rights including wage, working conditions, overtime, freedom of association have remained intact.
There are many reasons why the traditional audit program struggles to produce long term improvements in social performance of basic human rights, including:
1) Lack of accurate information being disclosed by suppliers on their performance by some audit process, calling into question the legitimacy of the claim made. This is a common challenge when the suppliers do a self-assessment of the screening questionnaires of the sourcing companies. So, though companies fulfill their check box activity of mapping and interpreting data but the real term impact on the supply chains remain questionable.
2) Often it is also observed that there is a clear lack of capacity in suppliers to address the issues that have been identified as a remedy for the complex human rights issues. In such cases though the suppliers intentionally do not want to violate human rights but since there are no structured internal controls to prohibit the human rights abuse. This is generally the case with tier 2 of suppliers (i.e suppliers of the main suppliers)
3) One major issue is the lack of any kind of incentive among the suppliers, to address the social performance issues. This case sometimes becomes challenging for large sourcing companies as many quality small suppliers do not wish to adhere to the code of conduct of companies without any other incentive than marginal profits.
These issues are recognized by global brands and retailers, many of whom have become frustrated with the limitations of the traditional approaches to making their supply chains ethical. In absence of any alternative companies continue to base their due diligence solely on audit approach that they acknowledge is not producing desirable results.
However, several leading brands are trying to innovate the space and bringing several unique solutions to address these issues. Their approach is more open are more collaborative. They ask themselves, observe the risks, and consult their peers, their suppliers and other stakeholders to understand the human rights issue in their supply chains. Their approaches have now made way to a new work culture where it is not about just auditing and policing the supply chain but to work as partners to improve the overall end result.
For example to name a few, Timberland’s approach to collaborative assessment, has transformed its relationship with suppliers globally or Chiquita’s holistic approach to its passion fruit supply chain in Costa Rica, which combines commercial incentives and innovations, capacity-building, civil society partnerships, and adherence to social and environmental standards and practices . Furthermore, Tesco’s approach to promoting sustainable improvements in addressing issues within its agricultural supply chain in South Africa, premised on the support of local initiatives driven by local actors.
Some of the key areas that bring innovative edge to the issue of human rights abuse in supply chain are:
- The shift from pass/fail compliance to comprehensive continuous improvement programs;
- Replacing audits with collaborative assessment and root cause analysis;
- The role of grievance mechanisms in improving social performance;
- The integration of capacity-building approaches for suppliers;
- Different forms of partnerships between global brand companies and civil society organizations;
- Providing commercial incentives to suppliers for improvements in social performance, such as price, volume, duration, and supplier preference;
- Developing metrics to help suppliers identify the business case for better social performance;
- Efforts by brands to use their leverage to address systemic issues;
- Industry-wide collaboration to tackle systemic issues;
- Aligning internal purchasing practices with social commitments made by global brands and retailers.
Though the answer the complex issue of avoiding human rights violation in supply chain is not simple, but still the solution can be found in combining multiple innovative approach that build on the existing approaches to tackle human rights abuse. Though several models are not yet tested and may work only in theory but the need to give a fresh innovative look to the existing ethical supply chain programs is evident. To summarize I think that there is a clear shift from the traditional auditing to the new era of collaborative partnering, we need to work closely in collaboration to understand the root cause of the issue and then address it.
I would love to hear views of people working in human rights sector to discuss potential solutions for supply chains. I can be reached on nish at insightbynish.com