As new regulations are making human rights due diligence (HRDD) mandatory across the globe, companies need to get closer to their supply chains than ever before. This means adopting a proactive approach to identifying child labor, modern slavery, forced marriage and other human rights issues in the supply chain, and taking responsibility for engaging stakeholders to help remedy these issues at source.
While the complexity of supply chains is daunting, the new paradigm does not create an obligation of results but rather provides a normative framework for how to engage with workers and communities in a systematic and robust manner. As companies advance on their journey to implement effective due diligence, here are five of the most common objections to getting started with effective due diligence in company supply chains, and how to overcome them.
1. “It’s My Suppliers’ Problem”
Companies might not feel the need to dig around in their supply chains looking for human rights violations but, as mandatory due diligence becomes the global standard, they’re going to have to before long. With measures being taken in Canada, Australia, Japan, Germany, and elsewhere, legislators are moving fast to make HRDD mandatory.
Issues outside of a company’s control can leave them feeling helpless; in times of economic and political crisis the risk of human rights abuses like child labor in the supply chain increases, demanding extra vigilance. New technology will not eradicate modern slavery on its own, but by enabling continuous engagement, and measurement through direct to worker contact via workers’ telephones or other communications devices, we can see what works, what does not, share data and learn collectively. Companies need to be ready to adopt the HRDD solutions of the future so they can adapt to a precarious global situation, compete with early adopters, and flourish under new regulations.
2. “Not in My Supply Chain”
The most recent report by the ILO, a longstanding authority on modern slavery, had the number of people living in conditions of modern slavery at a staggering 50 million in 2021. The ILO identified companies that are operating at the lower links of supply chains in high-risk sectors and locations as particularly vulnerable to worker abuse. While the ILO report focuses on high risk sectors and locations, in reality the risk of modern slavery is pervasive, it covers all countries and all sectors. This is why companies need to dispense with the belief that their supply chain is immune.
For some, the existence of human rights violations in the supply chain might come as a shock. The Responsible Sourcing Network has listed: “Raising awareness regarding forced labor with corporations” as the number one solution for tackling modern slavery. Awareness alone won’t fix company supply chains, but it is a prerequisite for action. This means opening supply chains up to the companies that run them, and accepting responsibility for addressing any workers rights issues they discover. When immigrant children are being exploited in rich countries like the US, the “it couldn’t happen here” attitude doesn’t hold water; complicity and responsibility are shared by all. Digital human rights risk assessments can be carried out, at scale, equitably across the entire supply chain, giving unparalleled insight into human rights issues without the exceptional resource cost of manual checks.
3. “The Job’s Just Too Big”
Companies might feel helpless trying to address unethical practices in their supply chains. Modern slavery’s pervasive nature defies one-size-fits-all solutions, silver bullets and quick fixes. Success in one area can often mean overlooking another.
While companies are daunted by the length, breadth and complexity of their supply chains, authorities have been working hard to make sure tainted goods aren’t entering national markets. US customs have estimated that $1billion worth of goods have been seized at the border since June 2022. Being passive won’t solve the problem.
As daunting a task as this is, solutions exist. Digital HRDD solutions mean companies won’t need to spread themselves thin, digital platforms quantify social impact data to make it measurable and shareable up and down the supply chain. A systematic approach to identifying supply chain risks and efficient resource use, based on evidence from the supply chain, will help companies fulfill their growing HRDD obligations.
4. “We Can’t Afford It”
HRDD has long been considered a “nice to have” rather than an essential part of a company’s DNA. This has also been reflected in the voluntary nature of first generation HRDD legislation. That approach hasn’t worked, and company HRDD policies will soon be business as usual. Tough methods of enforcement, like the use of Withhold Release Orders (WROs) to detain goods associated with forced labor on international borders will make it too expensive not to exercise proper supply chain due diligence. For companies looking to trade on international markets, HRDD will unlock global opportunities as well as improve company reputations.
Auditing supply chains costs time and money. But the cost-effective, accessible solutions of the future already exist. Research from the European Coalition for Corporate Justice shows that the estimated cost of carrying out effective due diligence is 0.014% of revenue for SMEs and 0.009% for large companies on average. Digital HRDD solutions cut the cost of auditing by removing the need for it to be done in person. Benchmarking and data organization allow companies to waste less and allocate their resources more effectively, as their decisions are backed up by reliable social compliance data directly from workers.
5. “I Can’t Get Workers to Engage”
Workers might be reluctant to participate in HRDD for a number of reasons including fear of reprisal, language barriers and a lack of anonymity.
But worker engagement is the cornerstone of any good HRDD process and the key to building resilient supply chains. With it, companies can capture social risks as they happen, nurturing an environment where there are clear paths for workers to provide direct feedback for transparency and accountability. Regular worker feedback ensures companies can back up their human rights policies and resource allocation with real time insights about the effectiveness of their programs – not just the outputs of their activities. Ulula have long worked in mineral supply chains in the DRC, providing remediation through accessible, free, anonymous SMS channels so workers can communicate with representatives in safety. Anonymous, worker-friendly and flexible technological solutions enable worker engagement in even the most inscrutable supply chains, and improve the identification of what are often hidden problems. Ulula’s digital HRDD platform has reached over 2 million people and consistently achieves high levels of participation in surveys and consistent usage of its grievance mechanism.
Companies can no longer keep their social responsibility at arm’s length with the rest of the supply chain. As companies wake up to their non-financial impact on the world at large, they’ll have to exercise unprecedented levels of engagement with the people behind their products. This requires a rigorous approach to supply chain transparency and HRDD that embraces technology’s power to highlight risk and facilitate access to remedy.