Managing supply chains and beyond audit approaches

For many large companies, undertaking extensive human rights due diligence on each supplier can be impracticable, particularly at the start of their journey. The numbers are simply too vast.

Approaches to prioritisation vary – and may reflect the characteristics of a company’s supply chain. Developing a high level “heat map” of a supply chain is one way to identify higher risk relationships. For one company, the most severe risks may be associated with the sourcing of a specific product. For another, the supply chain in a specific region of the world may present the biggest challenge.

Embedding human rights in existing systems can help make respecting human rights a routine part of how business gets done.

It also enhances efficiency and minimises duplicative processes. However, practitioners note that it’s important to ensure relevant teams understand how human rights fits within existing relationship-management systems and can recognise issues. It is also important to find a balance between consistent compliance with management processes, incentivising innovation and developing a capacity to manage emerging human rights challenges.

Key functions – including procurement, legal, business development and human resources (where the company works with recruitment agencies) – may need targeted training and capacity building to be able to ask the right questions, spot red flags and help the company respond. Employees in these teams should also know what to do if risks are identified, and where to go for more information or to escalate their concerns. Some companies have found it helpful to develop a roadmap or decision tree for the company’s key types of suppliers, with guidance on risk management processes for each supplier type.

For more on building know-how, see Raising awareness, training and building capacity

To really understand conditions on the ground, it will be important to speak with workers and other stakeholders. In part, this is because documents and management communications may not be sufficient or practicable – particularly when examining the informal labour sector.

There is also a reality that workers can be reluctant to communicate openly or trust mechanisms such as surveys. In-person discussions can enable rapport and trust to be built, creating an environment in which workers may be more comfortable speaking openly about their situation.

A company’s ability to gauge the effectiveness is minimal without direct contact with workers.

Some companies are exploring the use of worker voice tools to improve access to information about conditions in suppliers’ facilities between audits, boost transparency and enhance risk analysis. These tools can supplement the information collected through audit processes.

Where the tool involves a survey, it’s important to use questions that can be easily understood by workers, and that elicit information that can be confidently interpreted by the company. The usefulness of worker voice tools depends on workers’ trust. Building trust with suppliers is also important to implementing these tools effectively. It can be undermined if there is confusion about which mechanism (worker voice tool, supplier hotline, company hotline etc.) workers should use.

Understanding how and why human rights issues (e.g. payment of recruitment fees, passport retention, forced labour etc.) manifest in a company’s supply chain can generate insights that lead to more effective interventions. This means getting to grips with the pressures, incentives and constraints that shape the actions of other stakeholders in the system. It can be time-consuming and resource-intensive, and may not be practicable for all companies. With deeper insights into the root cause challenges, you can devise more effective strategies to combat modern slavery.

It also helps to be smart and opportunistic, leveraging situations in the company that can help achieve forward momentum and increase buy-in among key functions. For example, an executive with an interest in an aspect of the problem or a colleague with a mandate to implement a mandatory audit or training programme. Sometimes the initiative or idea proposed may seem unlikely to solve the problem. But it could be a valuable opportunity to build commitment internally that can be used to drive change over time.

It’s better to build capacity among suppliers than simply require compliance with a code of conduct. Companies are increasingly supporting suppliers to develop their own management systems and capability to operate with respect for human rights. They recognise that the supplier will be better able to manage human rights-related challenges with their own know-how. However, this takes time, and it can be helpful to have mechanisms and touch-points to track suppliers’ performance.

Training initiatives delivered in collaboration with suppliers, including labour agencies, can help build a common understanding of the challenges and shared expectations of performance. When delivered in-person, these initiatives are also an opportunity for the company delivering the training to learn more about what’s happening on the ground, and the different pressures and incentives faced by entities in its value chain. Companies can also use collaborative training sessions to help map where and how modern slavery occurs in its value chain by bringing together individuals with visibility of different parts of the value chain.

Where a company’s leverage with suppliers and other business partners is low, collaborating at an industry level can increase influence, enable the costs of delivering training to be shared, and communicate common expectations to suppliers. Basing training on key risks and real-life examples can help participants to understand what they need to do in practice.

Companies can use their influence in supplier relationships to address some of the most complex, intractable and systemic business-related human rights challenges – as well as more straightforward ones. Putting this into practice effectively can be difficult, but offers an opportunity to achieve real and sustained outcomes for affected people.

In addition to acting alone, companies are increasingly working to build industry or country-specific initiatives to take a more collaborative approach to solving shared challenges. This approach can significantly enhance their leverage in situations where an individual company may lack sufficiently significant influence in a relationship. This may include engagement with government authorities and regulatory bodies in some instances. Industry collaboration can also help achieve efficiencies with supply chain due diligence, particularly where major brands have common supply chains.

Using leverage is rarely as simple as cascading expectations down the supply chain. Modern supply chains are rarely simple or linear, and a more creative and proactive approach is likely to be needed.

For more, see Using Leverage