Nestlé recently shocked the international business community with a candid confession that the public doesn’t often hear: Forced labor was lurking in its supply chain.
After a year-long investigation, Nestlé uncovered migrant workers throughout Thailand’s seafood industry who are lured into employment with false promises and forced to catch fish that eventually end up in the company’s food supply chains.
Unfortunately, while the decision to go public with its discovery is surprising, the finding isn’t.
The United Nation’s International Labour Organization (ILO) estimates three out of every 1,000 people worldwide are trapped in some form of forced labor and that there are 11.7 million slaves in the Asia-Pacific region alone, a key sourcing hub for many global businesses, especially those in the apparel and textile industries.
Countries around the world, including the U.S., are trying to prevent these unfair practices by enacting due-diligence regulations that will change how companies report on and manage global supply chains and hold them liable both for their own and their suppliers’ actions.
There’s no doubt the new regulations are a step in the right direction for labor equality, but complying with new regulations can be difficult if the right people, processes and technology aren’t in place. Keeping up with a changing regulatory landscape is costly, takes a lot of time and resources and may even require significant organizational change. But the risks of non-compliance are even higher.
Thankfully, there are a few tried-and-true strategies for managing the supply chain that will help your team ensure compliance and ultimately make the world a better place.
Understand the context in which you’re buying
Procurement’s role is not just to buy goods at an ideal price, but to ensure these products contain the right kind of materials. Ensuring materials aren’t hazardous, mined with slave labor or sold through violent conflict requires complete transparency into the supply base.
Procurement teams need to understand the context in which they’re buying and conduct proper due-diligence across all tiers of suppliers. Teams can uncover this information by researching:
• The locations of suppliers’ manufacturing facilities
• From where and whom suppliers get their materials
• The supplier’s back up forms of supply
• Asking suppliers detailed questions around operations and employees
This context gives companies clearer insight into the risks in their supply chain and can uncover the suppliers that have forced labor and other unjust practices plaguing their operations.
Leverage the c-suite for sustained success
Tapping internal resources and the expertise of your colleagues is critical for staying on track with regulations and ensuring business process are not interrupted.
The c-suite, for example, should help you develop a risk management strategy that ties back to the organization’s overall business goals, which will ultimately ensure continuity and avoid additional financial and operational consequences.
It’s also a good practice to work with your c-level executives to create a plan of action for non-compliant members of your supply base. Developing this plan ahead of time will help you solve issues quickly before they become an even bigger risk to your business.
Audits are a necessary evil
Setting up routine audits is a relatively simple process that can do wonders for ensuring compliance. Ideally, audits should be conducted at least quarterly to stay on top of emerging issues. You can conduct these audits in-house or tap a third party expert, but you need to make sure that whoever is conducting the audit understands the local laws and is not afraid to call out questionable practices and inform you about negative findings.
Some findings may be hard to hear, but if you don’t understand what is and isn’t working on the ground, you have a higher risk of being non-compliant and could suffer hefty financial and reputational consequences.
Preparedness it the best form of risk management
Work with your legal team to make sure you’re aware of ever-changing local, national and global laws and you understand the implications of regulations coming down the pipeline. Understanding what each regulation means for your specific function and your supply base—both now and in the future—is critical for long-term success.
As new regulations come into effect, outline the potential compliance issues with your suppliers to identify what needs to change in their current processes and work with them to take immediate action. This will help avoid costly fines and mitigate potential disruptions to your supply base, putting you ahead of where you need to be.
When Nestlé uncovered the forced labor issues infiltrating their supply chain, it tackled the issue head-on and swiftly took action. In November, the company publically announced measures to protect workers from labor abuses, which included a migrant worker emergency response team, training for captains and boat owners operating in the industry and a plan to increase global awareness around minimum required labor standards. Similar remedies have been taken in textile and apparel companies, such as Adidas and H&M, to develop sustainable practices and gain better traceability of materials through the supply chain.
The most important thing to remember is to not be afraid to seek outside help or disclose the information you uncover in your due diligence initiatives. No company is alone in facing these issues and these new laws are designed to help businesses comply with what is right. If you recognize that, and understand it, it will help you move forward.
Mickey North Rizza is vice president of strategic services at BravoSolution. She is one of the top supply chain experts in the industry, a former analyst at both AMR and Gartner and a member of the Institute for Supply Management. She leverages her practitioner heritage and deep domain knowledge to accelerate sourcing and procurement performance.