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This Overlooked Supply Chain Risk Will Plague Businesses Even More in 2017

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Of all the factors contributing to human rights risks, supply chain blind spots are among the top three.

In its Human Rights Outlook 2017, risk analytics firm Verisk Maplecroft said businesses are entering 2017 increasingly exposed to human rights issues.

“Risks are now starting to emerge closer to home for Western businesses, as legislation strengthens and scrutiny of business practices increases,” Verisk principal analyst for research Dr. Alex Channer said. For example, she added, “Hardening immigration policy in the U.S., which is increasing the risk of labor abuses against undocumented workers, has emerged as one of the top drivers of human rights risks for business in 2017.”

What’s more, according to the report, risks further down the supply chain, like in land deals, blind spots, shipping and unethical recruitment, remain pressing concerns.

This year, the top 10 human rights issues are: social audits, mandatory reporting, supply chain blindspots, migration and modern slavery, corrupt recruitment, privacy, land rights, worker voice, new technology, and Sustainable Development Goals and UN guiding Principles.

The inconsistent quality of social auditing has proved a major risk for businesses who now have to answer to their clients and consumers about their business practices.

It’s easy to hide child or forced labor from an auditor who comes in for one or two days every so often, and it’s also not unlikely for auditors to be bribed or intimated into presenting favorable reports. The process isn’t credible and that leaves companies vulnerable to risk.

“Taking action to strengthen the audit process is essential to ensure the integrity of mandatory due diligence,” the report noted. “With many businesses wanting to comply with the law, while also keeping due diligence costs low, auditors will be under more pressure to rush through audits without time to conduct a proper inspection.”

If audit credibility can’t improve, brands will stay reluctant to share audits and the burden of more auditing will fall on suppliers.

By next year, however, auditors could start being accredited.

At present there’s no globally recognized qualification for becoming a social auditor, but the Association of Professional Social Compliance Auditors (APSCA) is trying to change that. By 2018, the association has plans to implement an initiative to accredit auditors, which will be linked to a formal certification and procedures for debarring an unethical auditor.

Companies tend to not share audits when they don’t know the auditor or the firm and feel they can’t verify the audit’s legitimacy.

“Our intent, with auditor certification, is that you’ll be able to check up on the auditor—are they certified, in good standing, they’ve completed the required training, continuous professional development,” Rona Starr, ASPCA executive director, said. “That means you’ll trust the audit was executed credibly—so you’ll accept an existing audit.”

Digging deeper into supply chain blindspots, Verisk said, as brands have prioritized due diligence in core production and processing activities, many have left vulnerabilities in their supply chains where they’re at risk for concerns like modern slavery.

The problem, really, is a lack of supply chain visibility. Much of the focus for audits, and other inspections even, has been on workers in farms and factories, while the staff like truckers, packers, cleaners, caterers and security personnel are often invisible, though they are “highly” vulnerable to modern slavery, according to the report.

Last year in some cases, seafarers went unpaid for months or were abandoned on bankrupt container ships (like Hanjin’s), and because they cross national jurisdictions, many don’t have state protection, which puts them at even greater risk for modern slavery or otherwise unethical working conditions.

“Seafarers’ wages and working conditions are often the first to suffer when ship owners or shipping companies compete at ever lower prices to transport ever fewer goods,” Channer said. “Seafarers also lack state protection if owners register a ship under a ‘flag of convenience’ to avoid higher costs and stricter labor regulations in their own country. Panama, Liberia and the Marshall Islands—which host 40 percent of world ship tonnage in their registers—are all high risk in our Maritime Labor Rights Index.”

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