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Companies Cite Costs for Lag in Supply Chain Mapping, Transparency

Comprehensive mapping of an organization’s supply chain can represent a significant short-term investment—but a new report argues that it’s the first step toward mitigating the long-term risks that come with labor exploitation and the trappings of modern slavery.

The International Corporate Accountability Roundtable (ICAR) and Focus on Labour Exploitation (FLEX) recommend several steps for businesses to take in order to prevent modern slavery in their supply chains in their report, “Full Disclosure: Toward Better Modern Slavery Reporting.” For one, the report explains that fighting back against forced labor in supply chains can lead to an improved relationship with the public, private investors and, ultimately, shoppers.

The first step a brand can take is to improve internal reporting and transparency by creating a comprehensive map of its supply chain.

“Companies must have a clear picture of their entire business supply chains, including where their suppliers and subcontractors operate, what they produce, how the work 
is performed, and by whom, in order to comprehensively identify and address risks
 of forced labor and human trafficking in their business operations,” the report notes. “In other words, they need to have a comprehensive understanding of their business operations down to the lowest rank of their supply chain.”

Oftentimes, a company can be unaware of the risks it is exposed to and the environment it has created when large swaths of its supply chain are left unmapped and transparency becomes an issue. Although efforts have increased in this area over recent years, ICAR and FLEX researchers say most companies still don’t go beyond their direct suppliers.

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By limiting their supply chain map to this first tier, businesses can be left unaware of risks present at the lower levels.

“Our research and interviews made clear that companies are not adequately and comprehensively mapping risks in their supply chains,” Abby Henderson, a legal policy fellow at ICAR told Sourcing Journal. “They are not looking to their own business model or practices as a cause or exacerbation of human rights risks to workers. Companies must have policies and practices that lead them to assess how their sourcing practices, for example, can negatively affect workers’ rights. They must then seek to prevent and address risks if and when risks are identified.”

Companies at least keen to take the first steps in mapping have released public lists of their vendors and suppliers. Marks & Spencer, for one, has already made this a priority in their sourcing strategies going forward.

Still, a common criticism of supply chain mapping levied by corporations is that too many resources are required to create comprehensive risk mapping at every stage of a business—especially for organizations with low margins and large supply chains. In that case, according to the report, businesses should prioritize efforts to create short term value while continuing to work to “systematically and progressively…build a more complete picture of each tier of suppliers over time.”

Falling behind in this area won’t bode well for businesses going forward. More and more, supply chains are mentioned in financial reporting and hold more weight when it comes to investments VCs are willing to make in businesses they feel they can better bank on where sourcing is concerned.