Over the past few years we have seen an increasing interest in how businesses are approaching human and labour rights issues in their operations. This is occurring at the national and international levels and extends to concerns about companies’ supply chains.
In New Zealand this is apparent in the upcoming legislation addressing workplace health and safety. The Health and Safety at Work Act 2015, which comes into effect in April 2016, raises the bar for many companies. Accountability is firmly paced on company officers, financial penalties have increased and liability now includes the risk of imprisonment.
Responsibility can no longer be delegated downwards or passed on to contractors. Embedding a health and safe work culture, and involving staff as well as contractors, is critical to meeting these new requirements.
Other issues are gaining ground here as well, such as diversity, living wages, and discrimination. There is also increased scrutiny on working conditions in sectors such as the dairy and fruit industries, which rely heavily on migrant labour.
Furthermore, in December 2015 the New Zealand Human Rights commission stated its intent to expand work in the business and human rights area, as defined in the United Nations Guiding Principles on Business and Human Rights.
The UNGPs have 3 core elements:
- The state duty to protect human rights
- The corporate responsibility to respect human rights
- Access to remedy for victims of business-related abuses
We are already seeing a number of countries and global companies – such as Nestlé, Unilever and H+M – adopt these principles. These companies, in turn, expect their suppliers to respect human and labour rights.
But these expectations don’t just stop with the first-tier suppliers. Companies such as Nestlé and Unilever expect their first-tier suppliers to monitor their own suppliers. This “cascading” of supplier requirements has created a positive shift in the way businesses address human and labour issues in both developed and developing countries.
Companies can no longer afford to ignore human and labour rights risks in their operations or in their supply chains.
So what are the steps companies are taking?
Generally the steps businesses undertake in addressing human and labour rights – at least in their own organisations – is relatively straightforward. It entails issue identification, developing policies, setting objectives, providing training and reporting on outcomes.
But developing a supplier program can be a bit trickier, depending on how many suppliers you have and their location. The majority of companies start by developing a supplier code of conduct based on their own human and labour rights policy. This is usually followed by a contractual requirement that suppliers comply with the code of conduct.
It is imperative that procurement staff is involved in the entire process of your supplier program. They can provide valuable insight into the types of human and labour risks that exist in your supply chain, and are a critical factor in ensuring the program succeeds.
There are also unique challenges when dealing with overseas suppliers. In many cases local and national legislation is in place but enforcement is non-existent. In these cases it is strongly recommended to conduct audits to ensure compliance with your code.
The companies I have worked in have chosen a step-by-step approach and focus on the most important supply chain issues initially – such as health and safety, working conditions, salary and working hours – and gradually include more issues with time. An option for many companies, depending on size, is to include human rights training in quality audits of suppliers. This would naturally require training to up-skill auditors.
Sharing supply chain data through Sedex
Another option is to share join an initiative such as the Supplier Ethical Data Exchange. It is the largest collaborative platform for sharing ethical supply chain data with over 27,000 businesses and suppliers in over 150 countries. By using a standard audit format, Sedex members are able to share information on four areas:
- health and safety
- labour standards
- business integrity
- the environment
The standardised audit is generally requested by a customer and conducted by a third party. The results can be shared by a supplier with other customers – thereby reducing the duplication of customer audits. The standardised audit is based on the Ethical Trading Initiative, national legislation and any additional customer requirements.
Even if you are not interested in becoming a member of Sedex it is worth looking at the audit format. It can provide valuable input when developing an audit process for monitoring your suppliers.
Daniel King is partner at The Nature of Business, a sustainability consultancy based in Wellington, New Zealand.