[Publisher’s note: Supply risk is a beast that wears many suits. Today, we continue an exclusive three-part series that examines the problem of human trafficking in the global cotton supply chain.]
In early November, LexisNexis, in partnership with Stop The Traffik, a UK-based non-governmental organization (NGO), published an in-depth report on the prevalence of forced labor and human trafficking in the cotton and textiles industries (click here to download the report). The report leveraged LexisNexis’s Human Trafficking Awareness (HTA) Index as its primary source to uncover the breadth and depth of child labor, forced labor, human trafficking, and unsafe working conditions prevalent in the modern cotton and textile industries. We read the report and then met with the report authors and the LexisNexis team to discuss their findings for this CPO Rising exclusive. In our first article, we examined the issue and presented many of the report’s key findings. Today, we continue the discussion of the report but also broaden it to include some strategies that Chief Procurement Officers and their teams can take to mitigate the risks of sourcing commodities from unethical suppliers.
Currently, regulation at the global, national, and state levels lags consumer advocacy efforts to compel businesses to ensure ethical sourcing practices in the global cotton and textiles industries. This means that potential repercussions from customers is greater than any statutory penalties. For starters, there is currently no international law that holds companies responsible for their suppliers’ working conditions. In the United States, there is currently no federal law mandating companies to investigate and/or remediate their supply chains for child labor, forced labor, human trafficking, or products produced under unsafe working conditions, although there is proposed legislation in Congress. In the meantime, individual states have taken some action. For example, the state of California passed the California Transparency in Supply Chains Act of 2012, which requires companies doing business in California worth more than $100 million to publicly disclose their efforts to rid their supply chains of human trafficking and slavery. But, as the report notes, when an independent compliance audit was conducted in February 2014, the vast majority of California businesses that are covered under the Act were non-compliant.
Absent of any meaningful regulatory risk, enterprises with a stake in the garment and textile industries are at risk of tarnishing their brands and impacting their revenues when evidence of human trafficking, unsafe work environments, or deadly accidents (like the Rana Plaza Garment Factory accident that killed 1,129 people in Bangladesh in 2013) appears. In the cotton/textile industry, it appears that most enterprises lack visibility into their supply chains for unsafe working conditions, child labor, forced labor, and human trafficking; the report shared the findings from a recent study that 93% of the fashion companies surveyed did not know or disclose from where their cotton originated.
So, how should Chief Procurement Officers approach this issue? To start, they need to estimate the level of risk they are exposed to and the consequences of a negative event. The estimate may not be precise, but once they have a relative understanding of the potential impact, they can begin to raise awareness internally of potential risks and allocate the appropriate resources to mitigate against them. CPOs, with the support of their executives, can then commit publicly that they will ensure an ethical supply chain – this commitment can be made to their customers, their staffs, and their suppliers. Making the commitment is easy, ensuring that is is kept is hard. To that end, there are a series of tools and services that procurement and supply chain professionals can utilize to gain visibility into their supply chains and categories and also track specific suppliers or regions including those provided by the report sponsor, LexisNexis.
After gaining visibility into their supply chains and a better understanding of where they and their suppliers are in terms of ethical sourcing and labor practices, businesses can issue codes of conduct for their suppliers, as well as corporate social responsibility (CSR) statements for their consumers. They can then provide their staff with training on ethical sourcing and procurement practices that are in line with their businesses’ codes of conduct and CSR statements. Chief Procurement Officers can track their suppliers’ performance over time and even reward those that adhere to ethical labor practices – for example, by giving them an “Ethical Supplier of the Year” award).
For many enterprises, taking these steps is easier said than done. After all, it’s easy to draft supplier codes of conduct and CSR statements, but not as easy to uphold them. Thus, in the final article in this series, we will examine these steps in the context of modern global supply chains, and how difficult it can be for many enterprises to gain total visibility and commit to ethical and sustainable sourcing.
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