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Modern slavery in the supply chain: how to manage high-risk suppliers

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  • MENA
Middle East Risk Watch - Issue 7 - July 2017
Modern slavery in the supply chain: how to manage high-risk suppliers


You know who your high risk suppliers and contractors are, your audits have told you that they are not meeting your worker welfare code, but there is commercial pressure from the business to just ‘make it work’. Sound familiar?

Managing high risk suppliers means going beyond standard supply chain audits to effect real change through targeted due diligence, transparency, partnership, and continual improvement. You must take suppliers with you, through education, remediation and risk management to reduce risk exposure in a lasting, sustainable way. Within your own business, commitment and training also plays a large part in managing high risk suppliers: from the procurement team to the board, everyone has an important role to play in reducing exposure. Herewith we list three things that should form part of your approach to managing high risk contractors in your supply chain.


  1. Use enhanced self-certification

    Your procurement team issues a self-certification questionnaire to prospective suppliers to receive assurance that your welfare code of conduct will be met, but is your team trained to spot potential welfare red flags and gaps in the supplier’s response? Will this self-certification form alert you to an ongoing cash-flow risk with the supplier that has seen workers not paid for three months this year? Does your procurement process assess the ability of the supplier to comply with the code of conduct given the likely value of the contract?

    Enhanced self-certification requires the supplier’s response to be supported by evidence to show how compliance may be achieved in practice. It is supplemented with background screening information and leads to a remediation plan that directly informs your monitoring strategy should the supplier be appointed. Essential to this process is training in the procurement function on how to evaluate responses and identify risk exposure.
  2. Understand the root causes of non-compliance

    Your audits are identifying repeated areas of non-compliance with your code of conduct, but these are not being resolved. Does this mean that the supplier is actually high-risk or could there be another cause behind this issue? For example, is your global code of conduct compatible with the local laws of the jurisdiction in which your supplier operates? Does your supplier have the resources to implement controls? Effective monitoring seeks to identify root causes of non-compliance and use this knowledge to build better controls that are more likely to be implemented by a supplier.

    Example: The supplier of security guards to one of your facilities does not comply with your working hour requirements, but does fully comply with local working-time laws. Complying with the code of conduct would require additional shifts and therefore increase costs to the supplier, which conflicts with the cost-reduction approach of your procurement team.
  3. Use a partnership approach to drive continual improvement

    You have identified the root causes of non-compliance and implemented a monitoring framework to address these issues. But effective management of high-risk contractors requires a supplier relationship of continual improvement. This approach requires a commitment from all stakeholders within the supply chain. Suppliers’ worker welfare representatives will benefit from training on the aims and objectives of a code of conduct along with regular guidance on how to comply with one. Companies can use supplier conferences to invite feedback from suppliers on the compliance challenges they face, while lessons learned from monitoring can be shared throughout the supply chain to highlight suppliers’ innovative solutions to enhance worker welfare.

    Takeaways
  • Your procurement team is your first line of defence. Give them the support to identify and manage your exposure to modern slavery risks.
  • Don’t rely on ‘arms-length’ controls, such as audits and self-certification tender responses, as the only measure of a supplier’s ability to comply with your code. Collect evidence of compliance, rather than yes or no answers, and give guidance to suppliers on how to obtain this.
  • Promote awareness of the causes of modern slavery risk to everyone in your business and supply chain and encourage stakeholders to identify and communicate these.  
  • High-risk suppliers aren’t your responsibility alone, so use engagement and partnership to understand how you can manage the root causes of their risk more effectively.
  • You cannot eliminate welfare risks in the supply chain, but you can manage your exposure. Don’t abandon your welfare obligations or principals, but do adapt your implementation of requirements to recognise genuine operational challenges.

 

Author

  • James Lewry, Director 

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