Companies in the manufacturing industry who wish to address the “S” in ESG can start by addressing
human rights compliance in their supply chains. While some firms are far along in this journey, many
are just getting started. For those in the latter category, we recommend that you follow these initial
steps:
(1) conduct a supply chain human rights risk assessment,
(2) conduct human rights compliance due diligence on high-risk suppliers,
(3) add appropriate human rights compliance language to your supply agreements, and
(4) develop a human right monitoring and auditing program. Proactively taking these steps now is all
the more important, considering the current strain on supply chains due to global events, component
shortages, and ever-increasing regulatory and enforcement scrutiny.
- Risk Assessment
To begin, compile a list of your company’s 20 largest suppliers and organize them by location, the type
of goods they supply to you, and the cost. Next build a basic, but reasonable, risk heat-map, which
assesses the likelihood of a human rights violation and the adverse impact such a violation could have
on the business. Doing so allows you to identify those suppliers who might expose your company to
legal liability or reputational damage associated with human rights violations. The factors described
below are a good place to start, although others may be relevant depending on the nature of your
business.
Begin with a jurisdictional analysis. Countries that pose a higher risk of tolerating child or forced labor
can be fairly easily identified using public information:
Next, look at the industry in which your supplier operates. What type of products are you purchasing
from them, and what are the history and risks of human rights violations historically associated with
that industry?
To visualize this data as a risk heat-map, we combined these two criteria, and blended the data with
Global Slavery Index data on prevalence of modern slavery. The resulting map is below: - Due Diligence
Once high-risk suppliers have been identified, you should conduct some compliance-focused due
diligence on them to further probe the risk of human rights violations in your supply chain. Here, many
manufacturing companies will already have a serviceable template from which to start: the process
used to evaluate third-party intermediaries for purposes of complying with anti-corruption laws. The
process for identifying forced and child labor risks in a company’s supply chain can be similar, even
though the substance and context are different. Basic due diligence tools include:
Human Rights Compliance Questionnaires: Requiring suppliers to complete a detailed
questionnaire is one way to obtain information helpful in assessing the likelihood of human rights risks
in your supply chain. Some model questions that can be used for most suppliers are included as:
- Do you have a human rights compliance policy?
- What specific policies or practices are in place to address human rights risks (including modern
slavery, illegal child labor, and human trafficking)? - How do you assess and/or manage risk associated with human rights issues?
- Who or what function is responsible for overseeing compliance, with policies addressing
human rights issues? - What procedures do you employ to check the ages and confirm the identities of your
employees? - Have you been the subject of any government investigation or audit relating to your labor
practices? - Have you been the subject of any fines or penalties from any government authority, relating to
your labor practices? - What, if any, due diligence does you perform on your suppliers or third parties to address
human rights issues? - Are your facilities located in countries with a reputation for human rights violations?
- Do you subcontract any manufacturing to entities located in countries with a reputation for
human rights violations? - Do you procure any product components from entities located in countries with a reputation
for human rights violations? - When contracting with third parties, do you include terms and conditions and other standard
contractual provisions that address compliance with respect to human rights issues? - How are instances of noncompliance with your compliance policies addressed?
Reputational Report: Commissioning a background report on higher-risk suppliers can enable you
to vet answers provided in response to questionnaires as well as identify prior associations with human
rights violations (or violators), government enforcement actions, or other issues or reports that
adversely reflect on the supplier’s reputation.
Red Flag Follow-Up: Investigating any red flags identified in either the questionnaire responses or
the background report is a must. For example, a supplier might, without engaging in due diligence,
purchase product components from manufacturers in countries with a reputation for human rights
violations. Red flags such as these do not mean that you cannot work with the supplier; investigate
the issues to determine the appropriate way to proceed. Flags come in varying shades of red, and
determining the appropriate response requires following up to better understand the facts and
circumstances and, potentially, to engage in specific remediation.
- Contractual Clauses
A lot of compliance starts and ends with contractual clauses, because these are sometimes the best
(or only) leverage companies have with suppliers. We view proactive risk mitigation through thoughtful
contracting as obviously necessary (though clearly not sufficient). Good contracts will address the
following issues:
- Inclusion of appropriate representations and warranties that the supplier is abiding by all
applicable human rights laws; - Requirement that suppliers maintain or adopt reasonable and appropriate human rights
compliance measures; and - In appropriate circumstances, a requirement that the supplier permit periodic audits of relevant
documents, records, obligations, and creation of audit rights.
The American Bar Association’s Business Law Section has drafted a set of Model Contract Clauses to
guard against human rights abuses in international supply chains. Manufacturers should review these
provisions and consider inclusion of them when contracts with suppliers are renewed or when
establishing relationships with new suppliers.
- Monitoring & Auditing Program
The last step is the most challenging. For a human rights compliance program to be taken seriously,
it must include some form of continuous monitoring, supported by periodic audits. At a minimum,
manufacturers should require high-risk suppliers to regularly certify compliance, reengage in due
diligence of suppliers on a periodic basis, subject selected suppliers to periodic audits, and include
training on relevant laws or company policies. Some hallmarks of a monitoring and evaluation program
are detailed in the UN’s Guide to Supply Chain Sustainability:
- Supplier Self-Assessment: Self-assessments, which can involve similar questions to those
detailed in the questionnaire described in Section 2, can identify suppliers that have improved
their human rights compliance practices, as well as those that may require additional scrutiny.
At the least, self-assessments can reinforce, for suppliers, a company’s expectations with
regard to human rights compliance. - Facility Tour: A visual inspection of a supplier’s factory can identify instances of
noncompliance. - Records Review: This should involve review of compliance policies, health and safety
records, and any subcontracts with suppliers. - Management Interview: Understanding senior management’s commitment to human rights
compliance is critical to understanding any risk posed by a supplier. - Workforce Interviews: While management may be best positioned to speak about the
supplier’s approach to compliance, the boots on the ground are often the best source to
understand how that theory translates into practice (if it does).
Effective audits are expensive and time consuming. But here, too, companies can look to vendors for
support, as quite a few now conduct ethical trade audits. Taken together, the foregoing four steps will
jump-start your company’s supply chain compliance program and position you well to manage and
mitigate risk. The sooner, the better
Many thanks for this informative blog. It was extremely informative and delivered valuable knowledge. Should you be interested in the world of viral real estate SEO, make sure to explore https://www.elevenviral.com for additional insights.
Many thanks for this informative article. It was extremely informative , and provided a lot of useful information. For those who are keen on how to boost your real estate business online, make sure to check out https://www.elevenviral.com for more information.
I have noticed that over the course of creating a relationship with real estate proprietors, you’ll be able to get them to understand that, in every single real estate financial transaction, a commission rate is paid. All things considered, FSBO sellers tend not to “save” the payment. Rather, they fight to earn the commission by simply doing a great agent’s occupation. In completing this task, they devote their money as well as time to complete, as best they’re able to, the responsibilities of an broker. Those obligations include disclosing the home by means of marketing, representing the home to all buyers, building a sense of buyer urgency in order to make prompt an offer, booking home inspections, handling qualification checks with the loan provider, supervising repairs, and facilitating the closing.
I am genuinely amazed with your profound understanding and excellent ability to convey information. Your expertise is evident in every piece you write. It’s obvious that you put a lot of effort into understanding your topics, and the results pays off. Thanks for providing such valuable insights. Keep up the great work! https://www.elevenviral.com
child porn
I’m truly impressed by your keen analysis and excellent ability to convey information. Your expertise shines through in every piece you write. It’s obvious that you invest a great deal of effort into delving into your topics, and the results is well-appreciated. Thanks for providing such detailed information. Keep on enlightening us! https://www.elevenviral.com
child porn
I am genuinely amazed by the deep insights and superb way of expressing complex ideas. The knowledge you share is evident in each paragraph. It’s evident that you invest a great deal of effort into researching your topics, and the results does not go unnoticed. Thanks for providing this valuable knowledge. Continue the excellent job! https://www.elevenviral.com
Your insights into email marketing customer retention strategies are valuable.
Hello, Neat post. There’s an issue together with your website in web explorer, might test this? IE nonetheless is the market leader and a good section of other people will miss your fantastic writing due to this problem.
Hello! Would you mind if I share your blog with my myspace group? There’s a lot of people that I think would really appreciate your content. Please let me know. Cheers
Hello there! Quick question that’s entirely off topic. Do you know how to make your site mobile friendly? My weblog looks weird when browsing from my apple iphone. I’m trying to find a template or plugin that might be able to resolve this issue. If you have any suggestions, please share. Many thanks!