Inside Supply Management Magazine

Assess Human Rights Risks Beforethe Next Tragedy Strikes

April 28, 2014

It was just a year ago that the world’s attention focused on the horrible conditions at the Rana Plaza garment factory in Bangladesh in the aftermath of the tragic factory collapse. The disaster also revealed the ongoing challenges supply management practitioners face in assessing social compliance in global supply chains. A major challenge lies in the fact that the weak links in a company’s social compliance supply chain often only come to light following a tragedy.

In a new report, Human Rights and Professional Wrongs, EY stresses the need for global businesses to reconsider some basic fundamentals in their approach to social compliance programs.

“A risk-based assessment provides the opportunity to uncover human rights abuses early enough in the business cycle that companies can do something about them before a problem erupts,” says Adam Carrel, senior manager, climate change and sustainability services for Ernst & Young LLP. He adds that any company that is contract manufacturing in a developing country should perform an assessment of the human rights risks within their supply chain.

Such an assessment, Carrel says, should use internal and third-party auditors, as well as third-party certifiers, empowering them to cover a “large and representative sample of a company’s factory base and expand the scope of work to cover the root causes behind the physical indicators of noncompliance.”

Among the recommendations for conducting an assessment:

Tighten procurement systems. Tightening systems will prevent orders from being placed with factories that have not had their social compliance status assessed.

Align agents and intermediaries with expectations. All agents or intermediaries in the supply chain need to know the social compliance expectations of the company.

Drive behavioral change. It’s important to drive behavioral change so there is continuous improvement in health and safety outcomes. Such changes should be part of corrective action plans.

Tackle the larger problem. Before a company performs a social compliance audit, it must first establish corporate-wide human-rights-related procedures and policies. Businesses also should incorporate human rights considerations and decisions early in the business cycle.

Maintain longer relations with fewer suppliers. There must be incentives for factories to invest in substantive improvement in working conditions. Supplier consolidation based on proven human rights improvements will require a partial re-envisioning of what constitutes high performance among procurement personnel.

A substantive assessment can help you raise awareness of human rights abuses in the supply chain and give business leaders information to address the problem in a meaningful way.