In the second part of this two-part article, Action Sustainability provides practical supply chain management insights and case studies in relation to the Modern Slavery Act 2018 Draft Guidance for Reporting Entities Appendix 2 ‘How to work with suppliers?’. Case studies include Intel, British Land, Colgate, Migros, the French Government, Nestle or Rio Tinto.
Consideration #5 – Consider how you can use existing supplier engagement processes.
Integrating sustainability into existing practices and processes is at the heart of ISO 20400. Organisations have many opportunities to engage with suppliers before, during and after the sourcing process, and can integrate modern slavery due diligence into the conversation. It is important to recognise that the supplier selection and contract management process may be too limited to solve complex human rights situations. Long-term business-to-business initiatives may be more relevant such as supplier development, supplier relationship management, and partnerships.
In the UK, the Supply Chain Sustainability School has been working with partners such as the National Grid and Costain to support understanding within the supply chain, engage and assess them and support continuous improvement. Learn more about the UK Supply Chain Sustainability School approach here.
> ISO 20400 Section 4.2 provides guidance on integration.
Consideration #6 – Ensure any ‘zero tolerance’ policies focus on zero tolerance for inaction not cases.
Modern Slavery is one of the most egregious breaches of human rights imaginable, and no instance should go unremedied. Organisations should set an expectation that all suppliers will adequately respond to any case they found, as opposed to imposing an obligation that no cases are found. This will provide a space for honest dialogues with suppliers and avoid the ‘fear factor’ created by a threat of contract termination.
Colgate’s approach to labour standards in its supply chains demonstrates this principle well. The company’s Third Party Code of Conduct sets out clear expectations from suppliers, and Colgate works with them to remediate any non-compliance through time-bound corrective action plans. Learn more about Colgate’s approach here.
> ISO 20400 Section 7.5.6 provides guidance on managing supplier failure.
Consideration #7 – Try to avoid blanket approaches and take a risk-based approach that prioritises high-risk suppliers.
Setting priorities focusing on high-risk suppliers will enable organisations to focus their resources on where they can have the greatest impact. Under the ISO standard, priority setting should consider the relevance and significance of sustainability issues (such as human rights), as well as other considerations such as the organisation’s capacity to influence outcomes.
Whilst the draft MSA Guidance defines risk as risk to individuals, Action Sustainability’s approach, based on ISO 20400, is to also assess business considerations when setting priorities. For instance, we think that an Energy distribution company should focus its limited resources and time on strategic and direct products such as cables and transformers rather than on laptops or office supplies. In this example, it is both a question of criticality to the business and capacity to influence. For laptops and office supplies, the company may focus on exercising basic due diligence (e.g. through its supplier Code of Conduct and T&Cs) and buying third-party certified products that address human rights standards. For cables and transformers, the company may engage with key suppliers to evaluate their factories, conduct social audits, provide technical support and/or initiate a supplier relationship management program.
Swiss retailer Migros has developed long-term agreements with local farms producing high-risk products such as coffee or cacao. This tailored approach recognises that greater focus and resources are needed to ensure greater visibility over the farming, production and distribution of these commodities. Learn more about Migros’s approach here.
> ISO 20400 Section 4.5.3 provides guidance on setting sustainable procurement priorities.
Consideration #8 – Consider how your entity may be contributing to suppliers’ modern slavery risks.
A long-term, robust modern slavery strategy should identify and address the root causes of exploitation, not just modern slavery risks. Embedding sustainable procurement across your organisations should also entail that your purchasing practices do not impose conditions conducive to exploiting workers in supply chains. This may include tight delivery deadlines without compensation, abusive contractual clauses or long payment terms.
The French Government’s Responsible Supplier Relations Label is an innovative certification program to guarantee that supplier relations promote sustainable practices, including sustainable labour practices. The Label is awarded after a thorough assessment on several criteria, such as guaranteeing fair financial treatment for suppliers, and treating suppliers and sub-contractors equally. The label provides a list of examples of poor practices that can give rise to adverse supply chain impacts (and also great practices to replicate!). Read more about the Responsible Supplier Relations Label here.
> ISO 20400 Section 5.4 provides guidance on understanding procurement practices and supply chains.
Consideration #9 – Encourage suppliers to respond to modern slavery risks in a way that is appropriate to their circumstances, including their size, capacity, structure, risk profile and leverage with their sub-suppliers.
Analysing your suppliers’ profile and capabilities will help you identify the areas where they can best contribute to your modern slavery strategy. There is no “one-size-fits-all” when it comes to working with your suppliers – your approach should be commensurate to the level of risk identified and tailored to your supplier capabilities. A typical mistake is to require the same level of policies, management systems and procedures to SMEs and multinational companies.
Through the implementation of its “Know your supplier” procedure, mining company Rio Tinto realised that some suppliers did not necessarily have a written policy to address modern slavery risks, or did not provide enough information on the company’s practices. To overcome this, their team developed a set of questions to better understand supplier practices and identify supplier-specific risks of human rights breaches. Read Rio Tinto’s 2018 Modern Slavery Statement here.
> ISO 20400 Section 7.2.5 provides guidance on analysing the supply market.
Consideration #10 – Identify and engage with suppliers that operate at ‘control points’ in your supply chains.
Once you have a robust understanding of your supply chain, you can start identifying leverage points where supplier engagement will have the greatest impact. In increasingly complex supply chains, organisations should focus their resources on suppliers who will be able to influence change.
Through an ambitious responsible sourcing and traceability programme, Nestlé leveraged their relationship with large Tier 1 suppliers to influence their own supply chains towards greater transparency over the provenance of their products. As part of the programme, Nestlé required Tier 1 suppliers to cascade obligations from its Supplier Code of Conduct to their own suppliers, and defined separate targets for each Tier to monitor progress. Read more about Nestlé’s approach here.
> ISO 20400 Section 4.5.4 provides guidance on exercise influence in supply chains.
Conclusion – It’s just about ‘good procurement’!
The draft Guidance Appendix 2 is a great starting point for organisations to start preparing their modern slavery supply chain management strategy. It is valuable to think of sustainable procurement as simply good procurement. By adopting this mindset, organisations will ensure they do not duplicate procedures and instead integrate sustainability considerations, including modern slavery, into their procurement processes. We hope this article enabled you to better understand how to practically do it.
If you would like to get started on your modern slavery supply chain management strategy, please get in touch!
In the UK: Helen Carter – firstname.lastname@example.org
In Australia: Jean-Louis Haie – email@example.com
For more information on our approach, please visit our website.