Complex Supply Chains Require Cohesive Due Diligence

Complex Supply Chains Require Cohesive Due Diligence

Imagine you are the lead compliance officer at a multinational corporation.

It’s production time for the holiday season and news comes across your desk that, despite your internal due diligence program, one of your suppliers has been caught forcing its personnel to work long, unpaid hours in unethical conditions.

What do you do?

Human Rights Violations in the Supply Chain

Apple Inc. recently launched an investigation into a plant in southwest China after a rights group claimed that one of Apple’s suppliers, Taiwan-based Quanta Computer, was illegally employing students to assemble Apple Watches at its factory.

Under the guise of “internships” that pair up vocational schools with manufacturers, the students allegedly worked “like robots”, performing repetitive tasks for hours, and often working overtime and night shifts. Students and Scholars Against Corporate Misbehaviour (SACOM) said the students’ graduation certificates would be withheld by the school if they refused to work.

Apple Inc. noted that Quanta was a new supplier and had been audited three times without finding student interns. Notwithstanding, SACOM demanded Apple investigate the incident and bring Quanta’s labor practices in line with corporate policies and those of the Chinese government.

Manufacturing internships are permitted under Chinese labor law. However, the practice of using unpaid interns to fill labor shortages during the holiday rush is widespread. Consequently, Chinese authorities have tightened regulations on work conditions in recent years.

Legislating Due Diligence

The International Labour Organization (ILO) estimates that close to 40 million people are victims of modern slavery. Because of the complexity of global supply chains, organizations are taking action to assess whether a product has been produced using slavery, and more governments are introducing legislation that makes it compulsory for businesses to report on risk in their supply chains.

For example, the UK’s Modern Slavery Act of 2015 was designed to combat human trafficking and slavery, and strengthens enforcement related to these offenCes. The act’s Transparency in Supply Chain provisions require businesses to publish an annual statement confirming the steps taken to ensure that slavery and human trafficking are not taking place in the operations or the supply chain.  

Depending on the severity of the offenCe, penalties for non-compliance can range from fines to jail time.

Know Your Supply Chain, Know Your Risks

The way in which a company engages with its suppliers can increase the likelihood that slavery was used to produce the final product. If an organization places a large order with a short turnaround time, for example, the request may be beyond the supplier’s capacity to fill in an ethical manner. In order to meet demand, the supplier may subcontract work to factories that are not regulated by the same standards — or simply force the overtime upon workers.

The ILO found that G20 countries collectively imported per annum $354 billion worth of products at risk of being produced by modern slavery, revealing that more needs to be done to combat human trafficking and modern slavery.

Do you know where risks lie within your supply chain? Download our Guidance on the 2018 Trafficking in Persons Report for country-specific insight.

How to Be Duly Diligent

  • Be aware: Know your legal obligations to protect worker rights.
  • Be objective: Identify issues in your supply chain, and regularly review your incidents and trends, inspections, audit findings, program evaluations and input from workers.
  • Be responsive: Develop and communicate your efforts to combat human trafficking, including corporate policies, procedures and practices, to minimize risk.
  • Be alert: Review your policies and practices frequently through self-evaluations, and monitor changes in regulations and industry practices.
  • Be transparent: Maintain evidence of the health of your supply chain, and be able to demonstrate that appropriate checks and reviews are in place to ensure continued due diligence.

In order to protect their reputation, avoid potential legal ramifications and ensure uninterrupted market access, companies need a solution that can help them efficiently conduct due diligence. Assent’s Corporate Social Responsibility Suite allows companies to streamline and automate their corporate social responsibility (CSR) programs, enabling them to identify and mitigate risk of human rights violations in their supply chains. For more information, contact info@assentcompliance.com.

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