A Roadmap to Modern Slavery Compliance and a Sustainable Supply Chain

The power to bring change, manage risk, improve ESG scores and unlock value.

Carsten Primdal

• Publisher: Vantage Compliance
• Year: 2020
• eBook ISBN: 9780994399120
• Edition: 1
• Topic: Business
• Subtopic: Operations
• Index: Business

Have you heard about Modern Slavery Acts and wondered where to start to become compliant? Do you have a gut feeling that you know next to nothing about your supply chain, other than the name of the factory and perhaps the defect rates on the product you receive? Are you worried that there may be some unsavoury practices hidden away somewhere in your supply chain?

If you answered yes to the above questions, this book is for you.

Carsten Primdal shares his knowledge on how to implement measures allowing you to gain important insights from your supply chain. These insights improve transparency, allow you to unlock value, empower partners to trust you, and increase customer and investor confi dence.

The methods, tools and structure in this book have already helped many global businesses, and now they can benefit you too.

1. WHAT IS AN ETHICAL SUPPLY CHAIN?

While corporate responsibility covers areas such as social, environmental and ethical business conduct and compliance, in general terms:

• ‘social’ refers to labour conditions, such as slavery or child labour
• ‘environmental’ refers to resource usage and pollution
• ‘ethical’ refers to bribery, corruption and fraud.

These specific definitions are quite technical, and are even unpractical because the problems they are used to describe often are part of a constellation of overlapping issues. In addition, everyone has their own definitions of what each term covers, making it ambiguous and very difficult to address. For these reasons, these terms are used interchangeably throughout this book and should be understood according to the context in which they appear.

THE TWO REALITIES DRIVING THE NEED FOR SUSTAINABILITY

Two mutually reinforcing drivers underpin the need to enhance the movement away from unethical, socially and environmentally exploitative business practices:

1. Repelling customers: Such practices are often criminal, and overexploit both human and natural resources. Engaging in criminal conduct can result in criminal charges being laid and the business must apply resources defending itself. In the process, consumers can lose trust and walk away. If such practices become public knowledge, customers may be repelled from buying.
2. Attracting customers: Consumers are becoming more conscious of their personal impact on the world and want to minimise this by purchasing from likeminded companies. This presents an opportunity for businesses ready to act and who walk the talk. This is an opportunity to attract and retain customers.

While compliance with the law is a given in most businesses, what happens in the supply chain is often seen as ‘outside our control’. Consumer sentiment can sometimes be difficult to gauge, but what is certain is that more and more consumers have an expectation that businesses understand what is going on in what was traditionally regarded as outside the direct control of the business.

Studies show that consumers are looking for companies whose products have minimal, if any, negative impacts on society:

According to surveys done in the US:

• 40% of consumers are interested in ethically or sustainably sourced products
• 32% of consumers check product labels for claims about sustainability
• 25% of consumers actively look for product origins when making a purchase decision.

For businesses, the key is if consumers are willing to pay extra for ethically sourced items:

• 52% would pay more for food and beverage products if they are ethically sourced
• 45% would pay more for clothing and footwear
• 44% would pay more for pharmaceuticals.

And how much extra would they pay?

• 30% of US consumers would pay 5% more for a product that is ethically sourced
• 28% would pay up to 20% more.

Source: Spend Matters

Similar numbers can be expected in Australia. This makes a compelling business case not just to remain compliant and stay out of trouble but also from a monetary perspective.

However, to make an informed decision on how deep to go, it’s important to understand what the issues are and where, why and how they occur, along with the drivers in key markets. Is this simply a nice vision based on an idealistic world view or is it a regulatory nightmare or the next big opportunity? Or perhaps a bit of all three?

In any case, there is a need to act on this increasingly important issue for consumers.

AN OFFICE SUPPLIES COMPANY

While being a well-known and large office supplies company, only few realise that this company has a very decent-size sustainability team, and require most of their suppliers to be able to demonstrate what they do to advance sustainability. This is in the company’s procurement policy and, surprising to many, it is not just a document but actually something they apply stringently.

To ensure compliance, suppliers are required to become members of SEDEX, and provide audit details, as well as engage with the company to constantly improve.

So, if you want to be a supplier to this business, that’s another requirement to fulfil, and don’t be surprised if your claims are looked into.

Like any other business that is serious about sustainability, this supplier of office equipment needs to be able to demonstrate that their suppliers are as serious about their commitments as they are themselves and that they take safeguarding of their customers’ reputations seriously.

2. UNETHICAL ACTIVITIES WITHIN SUPPLY CHAINS

Even with today’s heavy emphasis on corporate ‘risk management’, every supply chain contains inherent risks that have the potential to derail its activities and close down its participants. Some risks are location-based – such as earthquakes, floods, and fires – and are impossible to predict. At best, they are mitigated by insurance. Human-generated hazards, on the other hand, are often predictable, detectable and preventable – assuming that business leadership wants to make the effort to mitigate the identified risks.

Identifying unethical or illegal activities within any supply chain can be challenging, however. Some unsavoury activities can be non-compliant or illegal in one jurisdiction but not in another, which confounds the capacity to discover and mitigate them with consistency.

THE THREE COMMON SUSTAINABLE SUPPLY CHAIN CHALLENGES

There are three overarching categories of unethical activities that can pop up at any juncture within any supply chain, regardless of its location:

• social exploitation
• resource exploitation
• ethical misconduct.

SOCIAL EXPLOITATION

There are a number of issues related to social exploitation, such as paying less than minimum wages, demanding excess overtime without compensation, and child labour. Slavery is in the worst of categories, along with child labour. Slavery is defined as people being forced or sold to marry, provide sexual services, or for uncompensated labour. Slavery sparks vivid mental pictures of shackled slaves on slave boats crossing the Atlantic in the 17th century. As appalling as that trade was, modern slavery is every bit as bad – it’s just less visible to the untrained eye. The Global Slavery Index recorded over 40 million people in modern slavery in 2016, which may even be a significant underrepresentation of the actual number. Antislavery.org reports an estimated 10 million children involved in global slavery, while another 151 million – 114 million of them under 14 years – are forced to work rather than go to school.

RESOURCE EXPLOITATION

Many suppliers are chosen because of their ability to deliver a decent product for a lower unit price. What is less obvious is often these producers are located in countries with a lax or nonexistent application of environmental laws and regulations, leading to environmental degradation and pollution of the local area. This often contributes to their low costs.

In some cases, they use their access to exploit resources as they fulfil their contractual obligations to overseas buyers; for example, many people have heard about so-called ‘conflict minerals’ or ‘blood diamonds’, where mining practices are unduly harsh on workers, local populations and the surrounding environment. But other mineral supply chains that gain less public notoriety – such as those that produce tin, talc or marble – are also are often fraught with illegal activities.

ETHICAL MISCONDUCT

Ethical misconduct takes many forms, including corruption, bribery, kickbacks, money laundering, embezzlement, blackmail, and extortion, to name just a few. In a supply chain setting, ethical misconduct occurs frequently and can be almost unnoticeable. Another dubious practice could be a part supplier in cahoots with a warehouse covertly substituting some parts for inferior products while splitting the difference in co...

Table of contents

• Cover
• Title
• Testimonials
• With gratitude
• Copyright
• Contents
• Recommended reading
• Foreword
• Introduction: discovering what’s really going on
• 1. What is an ethical supply chain?
• 2. Unethical activities within supply chains
• 3. Domestic and international responses to sustainable supply chain issues
• 4. Preparing
• 5. Defining
• 6. Implementing
• 7. Monitoring and evaluating
• 8. The modern slavery acts
• Checklists, templates and policies
• Conclusion
• About the author
• Also by carsten primdal
• Bibliography