When it comes down to slavery, many of us in the Western world, including myself, should consider ourselves extremely lucky to being slaves only to things like our email, and no worse.
The issue of forced labor is incredibly serious business when it comes to major supply chain risks. Not only that, it is also incredibly widespread and pervasive, covering myriad industries from clothing to mining, fishing to farming, and many in between.
Awareness exploded onto the global scene with the Thai fishing scandal back in 2014, after which the U.S. State Department, in its trafficking in persons report, downgraded Thailand to tier three, the lowest ranking, and the country has remained there. At the time, Spend Matters Founder Jason Busch wrote, “it seems every quarter there’s a new supply chain crisis involving supplier practices and labor management capturing the attention of consumers.”
As long as consumers are happy with paying the lowest price at the supermarket, and until they shift away from making choices with their wallets and toward making them with their humanity, those crises should continue to be critical in raising awareness for consumers — as well as corporations and their supply chains.
How Widespread is Slavery Within Supply Chains?
By most consensus estimates, between 20 to 30 million forced laborers toil in the global workforce today.
Other reports, such as one put out International Trade Union Confederation, estimate more than 100 million “hidden workers” exist within the global supply chains of 50 major corporations, including McDonald’s, Apple, Coca-Cola Company, Johnson & Johnson and Wal-Mart, which could possibly make the forced-laborer contingent even higher than 30 million.
“Sixty percent of global trade in the real economy is dependent on the supply chains of our major corporations, which uses a business model based on exploitation and abuse of human rights in supply chains,” said Sharan Burrow, general secretary of the ITUC, in a January 2016 statement.
As of last August, according to Verisk Maplecroft’s Modern Slavery Index, modern slavery is “rife in 58% of countries,” with China and India the largest among 25 economies posing ‘extreme’ supply chain risks. In fact, Verisk Maplecroft pins 115 countries worldwide with posing ‘extreme’ or ‘high’ risk when it comes to modern slavery:
“While most multinational companies have robust systems in place to ensure slavery does not occur among their tier 1 suppliers, key numbers emerging from the research expose the extent of the challenges facing them lower down the supply chain, at the commodity level and from subcontractors,” according to that firm.
Many garment exporters, cocoa bean producers, rice producers, 3TG (tin, tungsten, tantalum) and cobalt producers are all near the bottom when it comes to risk.
So are there slaves in your supply chain?
Why Procurement Practitioners Have No Reason to Be in the Dark Any Longer
We asked Padmini Ranganathan, SAP Ariba’s Vice President of Products and Innovation, about the thought process practitioners should embark on — and the concrete steps they can take — to get to the bottom of that very loaded question.
“If you’re like most companies, you have no clue,” said Ranganathan. “But in today’s networked and data-driven economy, this shouldn’t be the case.”
There are global companies and brands that are already ahead of the game. For example, Adidas, Gap, H&M, and Lululemon all scored well on commitment and governance, traceability and risk assessment, purchasing practices, monitoring, and other benchmarks in this recent survey of 20 of the largest companies in the apparel and footwear sector.
There are also companies that are woefully behind (such as Prada, from the survey above.) But procurement organizations in every global corporation have room to improve.
Ultimately, leveraging the power of networks, big data and analytics, companies can gain a whole new level of transparency into the capabilities, performance, and social and environmentally responsible practices of their suppliers – and their suppliers’ suppliers, according to Ranganathan.
“They can map the bill of materials for products and services right down to their raw materials and cross-reference this information with hotspots where there is a high propensity for the use of forced and child labor to determine their risk,” she said. They can also “receive timely alerts that they can use to drive actions and report on them in meaningful ways.”
Of course, a lot of the broader corporate social responsibility (CSR) initiatives initially manifest in mitigating the risk of the company’s brand(s) being publicly linked with illegal activity. Many companies, for instance, have begun to highlight their ethical practices on their websites and product packaging, according to Ranganathan.
“The bottom risk measurement line comes down to one thing: how can you minimize the risk of winding up in the WSJ as a warning example of what not to do (versus being held up as a shining example of what to do — which unfortunately, is not valued as highly by [the] media)?” as Jason Busch and Thomas Kase put it in a 2013 Spend Matters PRO analysis.
The minimization of that risk, Ranganathan posits, begins and ends with technological connectivity — much in the same way as we get the latest fake news on our Facebook feeds. “With the help of modern technology, you can connect your systems — from ERP to specialized applications — to source, manage contracts, and assess each engagement opportunity across your supply base in ethically responsible ways,” she said.
“Combined with the power of business networks,” she continued, “you can proactively discover and build healthy, sustainable and ethical supply chains, transforming your organization in ways that not only help your business, but make the world a better place.”
...But How Much Does That Cost?
Back to that dichotomy we brought up at the beginning: although consumers and corporations are respectively becoming more aware and wanting to make better decisions for a better world, can we ever get away from “gimme the lowest price” at the end of the day, for either side?
“While supplier management activities such as audits and supplier development do not need to create undue cost burdens — and many companies are making suppliers pay for such activities and annual reviews themselves through such services as Achilles and Global Risk Management Solutions — retailer and consumer demands to drive down the cost of [goods] actually increase the chance of supplier infractions and corner-cutting,” according to Busch in this piece.
For the sake of those toiling in Thailand and across the globe, let’s hope harnessing big data, networks and technology will help all of us — consumers and corporations alike — turn that corner for good.