Tag Archives: human rights

Human Rights Falter In Grey Areas Of Procurement Policy

Workers are often the victims when there are gaps in legal procurement and ethical procurement, but businesses nowadays have a lot to lose as the lines between profit and social conscience are no longer so easily defined… 

Back in 2010, rotten Apple stories started flashing up on smartphones everywhere. Forget tales of environmental unsustainability, these concerned social injustice: poor pay, unhealthy conditions and worryingly low levels of worker welfare. Then came the shocking news of staff suicides.

Attention focused on a prime link in the Apple supply chain: a vast 1.4-square-mile megafactory complex owned and run by Foxconn Technology Group, a Taiwanese multinational contract-manufacturing company, specialising in electronics.

Dubbed ‘Foxconn City’, the mini metropolis housed almost half a million workers on a giant industrial park in Shenzhen, China.

Fast forward to 2019 and Apple is still sourcing from Foxconn, across various sites. The roll-call of Foxconn manufacturing, present and past, still reads like a who’s who of the tech world, and includes other monster brands such as Google, Huawei, Microsoft and Sony, to name but a few.

So, given that Apple was soon to become the first public company on the planet worth $1 trillion, how did it get embroiled in such a dubious ethical sourcing saga in the first place, plus seemingly fail to crisis-manage its public relations effectively when the story broke?

The simple, grim fact is that Apple and the tech community are by no means alone in this. The recent history of procurement by global consumer brands is littered with the reputational detritus of bad ethics and selective legality.

Fast fashion, in particular, has struggled to keep its name out of incriminating headlines, with ethical procurement issues ranging from ongoing stories around ‘dirty’ cotton, through ‘cry for help’ labels sewn into high street clothes, to the tragic Rana Plaza factory collapse in 2013, where 1,134 lost their lives.

Sourcing scandals also continue to flood out of food and agriculture. Ethical issues served up for public consumption range from TV exposés of supermarket chicken suppliers tampering with ‘kill dates’, to the abuse of water rights by industrial-scale avocado farmers in Chile.

Across all sectors and societies, employment remains the most mapped, but least navigable, legal and ethical intersection.

Figures from the International Labour Organization (ILO), released most recently in 2017, revealed that more than 40 million people worldwide were in modern slavery in 2016, including around 25 million in forced labour. Of those in forced labour, some 16 million were being exploited in the private sector. Furthermore, there were more than 152 million estimated victims of child labour, almost half of whom were aged between 5 and 11.

Ethical procurement is essentially a people business, affecting lives and livelihoods, for good or ill, says group director at the Chartered Institute of Procurement & Supply (CIPS), Cath Hill.

“Applying rigorous ethical standards to your supply chain is not just about compliance or completing necessary paperwork, but implementing good governance and preventing exploitation of human beings across the globe for the sake of profit,” she says.

In international waters, though, standardisation is a slippery fish.

If not a definitive and demonstrable difference, often at least, there exists a commercial and cultural tension between the norms of legal and ethical procurement. Discrepancies abound in a grey area between the two disciplines and, if unchecked and unpoliced, carve out a policy gap where human rights fall down.

Legal standards can lag behind best practice, especially in relation to global companies with complex supply chains, explains Martin Buttle, strategic lead for general merchandise at the Ethical Trading Initiative (ETI).

“A company that meets local labour laws in one country could still breach international minimum standards. The UN Guiding Principles on Business and Human Rights make it clear that businesses have a responsibility to respect human rights even in countries where national law is weak, or poorly enforced,” he says.

Based on ILO conventions, the internationally recognised ETI Base Code of labour standards has been designed to tackle exactly this kind of cross-border inconsistency and jumble of jurisdictions, representing a commitment to ensure all workers are free from exploitation and discrimination, paid a living wage and enjoy conditions of safety, security and equity.

Stepping out of the moral maze for a moment, there are also many bottom-line business-case benefits to be gained by adopting such an ethical approach, suggests Mr Buttle: “It can maintain the supply of goods, increase productivity and quality, and enhance a company’s reputation with its customer base, which is increasingly expected by consumers.”

However, it is often the pressure of competitive marketplaces and overly aggressive procurement practices or pricing policies that result in damaging knock-on effects, he says.

“Brands should understand how their actions impact on their suppliers’ ability to uphold labour rights. For example, a company with poor purchasing practices, such as unrealistic deadlines or unit prices, can cause challenges for its suppliers, leading to increased risk of poor wages and excessive working hours. This is particularly the case if a supplier feels forced to accept orders below the cost of production to win contracts.”

All too often, there is little communication and accountability, says Alex Saric, smart procurement expert at Ivalua: “Cost is the only discussion point and data isn’t shared effectively, while risk and CSR assessments can be a ‘tick-box’ exercise, meaning transparency initiatives end up half-baked.”

Weaknesses notwithstanding, big brands can still set a positive agenda for supplier behaviour, beyond compliance. “If suppliers see that being responsible is more likely to win them a contract, ethical practices change from a minimum requirement to a valuable key differentiator. They must operate sustainably, or face losing out to more ethical competitors,” Mr Saric says.

While any ethical shift is relatively slow and undoubtedly late, legislative momentum is only pushing in one direction and businesses would do well to watch this space closely, suggests Lee Rubin, counsel and global sourcing expert at international law firm Pillsbury Winthrop Shaw Pittman.

“When it comes to lawmaking, legal and ethical considerations are merging, typified by the Modern Slavery Act. While not all sections of the Act are directly applicable to business, the provision around ‘transparency in supply chains’ impacts the largest brands and companies.”

Serious money is also flowing more towards the good and the green, adds Mr Buttle: “Many investors understand that poor human rights practices in the supply chain can put their investment at risk. With a growing interest in social impact, we are starting to see the investment community influencing business decisions.”

All in all, this collective chorus calling for ethical procurement is simply becoming too important to ignore, says Ms Hill: “It is not only the right thing to do, but also the lines between profit and social conscience are no longer so easily defined. News travels fast and bad news travels at lightning speed.”

The heat is most definitely on, says Shaun McCarthy, director at leaders in sustainable procurement Action Sustainability: “These days the court of public opinion is an unforgiving place and brands need to be aware they are playing with fire when it comes to ethical procurement.”

Ultimately, therefore, brands that muddy transparency, frustrate traceability and neglect communications get burned, concludes retail expert and consumer champion Martin Newman: “Consumers will shop with their feet and their mouse. If you pay this lip service or they think you’re being disingenuous, they will not only not buy now, they’ll never come back; and they’ll tell all their friends and family about it.”

This article, edited by Jim McClelland, was taken from the Raconteur Future of Procurement report, as featured in The Times. 

Duty of Care Law: You Got The Green Light In France!

France’s new legislation, The Duty Of Care Law will prevent serious human rights risks and threats to fundamental freedoms. Will other countries follow suit? 

It would be wise for procurement professionals to pay close attention to France’s new sustainable procurement legislation.   The Duty of Care law, which affects organisations with over 5,000 employees, is likely to have some influence on other nations,  starting with those in the EU.

If similar human rights legislation is implemented across the globe; forewarned is forearmed, and sustainable, ethical procurement is a hot topic that’s only getting hotter!

Whilst the progress of global sustainability standards have traditionally been  pushed by individual businesses and activist groups, things are changing. This month saw the publication of ISO20400,  (International Standard for Sustainable Procurement), which creates a standard for every organisation in the world to follow.

The Duty of Care Law

In its much-awaited decision last month, the French constitutional council has given a  green light to the “Duty of Care” law (Devoir de Vigilance) although they stated that there remain some provisions to the French constitution.

The major points of the law, requiring French companies with at least 5 000 employees, including in their French direct or indirect subsidiaries (or 10 000 employees in their direct or indirect subsidiaries worldwide) to develop a diligence plan (“plan de vigilance”), are recognised of general interest. The intent is for the diligence plans to prevent serious risks related to human rights and fundamental freedoms, health and safety of persons and the environment. The constitutional council considers however that the sanctions initially included in the law violate the constitutional principle that penalties must have a sound legal basis. As a result, the civil fine of up to €10 million, as well as its increase to €30 million in case of damages that could have been prevented by implementing the diligence plan, are removed from the law.

Developing A Diligence Plan

The obligation of implementing a diligence plan however, as well as the formal notice and the civil liability mechanisms in case of lack or deficiency of the diligence plan, are constitutional. Consequently, companies are still compelled to implement a diligence plan, even if the law loses some of its deterrent effect, which makes for the first law of this type: it introduces an obligation much more stringent than a mere reporting obligation, such as the ones required by the UK Modern Slavery Act or the California Transparency Act. Companies are required to implement specific concrete actions and cannot limit themselves to reporting on what they do (or do not do).

There are also some talks of developing similar regulations at European Union level.  Eight national parliaments have called for a corporate duty of care towards the human rights and local environment impacted by the company’s operations. They have jointly proposed that the European Commission take action on this matter. This shows that the French “Duty of care” law is indeed the first step of a generalized global movement requiring companies to address their Corporate Social Responsibility (CSR) risks, including throughout their supply chain.

This article was first published on the EcoVadis Blog

20400 Reasons The World Needs An International Standard For Sustainable Procurement

ISO20400, otherwise known as the International Standard for Sustainable Procurement, is due to be published this month. Procurious recently interviewed Jean-Louis Haie, sustainable procurement expert, head of the Australian delegation for ISO20400, and guest speaker at the upcoming Women in Procurement 2017 conference in Melbourne.

“We are at a tipping point in terms of the sustainable procurement journey across the globe”, says Jean-Louis Haie. “Organisations spend between 40 per cent and 80 per cent of their revenue on the supply chain, but increasingly recognise that they can’t achieve their sustainability objectives without getting their suppliers to actively contribute.”

“CPOs who are serious about sustainability goals know that around half of those objectives can only be delivered by their suppliers. There’s no such thing as an effective sustainability program without a supply chain component.”

By nature, supply chains are international, which is why having an international standard is vital. “When you’re asking a supplier based in China to align with your business’ or your country’s standards, they simply don’t have the same standards and don’t speak the same language around sustainability. ISO20400 seeks to create a standard that will enable every organisation in the world, regardless of size, industry and location, to have a flexible guidance framework on sustainable procurement.”

Learning from France’s sustainable procurement bible

Jean-Louis says that it depends on the industry and the area of sustainability under discussion, but in general, governments around the world can learn from his home country (France) when it comes to implementing sustainable procurement. Three key milestones took place – in 2006, 2010 and 2012 – that illustrate France’s journey towards a national sustainable procurement standard.

“The first thing I would mention is that France has a National Procurement Code – a “bible” for procurement professionals that’s applied to all public procurement tasks. In 2006 they changed the Code to include some clear objectives and principles around sustainable procurement. This caused a lot of change, as governments, councils, public hospitals, water corporations etc were encouraged to look at environmental and social specifications when making purchasing decisions. The private sector followed to a certain extent. The point is that it’s a national Code, and highly centralised. I now live in Australia, and we don’t really have that here – the federal government, state governments and local councils are all pretty autonomous.”

In 2010, the ObsAR, a National Association for Sustainable Procurement was created in France in reaction to a crying need to share knowledge and experience around this important topic. “It’s a platform for public and private organisations to share lessons learned around sustainable procurement, through working groups, an annual conference, and ongoing discussions.

At the same time, the government started to get involved in making sure the big buying organisations (including private companies) manage their supply relationships with SMEs fairly. It created a Charter for Responsible Supplier Relationships, which described 10 commitments to be respected by signatory organisations. This initiative was a success and thousands of organisations follow its principles now. 2 years later, the Government transformed this Charter into a certification scheme, which was tested on a selection of 30 organisations, including some SMEs, multinational companies and government agencies.”

“The certification program includes fair payment terms, fair contractual clauses, checks on abuse of power, inclusion of social and environmental requirements, and more.”

While France’s sustainability journey is encouraging, Jean-Louis notes that supply chains are international. “These are international companies dealing with an international supply chain in a global economy”, he says. “No matter how rigorous the standards are in one country, the system can’t work unless there’s a similar standard in the country you’re sourcing from – hence the need for an international standard.”

What does ISO20400 include?

The Standard includes seven core subjects, such as the environment, fair operating practices, labour issues and human rights, with a range of subtopics under those, such as discrimination and gender inequality. “It provides the reader with a thorough description of all the potential sustainability issues and risks they may face when they want to put in place a contract and buy something. Then it’s the responsibility of the procurement professional to decide what the hot spots (risks) are for their particular procurement activity, using ISO20400 as a framework. The Standard provides a methodology to set priorities. What it doesn’t do is put more weight on any one subject over another – we’re not telling people that human rights are more important than the environment, for example.”

Bringing procurement and sustainability expertise together

“In my experience, procurement professionals struggle to work with sustainability experts. They should be best friends”, say Jean-Louis. “The trouble is that there’s no framework to enable these two groups of experts to speak the same language and work more effectively together. ISO20400 will provide a framework – or a bridge – to channel the discussion in plain English so they can understand each other.”

“For example, most companies have some sort of sustainable procurement code in place, which puts pressure on suppliers to comply. But they forget that a good many of these sustainability impacts are created by bad procurement practices. Look at the fashion industry, for example – impossible deadlines put pressure on suppliers, which causes them to abandon key guidelines such as working safely and not using child labour”.

Jean-Louis Haie is the founder of Planet Procurement and a guest speaker at Quest’s upcoming Women in Procurement 2017 conference in Melbourne, Australia.