The global supply chain expansion is a key driver of worldwide economic growth. Presently over half of all exports cross a border at least twice before reaching the end-customer. Exports are not well-tracked between borders, meaning these goods may pose unknown supply chain risks to purchasers. Of these export risks, the risk of modern slavery is becoming of increasing concern to Australians.
Understanding Modern Slavery
Modern slavery is a broad term used to define different types of human rights exploitation such as forced labor, debt bondage, human trafficking, and child labor. The United Nations estimates that some 168 million children are victims of forced labor across the world, while the Global Slavery Index estimates that approximately 46 million people are enslaved.
The Australian Government’s Response To Modern Slavery
The Australian government has proposed new legislation in which Australian companies will be required to report annually on measures they are taking to combat modern slavery. The government may follow in the footsteps of the United Kingdom, which not only has its own Modern Slavery Act but also a commissioner and independent investigators to evaluate complaints and educate businesses on human rights violations.
The Role Of Procurement In Combating Modern Slavery
Procurement professionals are best positioned to help rectify modern slavery in the supply chain. CPOs will need to extend policies beyond cost-saving strategies and establish the necessary frameworks to identify, measure, and help combat modern slavery.
Key Challenges In Identifying Risks
This is not a straightforward task as there is no industry consensus on standard metrics to evaluate supply chain risks. Additionally, there are other internal challenges including:
- Lack of corporate commitment: Executive teams may not often understand the implications of supply chain risks until the risk becomes a reputational or a costly problem for the organization
- Poor visibility of the supply chain: Large organizations are often formed through mergers and acquisitions. This results in fragmented information spread across many systems and databases. To achieve visibility, an integrated centralized view of suppliers and procurement activities is a necessity.
- Supply chain analysis: Analysis of suppliers and the supply chain is often narrow and limited to a few key factors. Procurement specialists need robust frameworks and necessary tools to obtain a comprehensive view of their supply chain
Bloom Consulting’s Process To Address This Problem
Bloom Consulting has developed a guide to help procurement professionals take the necessary steps toward implementing a robust framework:
Define a vision and a strategy.
As with any business change, implementation of this guide will need to be supported by the right people, processes, and technology to ensure a sustained transformation. This requires defining a vision and developing a business plan to ensure executive engagement and proper investment at the onset.
We at Bloom are particularly passionate about using the right technology, in conjunction with strong people, policies, and processes. New electronic tools are designed to collect and analyze supply chain data to help identify risk areas.
Suggested KPIs: Executive sign off on the vision and supplier risk strategy
Understand your supplier base
The goal of this step is to understand what you are buying and from whom. Start with creating a master supplier list, supplier records are often in different systems or in some cases not stored electronically. Conduct an analysis to identify, consolidate, and harmonize your organization’s supplier list in one place.
Next, classify your suppliers and spend using a standard taxonomy e.g. UNSPSC (United Nations Standard Products and Services Code). This is a key step that would help gain a standardized view of what you are buying. There are many third-party services to help you classify spend if you do not have an internal capability.
Suggested KPI: Harmonised supplier master list & categorized spend
Develop risk evaluation criteria
It is important not to overwhelm yourself with the large volume of suppliers and information, but rather methodologically target your high-risk areas for deeper risk review. In this step, we advise developing internal criteria to target high-risk suppliers. Key criteria include:
- High-volume suppliers: 1% of the volume
- High Spend suppliers: 0.5% or more of your annual spend
- High-risk export countries: China, India, Pakistan
- High-risk categories: electronics, textiles
- Sector risk: seasonal, hazardous, high risk or undesirable jobs
There are existing frameworks and tools to help. The Walkfree Foundation and CIPS risk tools have robust supplier risk screening guides. The Global Slavery Index provides a risk index based on regions and countries. Made in A Free World is an online tool to help identify high-risk countries and categories.
Suggested KPI: Successful development of criteria for high-risk suppliers
Create transparency
Apply your risk evaluation criteria to your categorized spending to identify your high-risk suppliers. These high-risk suppliers will require a deeper review. We suggest creating a supplier questionnaire to gain more transparency into the employment practices of your high-risk suppliers. In certain cases, you may also consider audits that can be organized by providers in a relevant region. These questionnaires and/or audits should have identified thresholds for which your organization will need to take further action.
Questionnaire: Develop, distribute, and collect a supplier questionnaire designed to understand your supplier’s policies on unethical workplace practices. See the sample questionnaire from Safeway and the Walkfree Foundations.
Audit: Perform inspections or audits to address and identify labor violations. Get a closer look at your supplier policies first-hand and be prepared to identify issues (recommended question sets from the Walkfree Foundation) or work with specialists in the region to help perform the audits (i.e. AsiaInspections)
Suggested KPIs:
- Successful development of a questionnaire and audit process
- Percent completion of questionnaires and audits of high-risk suppliers
Take further Action
Suppliers that do not satisfy the threshold criteria developed in step 3 are recommended for two courses of action, either remediation or if necessary, termination. Remediation is the preferred option as changing suppliers may not address the underlying issues. Remediation strategies may include buyer communication, education, performance management, and incentive strategies to encourage better workforce policies.
- Communication and Education: provide suppliers guidelines on policies and expected work practices consider issues of sourcing, quality, delivery, legal, and other geopolitical and cultural issues.
- Performance Management: develop metrics and a system to communicate gaps with suppliers. Be clear in the areas that need improvement and guide the process on how the suppliers need to improve.
- Incentive strategies: suppliers that have successfully improved their policies and processes should be properly incentivized to ensure that their practices are sustained.
Suggested KPI: Completion of supplier remediation plans.
Good luck on your journey in addressing slavery in the supply chain. Comments and feedback are welcome via [email protected].
