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Do your suppliers perform “social compliance” due diligence within their own supply chain?

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How do you ensure the products and components you intend to purchase are made from companies who abide by the International Labor Organization’s (ILO) working conditions?

These are common questions for companies in 2018. As consumer awareness around modern day slavery persists, it’s important for companies to have due diligence data to back up their statements. Make no mistake, modern day slavery compliance is a challenge for companies of all sizes – here’s an overview of modern day slavery in 2018, and how to approach compliance.

Enterprise Challenge

The never-ending challenge of cutting costs puts pressure on purchasing managers and procurement departments to find suppliers who can deliver the goods and services they need, at a lower price. For most companies, their cost-cutting journeys end up in developing countries where suppliers have a well known competitive advantage – manufacturing and selling products for a lower price than the rest of the world.

Labor Oversight

It’s important we address a serious challenge that workers face in the developing world. Despite the presence of global labor laws, developing countries with high manufacturing outputs have a lack of labor standards oversight. As a result, manufacturers are able to push their employees to work longer hours in bad conditions, pay them less and create a contract that leads them into a bonded labor situation. The outcome leaves a lively presence of modern day slavery violations that go uncovered.

Check out our SB-657 regulation guide, here.

Modern Day Slavery Regulation

States in the US, and governments worldwide have taken steps to eliminate modern day slavery. The current regulatory environment requires companies to create a summary of their annual efforts to mitigate the risk of slavery in their supply chains. Here are a few examples of global anti-human trafficking regulations:

FAR 52.222-50

The Federal Acquisition Regulation applies to US government contractors and concerns fair labor disputes, including wage requirements, subcontractors and payrolls. This specific section, added in 2015, concerns “Combating Trafficking in Persons” and requires employees to immediately notify the contracting officer of the violation and take the right actions to uphold them.

California SB-657

Also known as Senate Bill No. 657, The Transparency In Supply Chains Act, makes human trafficking disclosure mandatory for any company that is a retailer or manufacturer and has annual revenues of over $100 million. Under this rule, the company has to disclose their efforts, in the last fiscal year, to mitigate the risk of slavery in their supply chain. Learn more, here.

U.K. Modern Day Slavery Act

Similar to SB 657, a company that accrues over £60 million pounds in revenue and does business in the UK must disclose their efforts, in the last fiscal year, to mitigate the risk of slavery in their supply chain. Learn more, here

***The above regulations are strictly enforced and companies have received penalties and executives have faced criminal charges.

It’s extremely challenging to ensure your supply chain does not have instances of modern day slavery. There are, however, mechanisms that can be used to mitigate the risk of modern day slavery going undetected in your supply chain.

Building A Modern Day Slavery Due Diligence Program

Starting, or enhancing an anti-human trafficking program at your company can seem like an overwhelming task. However it’s important to understand, the quicker you identify risk in your supply chain, the quicker you’re able to set a corrective action plan in place. Here are a few common techniques companies use to assess modern day slavery risk in their supply chain.

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Create an initial Supplier Assessment to give you a high level overview of each supplier’s ethical business practices.

Distribute your Code of Conduct documentation. Request a confirmation that each supplier has reviewed and agrees to follow the rules you establish.

Have a conversation with your suppliers about any past experience with modern day slavery compliance.

Once you’ve collected all the information from your suppliers, it’s time to perform due diligence. If your due diligence process yields any high risks, next level action must be taken. Next level action typically typically comes in the form of specific supplier assessments, or field audits. To provide an example for context, here’s a brief outline of the approach we take with many companies who are starting programs, or want to enhance their current anti-human trafficking program.

Solution

At Source Intelligence, we’ve combined supplier engagement, versatile data collection, data centralization and advanced technology to create a solution that quickly highlights key risks in your supply chain.

With the input of industry thought leaders, we’ve developed an anti-human trafficking reporting template that’s designed to gather key risk information and is in accordance with the OECD Due Diligence guidelines on responsible sourcing. The reporting template gathers modern day slavery KPI’s and goes a step further, requesting suppliers to upload supporting documentation when necessary. Our system then takes the data your suppliers submit, and creates risk based visual reports that are filterable by a variety of focus points like working hours, wages and compensation, forced labor, discrimination, freedom of association and more.

We’ve found that this type of approach to modern day slavery compliance not only enhances supplier engagement, but it helps our clients identify risk that would otherwise go undetected.

Going A Step Further

Every supply chain is different. Raw materials and components come from all over the world and companies face unique risk management challenges. For this reason, it’s important that companies have the option to create custom risk management systems. With this in mind, we developed the supply chain desktop assessment program.

Product quality, safety and sustainability are the key elements of a strong supply chain and finding a cost effective management solution is the challenge. To address the complexity of traditional assessments, we’ve designed a revolutionary supply chain desktop management solution that gives you the ability to collect supplier compliance data in multiple categories, assign unique risk-scoring attributes to each assessment, and get real-time risk KPI’s. Our system prompts suppliers to upload supporting documentation when needed, creates a risk profile for each supplier and allows for third party review and commentary on each assessment. Click here to learn more about the desktop assessment program.

We’ve outlined fundamental and advanced steps to modern day slavery risk mitigation. If you’d like to learn more about our approach to anti-human trafficking compliance, or supply chain desktop assessments, click here to learn more about our platform capabilities.

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