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The Impact of Supply Chain Regulation: A focus on 'S' in ESG

Webinar Summary & Key Takeaways

The Impact of Supply Chain Regulation on Asian Businesses: A Focus on the ‘S’ in ESG

This webinar, hosted by Naomi Vowels of givvable, focused on the rising importance of social factors in ESG (Environmental, Social, and Governance), with a particular spotlight on human rights and modern slavery in the Asian context.

An expert panel shared insights on how companies can manage human rights risks within their supply chains. Panellists included industry leaders Matt Friedman (CEO, Mekong Club), Sue Meng Chan (Deputy Director, UN Global Compact Network Singapore), Stephen Morse (CEO, Unchained Solutions), and Sammy Ho Dumas (Director of Social Impact and Sustainability, Williams Sonoma).

Key Takeaways: 

(1) Rising importance of human rights in ESG

• Human Rights as a Key Risk: Managing human rights risks, particularly modern slavery, is increasingly viewed as critical for businesses, especially as new regulations from the US, EU, and Australia target this issue.
  
• Modern Slavery Statistics: Approximately 50 million people are trapped in modern slavery globally, with nearly 28 million in forced labor. Asia and the Pacific account for nearly 60% of these cases primarily in countries like China, India, and North Korea. Approximately 82% of forced labor is associated with the private sector and modern slavery generates $236bn in illegal profits each year.
  
• Asia is a high-risk area for modern slavery given its large population, countries that had long-standing feudal systems that were never completely dismantled, and a concentration of supply chain participants.
  
• The International Labour Organisation (ILO) has issued 11 indicators of forced labor that can help businesses identify whether there may be risks in their suppliers or supply chain.
  

(2) Relevant regulations

• Over the last 15-20 years there has been a marked transition from soft directives and targets on managing modern slavery to hard legislation. These legislative developments are significant as they not only impact organizations operating within the territorial bounds of the legislative jurisdiction but implicate suppliers that service businesses operating in those locations. Suppliers wanting to do business with companies that have to comply with these legislative requirements will need to be prepared to step up and align their business practices.
  
• Due diligence and reporting legislation that requires companies to drill down into their supply chains to ensure entities that are supplying to them have the rights controls, governance and risk management practices in place to minimize modern slavery risks. Examples include the EU Corporate Sustainability Due Diligence Directive (EUCSDD), the Supply Chain Due Diligence Act 2021 (Germany), the Child Labour Due Diligence Law 2019 (Netherlands), and the Transparency Act 2021 (Norway).
  
• Import bans which place the burden of proof on importing companies to demonstrate that their products have not been made using forced labour. Examples include the U.S. Uyghur Forced Labor Prevention Act (UFLPA) which presumes goods from China’s Xinjiang region are produced with forced labor unless proven otherwise. The Act places significant compliance pressure on companies importing goods into the US.
  
• Modern Slavery transparency legislation which typically require companies to report on the steps they are taking identify and address human rights risks in their supply chain. Examples, include the Modern Slavery Act 2015 (UK), Modern Slavery Act 2018 (Australia), Transparency in Supply Chains Act (California).
  

(3) Actions companies can take

• Supplier Due Diligence: Companies should implement robust due diligence measures, leveraging technology and data to get transparency on the actions of their suppliers as their relate to human rights, including modern slavery, and what measures they have in place to manage or eliminate risk. givvable’s supplier ESG screening tools are an example of how companies can effectively automate due diligence on their suppliers and supply chain.
  
• Supplier Engagement, Training & Capacity Building: Engaging suppliers and educating them about human rights is crucial. Matt Friedman emphasized that suppliers are often not trained in managing these risks, despite bearing the responsibility. The UN Global Compact’s Sustainable Procurement toolkit can support suppliers in this regard.
  
• Responsible Recruitment Policy: Companies like Williams Sonoma have adopted "no fees" policies where recruitment fees are covered by the employer, ensuring that workers are not exploited financially to secure jobs.
  
• Grievance Mechanisms: Companies must implement grievance mechanisms that reach down to the lowest levels of the supply chain. Consolidating industry-wide hotline services may be a cost-effective way to meet regulatory requirements.
  
• Supplier Engagement: Rather than cutting ties with suppliers that fail due diligence procedures, companies should engage and work to improve conditions, preventing further marginalization of workers.
  
  (4) Practical steps for implementation
  
  
• Conduct a Human Rights Risk Assessment: Identify salient human rights risks in supply chains and begin implementing measures to address risks identified.
  
• Supplier Code of Conduct: Establish and enforce a clear supplier code of conduct that outlines human rights expectations.
  
• Policy & Leadership Commitment: Ensure that human rights are a priority from the board level down and that there is dedicated leadership and resources to address these risks.
  
• Use of Technology for Transparency: Embrace technology solutions such as big data or traceability tools to provide transparency across the supply chain.
  
• Invest in Supplier Training: Offer training and support to suppliers on modern slavery risks and compliance with international regulations. Resources, such as givvable’s human rights module (register for free to access) can support this.
  
• Establish grievance and remediation mechanisms: provide grievance and remediation mechanisms to both your own workers and your supply chain workers.
  

This webinar underscores the importance of embedding human rights into the core operations of companies, especially those operating in Asia. With stricter regulations on the horizon, businesses must take proactive steps to ensure compliance and mitigate risks.

Schedule a demo with givvable.com to learn how to automate Supplier ESG Diligence and undertake Best Practice Materiality Assessments from human rights and modern slavery perspective today.