The European Union is actively preparing for “the world of 2030.” Through multiple legislations, initiatives, and proposals, the EU is showing its unwavering ambition to create a circular economy and make Sustainable Corporate Governance the business norm. The European Directive on Sustainable Corporate Governance is expected to be published before the end of the year.
The European Commission (EC) has several projects in the pipeline that adhere to the Charter of Fundamental Rights. Following in the steps of ILO’s Fundamental Conventions, the EC aims to encourage businesses to adopt long-term visions by incorporating sustainability into their strategies, including a focus on environmental, social rights, and governance (ESG) concerns.
A hub for commercial activity, the EU is the number one partner for 74 countries and imported €2.8 trillion worth of goods and services in 2019.
One significant concern is that of forced labor, an area where the EU places strong emphasis and commitment. It has recently published its guidelines on forced labor due diligence to help and encourage organizations to start the process and be ready when the legislation takes effect.
In this article, we’ll review the published guidelines, highlight the most important steps you can take to address the risk of forced labor in your supply chain, and how to respond if it is found.
Responsible Business Conduct And Labor Rights
Modern-day slavery may occur in the value chain regardless of industry, though some sectors are more exposed than others. The EU encourages all businesses to adopt responsible practices no matter their size, location, or structure.
Estimates on forced labor are rather chilling, and women and children are particularly vulnerable populations.
There may be up to 25 million people subject to modern-day slavery globally, two-thirds of which are exploited by private companies. Forced labor has many faces and you should be aware of markers in your operations that may point to human rights abuses and violations. The issue is most commonly linked to corruption, coercion, and may be as simple as unpaid overtime or as serious as trafficking or intention to subdue minorities, as is the case with the Uyghurs in Xinjiang.
The guidelines published by the EU aim to help understand and measure the risk of forced labor in operations and supply chains and provide advice on which measures are appropriate to address and mitigate risks.
Forced Labor Due Diligence
Due diligence is defined as the process businesses implement to identify, prevent, mitigate, and account for how they address actual and potential forced labor risks in their own operations, supply chains, and business relationships.
Responsible business conduct is an ongoing effort that starts with policies and management systems at the corporate level before being shared, explained, and becoming the object of training with suppliers and partners.
Per the EU’s forced labor due diligence goals, processes to prevent and mitigate risks should become a core component of practicing global business.
Process And Implementation
The guidance document recommends using the 6-step due diligence framework established by the OECD.
- Embed responsible business conduct into the company’s policies and management systems.
This includes:
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- Policies clearly enunciating a zero-tolerance policy
- Reference documents relevant to areas of risks
- Commitment to recruitment and retention practices at supplier levels and how to enforce them
- Rules and limits of subcontracting, using recruitment agencies, or supporting state-sponsored forced labor
Building awareness with all stakeholders and defining the interests of abiding by responsible practices are arguably the most urgent steps to take to get everyone on board and draw the path to long-term sustainability.
- Identify and assess actual or potential adverse impacts in the company’s operations, supply chains, and business relationships.
Digging deeper into the supply chain allows you to reveal potentials for risks and set up a system for red-flagging so you can prioritize areas where action is immediately needed.
Risk factors may stem from country or province location, migration or displaced populations, debt schemes for workers, history of organized crime, and the like.
Any red flag should lead to mapping the occurrences and triggering in-depth assessments and audits to collect as much data as possible. The higher the level of risk, the stronger the response should be when engaging intervention from trade unions, experts, and/or local governments.
Based on risk factors and historical data, you may want to review the qualification and supplier onboarding process.
- Cease, prevent, and mitigate adverse impacts.
Risk mitigation is a necessary but complex step to undertake. A lot may be at stake that goes beyond simply enforcing policies.
While stopping activities that proved to have an adverse impact is an option, remediation may be a more productive route. It all depends on the level of engagement of suppliers and local authorities as well as the consequences decisions have on communities.
Prevention is not always possible, especially in the case of culturally established practices. Communication and dialogue and involving external participants may be necessary, as could financial support. The goal is to agree on corrective actions beneficial to all, including the wronged workers. Ending business relationships should only be a last-resort decision.
- Track implementation and results.
If you can’t measure results, you can’t improve them. Whether through regular audits, surveys, or conclusions that lead to policy changes, make sure you implement processes that are quantifiable and trackable.
- Communicate how impacts are addressed.
Due diligence policies are meant to be known and widely diffused across your entire supply chain. It is counterproductive to minimize the importance of adverse impacts, worse yet keeping them under the corporate rug. By both recognizing them and communicating on the actions taken to mitigate and prevent, you can demonstrate your true and genuine commitment to stop forced labor. Do not underestimate the power of being transparent!
- Provide for or cooperate in remediation when appropriate.
Remediation is not your sole responsibility, although you can and likely will often be the main instigator. Some mechanisms may already be in place at a wider level, which is an opportunity to contribute. Industry associations, peer network groups, NGOs, or activists could already be at work to remedy the situation. Stay alert and share information and practices that can contribute to a perennial and sustainable solution.
Forced Labor Due Diligence And Technology
From the UN to ILO or OECD, forced labor is a prevalent issue for a wide variety of industries.
Source Intelligence’s Forced Labor Prevention and Anti Human Trafficking programs offer you the ability to close gaps in your processes by using data that you would otherwise not be able to collect or interpret in a productive manner. Data gathering is potentially the worst pain point of due diligence programs be they voluntary or regulatory.
Whichever your industry sector, the size of your company, or the depth of your supply chain, our cloud-based platform is designed to collect accurate information and validate it through proprietary AI algorithms. You obtain a clear risk map of your suppliers and can promptly address areas of high concern through supplier assessments and virtual audits.
Forced labor can no longer be supported, even involuntarily. Child labor must be eradicated. Gender inequality must become a thing of the past. Religious discrimination has no place in the modern economy.
Let us help you stop unknowingly supporting forced labor in your supply chain. Request a demo to see how our platform makes forced labor prevention automated and easy.
