July 6, 2023

Concerns over Human Rights in Supply Chains

More than two-thirds of chief executives at British companies are concerned about human rights issues in their supply chains, research has suggested. A survey, commissioned by procurement consultancy Proxima, surveyed 1,000 UK CEOs about their approach to supply chain issues.

It found that 67% are concerned with potential issues around human rights and labour rights. Concern is highest in the construction sector (77%), leisure and hospitality (77%), retail (72%), and the food and beverage manufacturing sector (70%), the survey found.

It comes as companies come under increasing scrutiny for emissions and human rights issues across their operations. According to the survey, almost half of UK bosses – 49% – said they expect to spend more time focussing on supply chain issues in the next 12 months.
It found that 42% are considering “onshoring” – moving their entire supply chain to their home country – as a way to prevent disruption and improve transparency.

Meanwhile, 36% said they are looking at “nearshoring” – moving supply chains to countries closer to the UK.

Simon Geale, executive vice president and chief procurement officer at Proxima, said: “Addressing human rights issues across the supply chain is a huge challenge for businesses and it is clearly high up on the agenda for CEOs. We’ve seen a number of businesses fall victim to human rights issues and, as we see increased scrutiny from customers and regulators, supply chain transparency is going to become increasingly critical. This is the emerging priority for CEOs at a time when business leaders are spending more time than ever tackling supply chain issues.”

The UK private sector has seen movement to tackle supply chain issues in recent years through initiatives like the Pharmaceutical Supply Chain Initiative, the Waste and Resources Action Programme, Scope 3 Peer Group, AIM-Progress and the Sustainable Procurement Pledge.
Unilever has been using satellite tracking to monitor deforestation and behavioural patterns around key factories while IMB has developed a supply chain solution blockchain technology, used by companies like Vodafone.

James Butcher, CEO of Supply Pilot, a tech platform that allows companies to better engage with their suppliers, said: “The supply chain disruption continues and this is why so many CEOs are focused on their supply chains. But this unfortunately is at the expense of progress on sustainability as reflected in the poor strategies on supply chain decarbonisation. I believe this is because of the internal narrative reflecting it as an either/or decision on where to focus, whereas a good supplier engagement programme focused on more sustainable and responsible procurement can address both the E and the S of ESG but also delivers more resilient supply chains.”

Neil Robson (pictured), partner at Katten UK, added:

“The fact that 67% of polled UK CEOs are concerned about human rights issues in their supply chains is testament to the fact that ESG is now well-and-truly coming of age. The “S” – the social element of the Environmental, Social and Governance framework used by firms and investors to assess an organization’s business practices – has long taken second or third place to environmental sustainability issues and good governance. However, given ESG’s evolution from ethical investing and ‘corporate social responsibility’, the social element has to remain in focus.

“Concerns with potential issues around human rights/ labour rights in the supply chain seem to have been growing in recent years, following requirements for UK businesses to adhere to the UK Modern Slavery Act, which has been in force since October 2015. As a world-leading piece of legislation, it sets out a range of measures on how modern slavery and human trafficking must be dealt with in the UK and focuses (at section 54) on ‘Transparency in Supply Chains‘. As the survey notes, addressing human rights issues across the supply chain is a huge challenge, but nonetheless supply chain transparency is a potential area of risk that is becoming increasingly critical – especially where those supply chains are overseas, opaque and unclear. Businesses that hold themselves out as ESG-compliant must address their sustainability and good governance, but they must also understand their impact on their entire supply chain and do their best to ensure they are doing the right thing for all concerned.”

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