Efficient and well managed supply chains are essential to corporate profitability and the health of the global economy. Companies are doing a lot – and being asked to do a lot more– to ensure the integrity of their operations and those of their suppliers around the world. Because of this, much of USCIB’s work in recent years has revolved around supply-chain concerns – customs practices, transport security, counterfeiting and piracy, labor and environmental concerns.
Most global companies have programs in place that set standards for suppliers and hold them accountable. More and more companies are adopting supplier codes of conduct to fill the gap created by the failure of local governments to implement or enforce their own laws, including labor and human rights laws.
But pressure is growing for companies to push supply chain management efforts even farther beyond their present scope.
New initiatives would make producers responsible for addressing broad social ills that may exist at some point in their extensive global supply chains, including child labor, forced labor, human trafficking, and armed conflict.
Examples of this trend abound:
- the California Transparency in Supply Chains Act, focused on slavery and human trafficking;
- efforts to address forced child labor in cotton production in Uzbekistan;
- similar efforts to address forced labor in Brazil
in cattle ranching, sugar and charcoal production; and
- the Dodd-Frank law, specifically Section 1502, which requires companies to disclose whether or not conflict minerals are used in their products.
The common element of all these challenges is that they are the result of systemic failures of governance or reflect pervasive social problems. Our view is that a prescriptive approach does not address the underlying cause of the problem and therefore is doomed to failure.
USCIB has engaged companies and policy makers on the importance of maintaining high standards and improving performance throughout the supply chain. We have:
- organized a series of workshops hosted by The Coca-Cola Company on how companies address forced labor, child labor and human rights;
- promoted awareness and support for the Better Work Campaign, an ILO/World Bank program to improve factory conditions in developing countries;
- engaged with the OECD on its recent revisions to the OECD Guidelines for Multinational Enterprises;
- contributed to OECD’s best practices for conflict minerals in the Congo region; and
- spearheaded efforts to address the Uzbek cotton issue via the International Labor Organization’s disciplinary process.
Perhaps our deepest involvement has been in helping craft the 2011 UN Guiding Principles on Business and Human Rights. The UN principles ask companies to respect human rights, starting with legal compliance, and institute a due diligence process to “know and show” that they do. But the guidelines are also very clear in stating that companies cannot – and should not – assume the responsibilities of governments, and that suppliers are themselves responsible for complying with national law and respecting human rights.
USCIB played a strong and vocal role in developing the UN principles, which are a sensible and responsible alternative to the overreach of the Dodd-Frank law. Policy makers should use the UN principles as a model for ensuring appropriate action by companies to keep their supply chains clean, while also maintaining pressure on local governments to live up to their fundamental responsibilities.
Other recent postings from Mr. Robinson: