Renewed focus on company supply chains

As many countries around the world celebrate International Workers Day, it seems fitting to pause and reflect on the tragic collapse of the garment factory last week in Dhaka, Bangladesh. This, together with the factory fires in Dhaka late last year, has highlighted the need for a greater focus on worker rights and safety standards in developing markets.

Certainly, the events in Dhaka demonstrate a serious failing in the safety audits carried out at the factories and the need for stronger accountability and transparency of the authorities who failed to act and disregarded safety warnings about the suitability of the site for development. As the rescue efforts continue, a number of multinational companies linked to the factory are facing calls for accountability and demands for compensation.

However, regardless of liability or concerns about who is responsible, these tragic events will undoubtedly lead companies to think further about how they manage their supply chains. This is clearly a difficult and complex area for businesses in many sectors. Some of the common issues faced by business include:

-   How can companies improve their due diligence and supply chain management?
-   Can companies drive value and best practice down their supply chains and avoid such incidents in future?
-   Is there a need to move away from a culture of audits and is it possible to exert positive influence in the environments in which they operate?

It is apparent that there is an increasing focus on how far a company’s responsibility extends down its supply chain – not only in terms of safety standards and worker rights, but also to other issues such as environmental sustainability and a company’s anti-corruption efforts. Some commentators have suggested that events such as those last week strengthen the argument for tighter regulatory supervision and scrutiny of company supply chains. This is to an extent already reflected in emerging policy at both UK and EU level, with legislators considering a range of proposals and initiatives ranging from the reporting of human trafficking risks in company supply chains to the responsible sourcing of conflict minerals.

As a strong advocate of responsible business practice, we think it is right that companies look at how they can improve practice throughout their supply chains and manage the environmental and social impacts of their operations. That said, it is vital that any new legislative proposals are workable, reflecting the complexity of international supply chains and supports responsible business practice.

Whilst the reputation of self-regulation has taken a dent as a result of the financial crisis, it is important to recognise that this is an area where business itself has been a driver of positive change and shared value creation. As such, we think it is essential that legislative frameworks complement existing corporate initiatives and avoid any movement towards a box-ticking approach.

For more information about our work in this area please visit our Responsible Business page or contact Emilie Boman.

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