In recent years, supply chains gained momentum as the leading social issue for companies to address. While environmental and climate change used to be the main topic of discussion, human rights and supply chains have taken over. This is partly due to the scandals and allegations of exploitative labour practices from multinational companies. But also due to the increased public awareness of the role companies play in determining the management of their own supply chains.
Social sustainability
The shift to focus on social issues acknowledges the profound impact that supply chains can have on our communities, labour rights, and societal well-being. Progress has been made in greening supply chains, but addressing social sustainability is a complex challenge yet to be achieved. A holistic approach that integrates social responsibility in a meaningful way into every aspect of the supply chain is the way to go. Then businesses can make a difference in the long-term.
Understanding the social issues in supply chains
First and foremost, we need to understand what the risks and impacts are in supply chains. These largely depend on the industry and the part of the world where a given company works. Social sustainability in supply chains encompasses fair labour practices, human rights protection, community engagement, diversity and inclusion, and ethical sourcing. Building social sustainability requires a more thorough look at these issues:
Labour related issues
- Labour exploitation
Supply chains often involve complex networks of subcontractors and suppliers. This can lead to challenges in monitoring and ensuring fair labour practices. Exploitative conditions such as low wages, long hours and unsafe working conditions can be prevalent, especially in industries like manufacturing and agriculture.
- Worker welfare
Ensuring the well-being of workers throughout the supply chain is essential. This includes addressing issues around child labour, forced labour, discrimination, lack of access to essential benefits like healthcare. Issues around exploitation and worker welfare are especially troubling in the gig economy or in sectors with seasonally contracted workforce.
- Labour rights violations
Encompassing the restriction on freedom of association and collective bargaining. I have had several clients whose subcontractors employed workers without employment contracts, completely violating local labour laws.
- Human rights risks
- Ethical sourcing
Companies face challenges in ensuring that their supply chains are free from human rights abuses, modern slavery, human trafficking and exploitation. Ethical sourcing policies and enhanced due diligence can screen out suppliers who can’t comply with legislation.
- Conflict minerals
Sourcing minerals from conflict-affected regions can contribute to human rights abuses and armed conflict. Companies can implement measures to trace the origin of minerals and avoid financing conflict or further contribute to human rights violations.
- Indigenous rights
Many supply chains involve land acquisition for resource extraction in areas inhabited by indigenous communities. Respecting Indigenous rights, including land rights and cultural heritage is crucial to avoid access restrictions to natural resources.
- Community and land-related aspects
- Land displacement
Though, we previously mentioned land issues in relation to indigenous people, supply chains might lead to land grabs from other communities. Proper consultation, compensation and resettlement plans are necessary to mitigate the negative impacts on affected communities.
- Community engagement and development
Enterprises have the responsibility to contribute positively to the communities where they operate. In certain developing countries, these manufacturing facilities provide the only ‘good’ jobs and communities rely on them economically. Engaging with the communities and supporting local development through CSR programs is a popular way for companies to build lasting relationships.
Strategies and Tools for Enhancing Social Sustainability
Achieving social sustainability in supply chains requires a multifaceted approach that integrates social considerations into every stage of the supply chain lifecycle. When I work with my clients, I always look at three key pillars: legal requirements, voluntary standards, and management systems.
Legal requirements
The EU’s adoption of the new directives specifically targeting human rights and environmental impacts in supply chains adds to the long list of legal requirements companies need to follow to address modern slavery risks and practice corporate responsibility globally. Most of the legislation is not prescriptive in terms of what needs to be done exactly. But they do require companies to enforce corporate level standards on suppliers. Some companies have started including standard contractual clauses that require suppliers to follow legislation and adhere to the company’s policy on social topics.
Voluntary standards and certifications
There is a wide variety of voluntary standards and certifications that companies can explore on their social sustainability journey beyond legal compliance. Plus, there are certifications on Fair Trade, SA8000, Ethical Trading Initiative (ETI) Base Code and decent work. There are also some more sector specific standards and certifications such as ethical fishing for food producers. It is up to companies to decide if they want to improve their practices by updating systems in line with best practices.
Supplier collaboration
Supplier collaboration through the provision of capacity building and training are great tools to raise awareness on labour rights, health and safety, diversity and inclusion and support suppliers to establish their own traceability systems. Typically, the supplier code of conduct is a legal requirement, but it could be extended to include more detailed expectation. These might include labour standards, human rights, environmental practices and ethical business conduct.
I would consider community investment through CSR programs as a voluntary initiative that allocates resources towards community development. It is ideally driven by the needs of locals and might include a combination of paying for services and providing training or education.
Management systems
Company management systems include the collection of policies, processes and management plans. Most of the policies are legal requirements as per my previous points. However, there can be additional policies focusing on areas where the company is exposed to risks in the supply chain. For example, HR policies typically include minimum age requirements.
Although, if the risk of child labour is relevant to the company, they might decide to have a separate policy on the prohibition of child labour. Following on from this example, a management plan would identify the risk of child labour. Whether it is for direct employees, contractors or subcontractors. This will describe a process to verify, record, audit and report on the age of workers. Supply chain specific management plans might include traceability and mapping, a supplier management plan, a supply chain risk assessment plan etc.
Stakeholder enagagement
The other important aspect of a company’s management system is stakeholder engagement and complaints management. Effective stakeholder engagement can facilitate the feedback mechanism from communities and workers in the supply chain.
Creating socially sustainable supply chains is not just a moral imperative. It is also a strategic business imperative in today’s interconnected world. If we prioritise social responsibility by embedding it into the operations, businesses can mitigate risks, enhance reputation and create value for society. Ultimately, building social sustainability requires a collective effort involving businesses, governments, civil society and other stakeholders.
We need to work together towards common goals to create supply chains. Not only to deliver economic value but also promote social justice, equity and dignity for all.
Ildiko Almasi Simsic is a social development specialist and Founder of E&S solutions which has developed the world’s first E&S specific research assistant – myESRA™.
