Digging Deeper: Increased Transparency is Changing How Companies Approach the Supply Chain

Digging Deeper: Increased Transparency is Changing How Companies Approach the Supply Chain

Legislation addressing supply chain abuses is just a start to creating transparency. More work must be done across sectors to raise the standards for human rights and create stable supply chains.

September 10, 2015

For the activists among us (or even just the activists at heart), it may be difficult to imagine that the majority of companies who are currently affected by transparency legislation had no idea that certain enumerated human rights violations – such as human trafficking – even occurred in their supply chains, but it’s true. Since California’s Supply Chain Transparency Act, and the UK Modern Slavery Act have gone into effect, the greatest outcome to date is that companies are more aware of the labor and human rights issues taking place within their business operations, and are starting to act.

These pieces of legislation have brought the kind of awareness non-profit organizations hope to create and have opened the door for companies–perhaps in collaboration with the non-profit sector–to take a serious look at how they dig into the deepest depths of their supply chains.

Some of the practical responses to the legislation have not been success stories. For example, many of the companies directly affected by Dodd-Frank’s section 1502 on how to source minerals from conflict zones in the Great Lakes region have simply left the region. This response fulfills the requirement of avoiding conflict, but the solution arguably misses the opportunity. By relocating mining operations, the companies are failing local communities that desperately need their investment  as well as the legislation protection. As such, more responsible companies seek assistance from expert organizations such as the Electronics Industry Citizenship Coalition (EICC), who work in collaboration with other companies, workers, governments, and civil society to figure out how to navigate the difficult terrain of supply chain management.

Moving operations to avoid specific legislation has a number of business downfalls as well. First, this trend in legislation is not dwindling. If anything, recent trends indicate that there will be expanded legislation with an increased scope. Expanding legislation brings its own set of difficulties. As more governing bodies wish to participate in the transparency trend, it will quickly become an undue burden if there is a different set of compliance aspects for every state in the country, or for each emerging issue, such as cotton, child labor, migrant labor, or environment. The same is true for the global economy. The more standardization that occurs in the laws and their specifications, the easier it will be for a company to adhere to the standard across the globe and across sectors. Too narrow a focus, as in Dodd-Frank, can lead to mass exodus and a continued evasion of the larger supply chain problem.

The second downfall is that by choosing to spend the time and money relocating, companies are not spending the time and money to address the broader implications of legislation and mainstream their own human rights operations. Companies are in a great place right now to evaluate partnerships that will help them move beyond a specific issue area such as cotton, or a specific geographic location such as the Great Lakes Region, to instead focus on the process that is used regardless of location or industry. By working together within industries and across sectors to discover new opportunities within legislation and promote human rights, there is an opportunity to move through this stage quickly and mitigate the need for an expansive tapestry of legislation. Working from both ends we will be able to raise the bar for companies to be committed to human rights and supply chain integrity, while also maintaining the business case for more stable supply chains.

Hillary W. Amster is Manager and Counsel at Fontheim International, LLC, where she advises multinational corporations on corporate social responsibility strategies.

This piece appears as part of KnowTheChain’s blog series on a growing trend towards supply chain transparency. Follow the discussion at: http://bit.ly/1HpEEOu

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