Applicable on Paper Only? Why ICT Companies Need to Address Forced Labor Risks in Lower Supply Chain Tiers
This feature is based on the 2022/2023 KTC ICT benchmark data.
Media reports increasingly highlight linkages to labor rights abuses in lower tiers of companies’ supply chains. On paper, the majority of the largest global ICT companies have policies in place asking their suppliers to not only implement their standards, but to also cascade their standards further down the supply chains.
Yet our findings show that implementation often stops at tier 1 – and highlight what needs to change.
ICT Supply Chains are Highly Inter-Connected
Many of the largest global ICT companies buy from and supply to each other. Apple alone discloses sourcing from 26 of the 60 benchmarked companies.
Click on a circle to see a company’s supply chain relationships Drag a circle around for greater visibility
Size of circle indicates market capitalization. Information in the graphic is limited by the availability of public supplier lists; only 12 of the 49 benchmarked ICT companies disclose such information.
Buyers Require Tier 1 Suppliers to Cascade Standards – Yet Many Tier 1 Suppliers Do Not Seem to Look Beyond Their Own Operations
Such strong interconnectedness presents both risks and opportunities. Take the five highest scoring companies in the benchmark as an example. All five disclose a range of steps taken to address forced labor risks in particular at tier 1 suppliers—and all require their suppliers to cascade their standards further down their supply chains.
Yet they all source from lower-scoring suppliers, meaning suppliers do not seem to implement these requirements. For example, Apple sources from suppliers scoring as low as 0/100. While some of those suppliers might have stronger practices in their own operations, they fall short on disclosing how they address risks in their own supply chains.
2020 analysis: Buyers have a Multitude of Connections to Low Scoring Suppliers
In 2020 we analysed the connection between buyers and low-scoring suppliers (i.e., those that fail to demonstrate how they ensure respect for international labor standards in their own supply chains).
Take Samsung as an example: Samsung directly sources from BOE Technology (0/100) as well as Kyocera (3/100). Even if Samsung were to discontinue its relationship with Kyocera, it may nevertheless be indirectly sourcing from Kyocera, through other suppliers such as NXP. Further, Samsung may also be connected to other low-scoring suppliers, such as Luxshare (4/100) – via its supplier Intel (who is sourcing from Microsoft who in turn is sourcing from Luxshare).
Where labor standards in lower tiers of supply chains are not managed, this creates significant risk for buyers. However, it is also an opportunity for leverage and collaboration: the top 5 highest-scoring companies source from 38 of the benchmarked companies. This includes 21 suppliers that are shared among at least two of the buyers. Buyers have a responsibility to ensure through responsible purchasing practice and capacity building that suppliers are enabled to undertake human rights due diligence in their own supply chains—working with peers can help to share costs and ensure suppliers receive the same requests for supply chain management from different buyers.
Data Visualisation by Toby Rubenstein. Data from KnowTheChain’s 2020 ICT Benchmark.