The role of benchmarking in eliminating forced labour from global corporate supply chains
From seafood fished in Thailand, to cotton picked in Uzbekistan – the supply chains of many everyday products can be traced to people forced to work in inhuman conditions. The International Labour Organisation estimates that $150 billion in profits are generated in the private economy each year from forced labour.
Just as there was an incontestable moral imperative to end historical slavery, there is also a need to end its modern-day forms, which are endemic to our global economic system.
So, what are companies doing about this? There are laudable examples of action. Nestlé recently launched a detailed action plan on responsible sourcing of seafood from Thailand. In 2014, Apple required its suppliers to reimburse nearly $3.96 million to over 4,500 factory workers for excessive recruitment fees. But a few strong examples of action by market leaders are not enough.
A report released this week by KnowtheChain, in which the Business and Human Rights Resource Centre is a partner, assesses 20 companies’ policies and practices on supply chain forced labour. The report provides a “transparency snapshot” across three industries: food and beverage, apparel and footwear, and information and communications technology (ICT).
It found that 17 of the 20 have a formal corporate policy on supply chain forced labour and trafficking, demonstrating that they recognise the importance of the issue. However, only five provide evidence of how those policies are made available to vulnerable parties including workers, and only three conduct interviews with subcontracted personnel.
Most of the companies have a grievance mechanism at company level, yet only a third require their suppliers to do so. And there is a long way to go on supply chain transparency, with 4 of the 20 companies disclosing the names and locations of their first-tier suppliers.
Building on this pilot report, in 2016 KnowtheChain will benchmark companies, by sector, on their efforts to exclude forced labour from their supply chains. Companies will be compared in areas such as supply chain traceability, business relationships, recruitment practices, worker communication, monitoring, grievance procedures and remedy.
There is increasing recognition that benchmarks can play a powerful role in changing corporate behaviour. They can encourage companies to respect human rights by harnessing the competitive nature of markets to drive a “race to the top.” The Access to Medicines Index and Behind the Brands have both led to clear improvements in conduct by pharmaceutical and food companies, respectively.
In a 2014 survey of senior business executives, the Economist Intelligence Unit reported that the largest proportion of respondents considered benchmarking companies as the factor that would make the greatest difference on their approach to human rights.
Of course, benchmarking companies is part of a much broader ecosystem of action needed to address forced labour. Drivers of forced labour on the corporate side include pressures for low costs and just-in-time delivery. Additional drivers include inequality within and between countries, a lack of government oversight and corruption. No company acting alone can address this dynamic fully.
At the same time, progress cannot be made without serious corporate engagement and action. With the recent entry into force of the UK Modern Slavery Act and the California Transparency in Supply Chains Act of 2010, companies are increasingly expected to report on the ways in which they are combating forced labour in their supply chains. Investors and civil society will be quick to identify those that have little of substance to report.
Through KnowtheChain’s benchmarking work, we hope to recognise advances by leaders, incentivise laggard companies to improve, as well as contribute to systemic change across the industries with high risks of modern-day slavery.
Written by Phil Bloomer, Executive Director of Business & Human Rights Resource Centre, London
SOURCE: [Business & Human Rights Resource Centre]
5 Minutes With: Jim Bureau, CEO Jaggaer
What is data analytics, and why is it important for organisations to utilise?
Data analytics is the process of collecting, cleansing, transforming and analysing an organisation’s information to identify trends and extract meaningful insights to solve problems.
The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions. Spend analysis and other advanced statistical analyses eliminate the guesswork and reactivity common with spreadsheets and other manual approaches and drive greater efficiency and value.
As procurement continues to play a central role in organisational success, adopting analytics is critical for improving operations, meeting and achieving key performance indicators, reducing staff burnout, gaining valuable market intelligence and protecting the bottom line.
How can organisations use procurement analytics to benefit their operations?
Teams can leverage data analytics to tangibly improve performance across all procurement activities - identifying new savings opportunities, getting a consolidated view of spend, understanding the right time for contract re-negotiations, and which suppliers to tap when prioritising and segmenting suppliers, assessing and addressing supply chain risk and more.
Procurement can ultimately create a more comprehensive sourcing process that invites more suppliers to the table and gets even more granular about cost drivers and other criteria.
"The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions"
Procurement analytics can provide critical insight for spend management, category management, supplier contracts and negotiations, strategic sourcing, spend forecasting and more. Unilever, for example, used actionable insight from spend analysis to optimise spending, sourcing, and contract negotiations for an especially unpredictable industry such as transport and logistics.
Whether a team needs to figure out ways to retain cash, further diversify its supply base, or deliver value on sustainability, innovation or diversity initiatives, analytics can help procurement deliver on organisational needs.
How is data analytics used in supply chain and procurement?
Data analytics encompasses descriptive, diagnostic, predictive and prescriptive data.
Descriptive shows what’s happened in the past, while diagnostic analytics surface answers to ‘why’ those previous events happened.
This clear view into procurement operations and trends lays the groundwork for predictive analytics, which forecasts future events, and prescriptive analytics, which recommends the best actions for teams to take based on those predictions.
Teams can leverage all four types of analytics to gain visibility across the supply chain and identify optimisation and value generating opportunities.
Take on-time delivery (OTD) as an example. Predictive analytics are identifying the probability of whether an order will be delivered on time even before its placed, based on previous events. Combined with recommendation engines that suggest improvement actions, the analytics enable teams to proactively mitigate risk of late deliveries, such as through spreading an order over a second or third source of supply.
Advanced analytics is a research and development focus for JAGGAER, and we expect procurement’s ability to leverage AI to become even stronger and more impactful.