The incidence of child labour is what marks out the best- and worst-performing countries for ESG supply chain risk, a new environmental study claims.
Even a number of low-risk countries show a deterioration in scores for child labour, transparency, working hours and policy in 2023, the report from global assurance specialist LRQA adds.
The findings are based on data from 25,000 supply chain audits from 100 regions and across 20 sectors. Regions were evaluated against five categories: labour, health and safety, environment, business ethics and management systems.
Pakistan is the country at highest risk of ESG supply chain violations in 2023. It is joined in the lower performers by other southeast Asian economies making textiles and electronics, including Bangladesh, India, Cambodia and Vietnam.
Germany tops the list for lowest supply chain risk, alongside Japan, Taiwan and European agricultural and manufacturing nations Portugal and Spain.
LRQA also says that, with a growing number of major conflicts displacing populations, forced labour and human rights violations for migrant workers have also been flagged as a growing cause for concern in every nation.
In an interview with Supply Chain Digital earlier this year, LRQA Board Advisor Paul Butcher said that forced labour was an area of growing concern in supply chain, and that organisations need to ensure "they are addressing this issue in their supply chain, right down to their suppliers’ suppliers".
Supply chain ESG risk 'increases with disruption'
He added: "ESG risks increase during times of supply disruption because businesses are more likely to be changing suppliers, and without visibility across the value chain this can mean they don't really know what’s happening in your supply chain. This is even more true now, with the war in Ukraine."
Commenting on the report, LRQA ESG Advisory MD Kevin Franklin said: “We are operating in a time where immense change is the only constant. The ESG trends we see on the ground in supply chains show direct connections to global crises like the Russia-Ukraine and Israel-Hamas conflicts.
“These events bring unforeseen and cascading impacts on business operations globally and further intensify human rights violations across a range of sectors.
“It is important to remember that overall lower risk does not necessarily mean no risk. The rising complexity of due diligence regulations and the lack of alignment in risk assessment and disclosure standards continue to muddy the waters of transparent and credible reporting.”
Franklin adds: “For businesses operating with partners worldwide, the directive is clear: proactive risk management with suppliers requires forward-thinking, to expand knowledge of your supply chain's ESG risk landscape, and thorough, transparent and robust data, to monitor regularly for present and emerging challenges.”