How well do you really know your suppliers?
Ethical procurement is a critical element of the modern supply chain.
Annual modern slavery reporting is required for large businesses in countries like Australia, the UK, and France. In the US (California Transparency in Supply Chains Act), the law requires companies to disclose information regarding their efforts to eradicate human trafficking and slavery within their supply chain. Governments across the globe are legislating to prevent modern slavery – placing the onus on businesses to identify and act on it throughout multi-tier supply chains.
“Ignorance is no longer a defense,” says Tony Sharpe, Robobai CCO.
“Some companies still see modern slavery reporting as something to appease governments and regulators. But it’s vital to get on the front foot now as requirements will only grow.”
What does modern slavery look like?
It’s estimated 40 million people worldwide are currently victims of modern slavery. There are three main forms of exploitation and loss of freedoms:
- Social exploitation – buying products from suppliers who engage in deliberate underpayment through child labor, debt bondage and servitude
- Resource exploitation – using cheap resources from countries with lax environmental laws that contribute to pollution and environmental degradation
- Ethical misconduct – dealing with organizations implicated in corruption, bribery, money laundering, fraud, embezzlement, blackmail or extortion.
Your organization or tier-1 suppliers may not engage in these activities, but if someone further down the supply chain does, you risk paying the penalty for their unethical conduct.
Spotting the signs of modern slavery
The signs of modern slavery can be subtle in complex supply chains. With thousands of suppliers in the mix, it’s a tough ask to understand their business practices without systems capable of custom configuration and automation. And it gets even trickier if your suppliers are covertly sub-contracting to others.
Signs of modern slavery risks in your supply chain can include:
- Low visibility – no trusted end-to-end view of your product and all suppliers
- Location – your suppliers source resources, parts or labor from countries with known modern slavery issues
- Product and category type – your product, or its components, is in a high-risk group for exploitation – this includes garments, computers, fish, cocoa and sugarcane
- Lack of communication – suppliers not interested in discussing modern slavery or refuse to answer questions about their processes.
These are red flags you can’t ignore; aside from falling foul of government legislation, your reputation and customer loyalty will be tested.
3 steps towards modern slavery identification
"Getting started can seem overwhelming if you rely on manually compiling reports and risk assessments. If you have 5,000 suppliers, where do you begin?" Tony Sharpe recommends starting with three simple steps.
1. Understand what risks you need to manage
2. Use combined spend analytics and risk tools to prioritize
3. Ask the right suppliers the right questions to interrogate their current practices
“It’s important to consider this not just as a risk-driven exercise and also not purely spend-driven. Businesses tend to rely on the 80/20 rule – they prioritize the 20% of suppliers that account for 80% of their spend,” he said.
“But spend amount has to be considered alongside other elements. How can you identify your top suppliers that represent the biggest risk to your business?”
How well do you know your suppliers? (and their suppliers)
Modern slavery makes knowing our suppliers business-critical.
“We typically look through three lenses to get a holistic view of a supply chain and which categories and suppliers we can identify as higher risk,” said Tony.
- Location – are they operating in a country where modern slavery is rife or where regulations are lax or non-existent?
- Category – are they in a higher-risk industry or category of spend?
- Supplier – do you have a clear view of their processes? Do they have a history of poor labor and worker practices?
These simple questions can help identify higher-risk suppliers – and alternative suppliers to fill supply gaps.
Risk assessment can be a costly and time-consuming exercise – and likely one your existing procurement team has limited capacity for. The right procurement platform makes assessing risk easier, faster and more comprehensive.
Simplify with smarter data and analytics
Harnessing AI-driven technology, like Robobai’s KYS platform, simplifies supplier risk assessment. Supplier data is available in real-time, so instead of hours trying to prioritize suppliers for compliance activity, your KYS compliance tool identifies a list of high-risk suppliers based on your custom business parameters.
“We embed modern slavery questionnaires directly into our Know Your Supplier platform,” said Tony.
“The responses allow us to see and measure problems, engage those suppliers, and ask a series of more detailed questions. You can quickly see who is high, medium, and low risk.”
You’ve found signs of modern slavery. Now what?
Seeing signs of modern slavery isn’t necessarily a prompt to remove the supplier immediately. While prevention is better than cure, the emphasis in the Modern Slavery Act is on continuous improvement. Remediation can provide significant opportunities to work with high-risk suppliers to make a tangible difference in the supply chain by breaking modern slavery cycles.
For organizations committed to responding to modern slavery in their supply chains and operations, building long-term relationships with trusted suppliers is crucial.
“We embed modern slavery questionnaires directly into our Know Your Supplier platform,” said Tony.
“The responses allow us to see and measure problems, engage those suppliers, and ask a series of more detailed questions. You can quickly see who is high, medium, and low risk and choose how to respond based on your supplier relationship.”
Know your suppliers and your risks with Robobai.
