Consider this scenario that illustrates the importance of due diligence, planning, and compliance in building a sustainable supply chain that aligns with your business practices.

Your company discovers that, unbeknownst to you, one of your significant suppliers uses workers from low-cost countries, and houses them in dormitories where they do not have freedom of movement. This, you realize, is forced labor. To compound this, the supplier confiscates the workers’ identity documents when they arrive on site, so that they cannot leave the country and return to their home country of their own will. These practices are contrary to the international law on forced labor, and are expressly illegal in the supplier’s country. Despite the illegality, forced labor persists in the supplier’s country, because bribes are paid to local officials to look the other way. 

Your company did not know of these illegal, unethical practices. When they came to light, you immediately took action to cut off your relationship with the supplier. You also went into planning mode: you referred to the SASB standards, which indicate that labor practices are material to your company’s financial performance. Beyond that, your stakeholder engagement and materiality assessment work showed that your customers and employees believe that forced labor is an issue with significant stakeholder impact. Finally, you consulted UN Sustainable Development Goal 8, which aims to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”.

All this convinced you to make sustainable employment practices, not only in your own company, but in your supply chain, a strategic priority. You engaged employees in the planning process, and told them what they need to do to support the strategy. You redrafted your employee code of conduct to take a position on forced labor, and told your employees how they can be vigilant in their supply chain selection practices. Beyond that, you adopted a policy that spells out how to conduct forced labor due diligence, and the consequences, up to and including termination of employment, for failing to comply with the policy. You reinforced all of this through employee communications and training. And your internal audit department incorporated a forced labor audit into their audit schedule. Their audits will help tell you if your code of conduct, policies, communication and training have been successful, and what further changes or enhancements need to be made.

Bad surprises happen. Avoid them with due diligence. When they happen, plan to do better, and execute on your plan. Communicate your expectations to employees and suppliers. Verify, and continuously improve. Stay on a path to sustainability, and reach out to Clear Strategy for help.

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