Ethics ‘Gremlins’ Hiding In Manufacturers’ Supply Chains

17 Mar 2014

Only half of UK firms audit suppliers in terms of ethics

UK manufacturers could be inadvertently relying upon slave and child labourers in their supply chains because they are not always auditing suppliers and relying only on trust, according to new research from Achilles – a global supply chain risk management company.

Only 51% of manufacturers are regularly auditing their direct (Tier 1) suppliers in terms of ethics, or checking their claims that they do not use child workers, slaves or conflict minerals – elements sourced in areas that fund terrorism or war. Only 38% of manufacturers are auditing their indirect (Tier 2) suppliers on the same criteria. In addition, around one in five large manufacturers said they are confident in suppliers’ ethical compliance purely because of personal relationships.**

In addition, UK manufacturers lose confidence in the ethical standards of suppliers at every level of their supply chains:

Key findings:

  • 80 per cent of UK manufacturers said they were ‘very confident’ their direct (Tier 1) suppliers did not use slave labourers
  • But only 53% were ‘very confident’ that their main suppliers’ suppliers (Tier 2) did not use slave labourers.
  • 70% of manufacturers were very confident that their direct (Tier 1) suppliers were not using any child labourers.
  • But only 47% were very confident their main suppliers’ suppliers (Tier 2) were not using child labourers.
  • 57% were very confident their Tier 1 suppliers did not use conflict minerals, but only 42% were very confident in their Tier 2s.
  • 63% were very confident their Tier 1 suppliers were not using unaudited factories but only 46% were very confident at Tier 2.

The results were unveiled just weeks after The Home Office published a draft version of a Modern Slavery Bill, which aims to reduce the number of slavery cases, increase prosecution against perpetrators and protect those affected. Businesses will also be required to disclose steps they have taken to eradicate modern slavery from their supply chains.

False sense of confidence?

Less than half (47%) of manufacturers had ‘mapped’ their supply chains to identify the exact identity of all their suppliers.

Despite this, 96% of manufacturers said they felt confident that they were effectively managing risks in their supply chain.

Richard Collins, an Executive Director at Achilles, said: “This survey shows just how unsure large UK manufacturers actually are about the treatment of people within their supply chains.

“UK manufacturers may well soon have a legal, as well as moral, duty to tackle the use of slave and child labourers in their supply chains. We would urge large businesses to get ahead and map their supply chains to identify exactly who their suppliers are, and then audit each one in terms of business performance and ethics. This will help protect their reputation, bottom line and ultimately, the people at the heart of UK supply chains.”

CIPS Group CEO David Noble commented: “Procurement and supply chain professionals have a huge responsibility here. Trust and honest relationships are key in good supplier management, but trust alone is not enough.

We can’t underestimate the complexity of today’s supply chains and neither should we ever underestimate the value that appropriately trained and skilled procurement and supply professionals bring. Ensuring as much visibility throughout the tiers of supply chains as possible is critical in reducing risk to reputation and finances.

We believe all procurement and supply management professionals should hold a professional licence and are calling on a self-regulated approach, to ensure trained staff conduct this important activity. Failing this may result in consequences that can be disastrous for business as well as those experiencing life in bonded labour.”

 


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