Decent Work in Global Supply Chains A Baseline Report 1 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT INTRODUCTION Worldwide, 152 million people are victims of child labour.1 The UN Global Compact defines supply chain sustainability as Widespread informal employment persists, and an estimated the management of environmental, social and economic impacts 24.9 million people are trapped in forced labour. Out of them, and the encouragement of good governance throughout the 16 million are exploited in the private sector.2 Across the lifecycles of goods and services.4 The objective of supply world, millions of young women and men are looking for chain sustainability is to create, protect and grow long-term opportunities to enter the labour market. At the same time, environmental, social and economic value for all stakeholders 780 million working women and men are not earning enough involved in bringing products to the market. Through supply to lift themselves out of poverty. Current megatrends, such chain sustainability, companies protect the long-term viability as globalization, technological advances (including robots of their business and secure a social license to operate. and artificial intelligence), demographic changes and climate Companies that are committed to taking action to advance change will significantly influence the future of work. In this decent work in the supply chain can significantly improve the transition, vulnerable groups will be especially affected risking lives of people and could lift millions out of poverty. the rise of inequalities and the broadening of the gender gap. Supply chains continue to be one of the most important levers 152 million for business to create a positive impact in the world, with an people are victims of child labour estimated 80% of global trade passing through supply chains.3 Supply chains contribute to economic growth, job creation, poverty reduction, entrepreneurship and to workers’ transition 16 million from the informal to the formal economy. However, failures out of the 24.9 million people trapped at all levels within global supply chains have contributed to in forced labour are exploited in the decent work deficits and the undermining of fundamental private sector labour rights and human rights. To effectively tackle decent work deficits and prevent human rights violations throughout the supply chain, businesses need to take a holistic approach to 780 million working women and men are not earning supply chain sustainability in a way that addresses root causes enough to lift themselves out of poverty and goes beyond mere compliance with labour standards. For more information, refer to: Supply Chain Sustainability - A Practical Guide for Continuous Improvement, Second Edition 1 Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, Geneva, 2017 2 Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, Geneva, 2017 3 Supply Chain Sustainability - A Practical Guide for Continuous Improvement, Second Edition, UN Global Compact, New York, 2015 4 Supply Chain Sustainability - A Practical Guide for Continuous Improvement, Second Edition, UN Global Compact, New York, 2015 2 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT In 2017, the UN Global Compact developed an Action Platform Participants are given the opportunity to advance the SDGs on Decent Work in Global Supply Chains to provide a forum for taking into account the UN Guiding Principles on Business open dialogue and a launching pad for action to address one and Human Rights and the International Labour Conference’s of the most urgent challenges facing companies, workers and Conclusions on Decent Work in Global Supply Chains. The their communities, namely the continued violation of human participating organizations come from a wide range of rights in supply chains. Through the facilitation of continuous industries and countries and their supply chains vary greatly learning and collaboration at the global and local level, the in size and scope. Platform aims to inspire action, help build a human rights- based approach to the 2030 Agenda, and develop thought leadership on the role of business in promoting decent work. Decent Work in Global Supply Chains Action Platform Participants (2018) • Accenture • RELX Group plc • A.P. Moller-Maersk • Restaurantes Toks S.A. de C.V. • Assent Compliance Incorporated • Safaricom Limited • BASF SE • Sakhalin Energy Investment Company Ltd. • Fuji Xerox Co., Ltd. • SAP Ariba • INDITEX • Total • Nestlé S.A. • Unilever • NPI Governance Consulting • UPM-Kymmene Corporation • Pernod Ricard • Valeo • Pirelli & C. S.p.A. • Volvo Cars 3 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT OBJECTIVE This report aims to summarize salient issues to provide a provided information on their supplier mapping, challenges and baseline picture of participating companies at the start of the opportunities in sustainable supply chains, and actions taken Action Platform, and to ensure that the work of the Action to combat modern slavery and child labour and to ensure Platform is Intentional, Ambitious, Consistent, Collaborative good labour standards. Also other sources of information and Accountable.5 In 2019 — after the Action Platform’s two- were referred to in the preparation of this report, such as year lifespan — another round of bilateral interviews will be the Blueprint for Business Leadership on the SDGs, the 2017 conducted to capture the companies’ progress on developing Progress Report of the UN Global Compact, the Women’s sustainable supply chains, which will be captured in the Action Empowerment Principles Global Trends Report 2018, and Platform progress report. insights from participating Global Compact Local Networks. METHODOLOGY This assessment is based on data of bilateral interviews with supply chain, procurement, and sustainability executives of 17 of the companies that participate in the Action Platform on Decent Work in Global Supply Chains of the UN Global Compact. Each company is committed to developing their procurement strategies and making their supply chains more sustainable. In the interviews, the company representatives provided valuable inputs on the challenges, opportunities and drivers of sustainable supply chains. All companies Disclaimer: This assessment was designed and conducted by the UN Global Compact. It is not based on UN recommendations, and is not meant to make any assessment of the level of compliance with UN standards. It has been developed to capture a snapshot of what companies are already tracking in terms of their activities related to decent work and human rights in their supply chains. The company examples in the report are real-life practices undertaken by some of the Action Platform participants. The examples are not endorsed by the UN and have not been formally vetted. They are intended to raise awareness of the many ways in which business can improve decent work in their supply chains. For more information, refer to: Blueprint for Business Leadership on the SDGs 5 These five values are based on the “Five Qualities of SDG Leadership” covered in the Blueprint for Business Leadership on the SDGs by the UN Global Compact. 4 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT GEOGRAPHICAL REPRESENTATION • Canada • Germany • Mexico • Sweden • Denmark • Italy • Russian Federation • Switzerland • Finland • Japan • South Africa • United Kingdom • France • Kenya • Spain • United States of America INDUSTRIES SOFTWARE & CONSULTING INDUSTRIAL COMPUTER CHEMICALS SERVICES TRANSPORTATION SERVICES TECHNOLOGY, HARDWARE APPAREL FOOD PRODUCER BEVERAGES MEDIA & EQUIPMENT AUTOMOBILES MOBILE OIL & GAS FORESTRY & PAPER & PARTS TELECOMMUNICATIONS 5 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 2. KEY FINDINGS Companies predominantly take a risk-based approach to decent work in procurement. Companies experience internal challenges when managing sustainability across supply chains, including lack of resources, data, technology and buy-in. Companies experience external challenges when managing sustainability across supply chains, including weak institutions, inconsistent labour legislations, crime and corruption and a lack of leverage with suppliers. Collaboration is essential for companies to make greater progress in achieving sustainability in supply chains. Technology enables transparency and oversight through supply chains beyond Tier 1. Modern slavery and child labour persist as most pressing human rights risks in supply chains. 6 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 3. PARTICIPANT DATA AND SUPPLIER MAPPING KEY STATS 53% of Action Platform participants are already mapping their suppliers beyond Tier 1 An additional 24% of 24% Action Platform participants are planning to map beyond Tier 1 suppliers in the future There is an increasing expectation for all suppliers to meet Typically, companies are utilizing a risk-based approach to standards, thus requiring companies to double down on procurement, mapping those materials and goods that present efforts to achieve supply chain traceability and transparency the greatest estimated risk to people, planet and profit. This in all procurement activities. means that the decision to map beyond Tier 1 suppliers is greatly influenced by the nature, location and priority of the The most widely reported challenge in sustainable supply commodities supplied. For instance in high-risk sectors, such chain management amongst goods manufacturers is as mining, metal and chemical industries, participants are achieving transparency beyond Tier 1 suppliers. This mapping up to seven tiers of suppliers — in some cases due challenge is amplified by the sheer number of suppliers, to strict regulations. the complexity of global operations involving inconsistent regulations as well as the use of short-term subcontractors. OWNERSHIP OF SUSTAINABLE SUPPLY CHAINS Even within the companies’ Tier 1 supplier mapping, there Accountability for supply chain sustainability typically resides within a are varying levels of traceability depending on the region range of different functions: and commodity. Around half of the companies stated they • In almost 50% of Action Platform participants supply chain were mapping beyond Tier 1 suppliers and tracing sub-tier sustainability is owned by the corporate sustainability team. suppliers as well. Another 24% are planning on increasing • In 25% of Action Platform participants it is owned by the procurement their supply chain traceability by starting to manage or supply chain function. suppliers beyond Tier 1 in the near future. The most common • The remaining Action Platform participants leverage marketing, finance reasons why companies do not trace their sub-tier suppliers or operations teams to drive supply chain sustainability. are the lack of formal processes for mapping beyond Tier 1 as well as the lack of capacity and resources to improve supply chain transparency. 7 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 4. DECENT WORK IN GLOBAL SUPPLY CHAINS: CHALLENGES FOR ORGANIZATIONS INTERNAL IMPEDIMENTS Lack of resources Most companies identified the lack of financial and human throughout extended supply chains it is difficult to know where resources as a major constraint for achieving supply issues manifest and what the drivers behind those issues look chain sustainability. They agreed that a dedicated team of like on the ground. Another major challenge in tracking issues in professionals is critical for embedding sustainability into supply chains is the absence of automated data systems that are procurement operations. Without significant internal human capable of monitoring and transferring traceability information resources capacity, it can be extremely difficult to track between companies and suppliers. One company stated that it suppliers and employment standards across supply chains. put nearly all of last year’s efforts of managing its supply chain Similarly, various companies stated that limited financial sustainability into updating and streamlining an internal platform resources allocated to supply chain sustainability remain an for data sharing. issue in assessing and monitoring suppliers. As one company put it “maintaining investment flows that target responsible Lack of buy-in across the company sourcing remains one of our greatest internal impediments, Companies also identified the difficulty of getting buy-in especially when there are competing business priorities across different departments and sectors within a company as related to operational cost.” a challenge. Supply chain professionals often find demonstrating and communicating the value of sustainability to business Lack of data and technology challenging, since it can be hard to quantify and assess the Another major challenge for organizations is the lack of data on impact of investing in social and environmental practices, supply chains. Global supply chains are a highly complex net of at least on a short-term basis. That is why some companies operations involving a magnitude of suppliers, subcontractors and mentioned that they have had difficulties in gaining high-level middlemen operating in numerous countries, which makes tracing support for remedial actions against suppliers that behave resources and raw materials to their source extremely difficult. irresponsibly. One company stated that “knowing how to maintain Companies typically rely on financial systems that often do not business momentum on issues that take years to change or provide a comprehensive picture of the supplier base, particularly transform is challenging.” Large multinational corporations on a factory level. This poor visibility of supply chain transactions in particular may find it challenging to communicate the makes under-the-radar movement difficult to track. Without importance of responsible sourcing across subsidiaries. adequate traceability tools and systems to monitor all actors 8 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT EXTERNAL IMPEDIMENTS Lack of leverage with suppliers Another frequently identified challenge is ensuring suppliers’ Weak institutions and inconsistent labour compliance with a company’s due diligence policies. Several legislations companies may source from the same factory and each Governments play a critical role in advancing sustainability company may only represent a small percentage of the through regulating businesses. They set minimum factory’s production. Additionally, competition with peer sustainability requirements for their respective markets and companies that may not comply with comparable decent create a level playing field for companies in terms of social work standards often perpetuates companies’ inability to have and environmental standards. However, most companies cite leverage over their suppliers. This lack of leverage not only the lack of Government enforcement as a challenge for the presents a challenge in enforcing employment policies but it effective implementation of legislation in certain countries and also makes identifying risk areas more difficult. Companies regions. Supplier countries with lower decent work standards cited that without enough leverage over their suppliers, due or limited enforcement capacities perpetuate occupational diligence questionnaires and surveys are often ignored or not health and safety issues as well as inadequate labour and wage deemed important enough, which results in very low overall standards. A number of companies reported that inconsistent response rates. Companies also acknowledged that their labour legislation and a limited respect for the rule of law in suppliers may struggle to respond to multiple questionnaires certain supplier countries make compliance with international from different buyers. human rights standards challenging. Companies operating in environments with weak Government institutions or regulatory enforcement indicated that they feel an obligation to establish their own standards to measure their suppliers. Crime and corruption Organized crime and corruption have great influence in environments where respect for decent working conditions is compromised. Many companies indicated that crime and corruption levels present a major constraint on managing sustainability across supply chains. One company stated that “many suppliers signal corruption as a barrier to fully committing to sustainability and equal opportunity and do not see the competitive advantage in being more sustainable than their competitors.” 9 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 5. DECENT WORK IN GLOBAL SUPPLY CHAINS: OPPORTUNITIES MOST EFFECTIVE MEANS OF MANAGING These industry collaborations require a willingness of all industry SUPPLY CHAIN RISK players to cooperate and share their knowledge, which can be difficult for companies. As one company put it, “theoretically Industry collaboration all players in our industry would benefit from cooperating and Almost all of the participating companies mentioned applying coordinated and equal pressure within their supply collaboration with industry peers as one of the most effective chains to drive change.” However, some companies did admit that ways to manage supply chain risks. Industry initiatives offer the fear of inadvertently violating antitrust laws could sometimes collaboration opportunities and they can be either broad in hinder such collaboration, and stressed the importance of scope, such as the chemical industry sustainability initiative taking measures to avoid that from happening. While almost Together for Sustainability (TfS), or focus on specific target all participants mentioned industry collaborations as effective areas, such as the Slavery and Trafficking Risk Template ways to manage supply chain risk, around 70% also expressed Development Committee or the ACT initiative on living wages. concerns about the lack of opportunities to collaborate with These industry collaborations help companies streamline peers to make progress on shared decent work goals. industry expectations by creating shared ethical guidelines and Codes of Conduct, establishing common supplier assessment and screening tools and offering opportunities for knowledge Assent Compliance actively engages in multi-stakeholder industry sharing and capacity building. Many industry collaborations initiatives that aim to advance respect for human rights in global supply establish shared platforms with a clear set of guiding principles chains through knowledge sharing and the development of innovative due diligence tools and technological solutions. Some of these initiatives and implementation frameworks. include the Social Responsibility Alliance, Social and Labor Convergence Project, and the Global Reporting Initiative. EXAMPLES OF INDUSTRY COLLABORATIONS6 • DRIVE Sustainability Initiative – Automotive Industry • Together for Sustainability (TfS) – Chemical Industry • ACT (Action, Collaboration, Transformation) on Living Wages – Textile Industry • Responsible Business Alliance – Electronics Industry • Consumer Goods Forum – Consumer Goods 6 This is not an exhaustive list, and there are many other useful initiatives and industry collaborations to support companies on specific supply chain sustainability topics. 10 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT On-the-ground management Most companies are convinced that direct and sustained engagement with suppliers on the ground is one of the most effective ways to mitigate supply chain risks. Examples of engaging with suppliers include practice sharing, capacity building and training exercises on supplier sites. Companies work with implementation partners on the ground and develop tangible and time-bound remediation action plans that relate to actual conditions in the supply chain instead of theoretical frameworks developed far away from the suppliers. Some companies also use local labour relation teams as liaisons between suppliers and the company headquarters. These local teams can network with local governments, trade unions, NGOs and other stakeholders on the ground and regularly communicate issues to the headquarters. Companies mentioned numerous worker–management collaborations, varying in scope and scale. Examples include BASF has Community Advisory Panels (CAPs) at their larger production real-life information gathering as an oversight measure to sites that provide communities with the opportunity for direct monitor the treatment of workers, working closely with trade involvement, while allowing BASF to better address local expectations. unions to better understand the workers’ needs, employment These panels are part of BASF’s grievance mechanism. They consist of individuals who live near or around a chemical facility and who represent assistant programmes in factories, annual worker grievance the fabric of their community. Under the CAPs, the panel members meet surveys, and labour relation teams that visit suppliers. regularly with site management to discuss issues of mutual interest. Policy Documents and Codes of Conduct A widely used way to mitigate supply chain risks is the development of internal policies and external Codes of Restaurantes Toks hired an individual coffee producer and asked them to organize the company’s other coffee producers. That way, the Conduct for suppliers. 94% of companies have a Code of company built its own cooperative, consisting of 120 coffee producers this Conduct that all of their Tier 1 suppliers are required to sign and season, and 500 projected for next season. The company now buys coffee acknowledge the contents of. Most companies also utilize directly from the producers without intermediaries. The producers in the stand-alone policies on human rights issues, such as child cooperative are paid up to 100% more than what they usually earn in the labour or modern slavery. Not all companies, however, have a supply chain. The coffee project serves as a trust-building initiative between the company and its suppliers and continues to contribute to raising the clear framework in place for cases in which a supplier breaks standard of living for individuals working within the supply chain. the Code of Conduct. Around 70% of companies have specific, written guidelines on procedures in the case of a breach in the Code of Conduct, including terminating the business relationship as a last resort. RELX Group requires their business partners to sign the company’s Code of Conduct, which is based on the Ten Principles of the UN Global Compact and stipulates that auditing will be a part of their business relationship with the group. RELX Group also ensures that all of its suppliers visibly post their Code of Conduct in the workplace so employees are able to contact RELX directly if they feel retribution is taking place. The company has also made a series of webinars on their Code of Conduct (e.g., on the topic of modern slavery). These webinars are made available for suppliers to inform them on how to identify and report supply chain risks. 11 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT OPPORTUNITIES FOR GREATEST IMPACT ON The SAP Ariba Supplier Risk Management tool enables companies FUTURE SUPPLY CHAINS to detect, assess and remediate compliance, ESG (environmental, social and governance) and operational risks that improve sustainable, Technology was most frequently cited as having the greatest and responsible business practices within a company’s supply chain. It impact on future supply chains. It has opened up new frontiers empowers procurement professionals in making informed buying decisions in supply chain transparency and process automation, and plays by helping track and improve progress on sustainable sourcing strategies, a critical role in enhancing the ability of companies to manage such as ending forced and child labour and achieving inclusion and sustainability effectively. Although it can require changes in diversity goals. To date, the tool tracks over 1 million suppliers across 230 risk signals, providing an opportunity to proactively assess and remediate management and investments, companies are looking for risks. It provides a framework for companies to assess their suppliers’ ways to leverage and enhance technology solutions to support practices against regulatory controls and internal policies. In the future, visibility, collaboration and communication. the tool will have the ability to report across the supplier base the practices of good, risky and strong suppliers based on the factors outlined in the Global Reporting Initiative (GRI) Indicators. The tool is now expanding to SUPPLY CHAIN RISK MANAGEMENT VENDORS provide corporate procurement organizations with more information on the MENTIONED BY COMPANIES available resources and governance practices based on the Interactive Map • Assent Compliance • Maplecroft • SAP Ariba for Business of Anti-Human Trafficking Organisations of the United Nations Global Compact Action Platform on Decent Work in Global Supply Chains. • Ecovadis • RepRisk • Sedex The global trend of so-called real-time technologies and cloud software has created a surge in digital supply chain solutions. Technology enables supply chains and procurement executives to better understand their supply chain characteristics, get a better handle on supplier performance, and more successfully manage their risks. 12 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT Solutions vary in their focus and scope, but most companies Unilever is exploring more effective uses of external platforms — stated that they were increasingly focused on streamlining including social media outlets — to expose where labour abuses may data-tracking processes to provide a single ‘source of truth’ of occur within supply chains. The company believes that in the future supply chain information. One third of all companies mentioned social media may supplement traditional auditing protocols and worker grievance tools. blockchain technology as a key resource to potentially improve supply chain traceability, with some starting to explore and test its usability for this purpose. In the future, blockchains could increase access to manufacturing information, since they are UPM identifies suppliers with a ‘high sustainability risk’ by assessing the structured as shared databases and enable firms and suppliers company’s country of origin, commodity-related risks and the number of at the very end of the supply chain to engage in transactions. tiers in the company’s supply chain. Additionally, UPM is in the process of introducing an external risk assessment tool to continuously categorize Companies also identified that data analytics tools together suppliers based upon a range of variables, including whether they are on with cloud technologies — that involve not only data tracking sanction lists or if they have received negative publicity in the past. but also analysis and visualization of supplier data — will have a significant impact on future supply chains. Social media and messaging apps were frequently cited to provide opportunities to expose where labour abuses occur within supply chains in real time. Social media may even have the potential to supplement traditional grievance protocols. Building and ensuring trust among supply chain stakeholders is, however, required in order for these solutions to be effective. Companies also identified a need for collaborative platforms to share supplier assessments with industry peers, such as the Sedex platform for the sharing of supplier data on responsible sourcing. 13 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 6. MODERN SLAVERY AND CHILD LABOUR The International Labour Organization (ILO) estimates that 24.9 million people are victims of forced labour, with one For more information, see: in four being a child.7 Additionally, the ILO estimates that • Interactive Map for Business of Anti-Human-Trafficking forced labour generates an annual profit of USD 150 billion. Organisations These numbers demonstrate clearly how likely it is that • Business: It’s Time to Act forced labour exists in a company’s supply chain regardless of the industry. They also showcase how important it is for companies to manage their supply chains effectively to combat modern slavery and child labour and to ensure decent work. The ways in which companies operate can 24.9 million increase the likelihood of modern slavery and child labour people are victims of forced labour occurring in their supply chains. Companies are increasingly aware of these risks and take steps to mitigate them: 88% of Action Platform participants have measures in place that 1 in 4 of the 24.9 million people are children are intended to contribute to the eradication of child labour and 94% of them have measures in place that are intended to contribute to the eradication of modern slavery. $150 billion in profits generated by forced labour KEY STATS KEY STATS 94% of Action Platform participants have measures in place intended to contribute to the eradication of modern slavery8 88% of Action Platform participants have measures in place intended to contribute to the eradication of child labour Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, Geneva, 2017 7 Modern slavery covers a set of specific legal concepts, including forced labour, debt bondage, forced marriage, other slavery and slavery like practices, and 8 human trafficking. (Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, Geneva, 2017) 14 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT STEPS TAKEN TO COMBAT MODERN SLAVERY Pernod Ricard assesses suppliers through its ‘Blue Source Process,’ AND CHILD LABOUR which includes policies, commitments, mapping tools, assessments and audits. The measures start with signing a Supplier CSR Commitment, including a dedicated section to labour and human rights, and referring to the Ten Principles of the UN Global Compact, the ILO Principles and other key conventions. Following these commitments, the company conducts a supplier risk mapping to identify high-risk suppliers. Suppliers that are considered high-risk based on the analysis go through an Ecovadis CSR assessment. Depending on the result of the assessment, Pernod Ricard can request suppliers to go through a Sedex Members Ethical Trade Audit (SMETA). 35% of Action Platform participants currently issue modern slavery statements The most common approaches taken by companies to show their commitment to combat modern slavery are Modern 94% of Action Platform Slavery Statements and supplier audits. Legislation requiring the disclosure of information about companies’ efforts to participants ensure that there is no slavery in their supply chains has state that child labour is part of their supplier Code of Conduct become increasingly prominent. The California Transparency in Supply Chains Act of 2012 requires large companies with A.P. Moller-Maersk has a global supply chain of more than 70,000 annual gross receipts of over USD 100 million doing business suppliers in over 100 countries. The supply chain sustainability impacts in California to disclose information about their efforts to vary from industry to industry and region to region. Hence, a single- eradicate slavery from their supply chains. In 2015, the standard approach does not work for driving responsible procurement Parliament of the United Kingdom passed the Modern Slavery at A.P. Moller-Maersk. Maersk has developed a risk-based supplier category approach to address supply chain sustainability impacts in some Act, which requires businesses that have an annual turnover of of the critical supplier categories. The company assesses each supplier over £36 million to publish an annual statement confirming the category for potential sustainability risks and develops customized steps taken to ensure that slavery and human trafficking are approaches to assess suppliers through practices, such as documentation not taking place in their supply chains. reviews, self-assessments and audits, and to drive improvements through time-bound improvement plans where gaps are identified. This approach is further sharpened with a geographical risk mapping and by combining it While no company had a specific statement on child labour, with supplier risk categories to drive focused efforts. 94% of companies state that child labour is part of their supplier Code of Conduct. Some companies have child labour remediation plans that include procedures to follow up with suppliers that abuse the company’s child labour guidelines and collaboration with local NGOs to ensure children go to school. Most companies also mentioned that they have periodic supplier audits with the specific purpose to expose and combat modern slavery and child labour. 15 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 7. EMPLOYMENT STANDARDS AND SUPPLY CHAINS Around the world, 780 million working women and men STEPS TAKEN TO IMPROVE EMPLOYMENT are not earning enough to lift themselves out of poverty.9 STANDARDS ALONG THE SUPPLY CHAIN Current trends that are changing the future of work, such as 35% of the companies interviewed for this report require for their globalization, climate change, and technological advancements, suppliers to pay the legal minimum wage and 52% have policies affect vulnerable groups in particular and risk the rise of in place that require suppliers to pay an adequate or living wage. inequalities and the broadening of the gender gap. Companies While minimum wages and living wages are important to meet try to combat this with requirements for their suppliers to meet the needs of workers and their families, measures to prevent minimum wage levels, maximum working hours and anti- non-compliance in the supply chain are required for them to be discrimination policies. However, it is important to note that effective. To combat the challenge of supplier non-compliance, there is typically a difference between the national minimum companies mentioned measures such as periodic audits, lobbying wage and an adequate wage, since national minimum wages to raise the national minimum wage and the development of often do not cover basic living expenses. In many cases, paying cross-sector guidelines to put pressure on all suppliers equally. workers the national minimum wage is not enough to lift them Another important measure to ensure that workers are paid out of poverty. fairly is to recognize the right to freedom of association and trade unions for all workers across the supply chain. 82% of Action ILO DEFINITION OF MINIMUM WAGE Platform participants include freedom of association in their • Minimum wages have been defined as the minimum amount of policy statements and Codes of Conduct. Most companies expect remuneration that an employer is required to pay wage earners for their suppliers to ask their own suppliers to follow their policies the work performed during a given period, which cannot be reduced by collective agreement or an individual contract. on fair employment standards, therefore multiplying the impact. • For further information, refer to the ILO’s website. KEY STATS 82% of Action Platform participants have a policy that 35% recognizes the right to freedom of association for all workers in the supply chain of Action Platform participants require suppliers to pay workers a minimum wage 52% of Action Platform participants require suppliers to pay workers a living wage 70% of Action Platform participants have health and 47% of Action Platform participants require major business partners along the supply chain to have safety policies in place that explicitly extend to anti-discrimination policies workers along the supply chain 9 Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, Geneva, 2017 16 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT In 2017, INDITEX approved a Strategy for the Empowerment of Women in its Supply Chain based on three main pillars, including empowerment, health and protection. This strategy has a gender perspective that allows going deeper into sensitive gender issues and developing specific actions and practices related to women. To guarantee greater equality for women — and in line with Inditex’s global commitment under the “Workers at the Centre” strategy — a number of projects have been developed locally. These include the health programme in Morocco in partnership with the NGO Medicus Mundi International and the Sowbhagyam Project to contribute to the enforcement of better working conditions for women in Southern India. Accenture is committed to promoting ethical and sustainable procurement practices that create long-term value for its clients, suppliers and communities. With a multi-billion-dollar supply chain, the company leverages its purchasing power to drive positive change on a global scale and to build a more inclusive world. Accenture’s Supplier Inclusion & Diversity Program, which reaches 17 countries, incorporates diverse businesses into its supply chain, while providing access to innovative, responsive and cost-competitive supply solutions for its clients. At the same time, it helps suppliers grow their representation and influence in their own markets. For further information, refer to: Less than half of the companies participating in the Action Platform on Decent Work in Global Supply Chains require The Women’s Empowerment Principles Gender Gap major business partners along their supply chain to have anti- Analysis Tool discrimination policies on the basis of gender, age, ethnicity, sexual orientation, race, disabilities, religion or membership of a union. This finding is also complemented by an analysis carried out by the UN Global Compact, UN Women and IDB Invest of the aggregate results arising out of the first 100 companies’ use of the Women’s Empowerment Principles Gender Gap Analysis Tool. The analysis shows that few businesses are effectively implementing gender strategies across their value chains. Currently, only about 12% of businesses include gender equality criteria in their supply chain management tools and approximately 5% set procurement and/or percentage-spend targets specific to women-owned businesses.10 10 Women’s Empowerment Principles Global Trends Report 2018, UN Global Compact, New York, 2018 17 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 8. HUMAN RIGHTS AND SUPPLY CHAINS Steps Taken to Conduct Human Rights Human Rights Impact Assessment Due Diligence Human Rights Impact Assessment (HRIA) can be defined Almost all companies (94%) have supplier Codes of Conduct as a process for identifying, understanding, assessing and that cover human rights issues, and 59% have a stand- addressing the adverse effects of programmes, projects alone policy that refers exclusively to human rights in their and activities on the human rights enjoyment of workers, operations. Human Rights Impact Assessments (HRIA) were communities, consumers or other rights-holders. The United referenced as being an important step when conducting Nations Guiding Principles on Business and Human Rights set effective human rights due diligence across supply chains. the expectation that businesses should respect human rights by using a process of human rights due diligence. The assessment of human rights impacts is a critical step in this process.11 KEY STATS 94% of Action Platform participants have a publicly available Code of Conduct which addresses 76% human rights of Action Platform participants 59% have undertaken a Human Rights Impact Assessment of Action Platform participants have a stand-alone human rights policy 11 Business and Human Rights Resource Center 18 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT Sakhalin Energy conducts Human Rights Impact Assessments as part of its integrated Environmental, Social, and Health Impact Assessment (ESHIA). The company undertakes this assessment prior to any significant project activity. The results of the assessments help inform key decisions related to project development. For a systematic and consistent assessment of human rights impacts the company applies a risk assessment matrix. Total has conducted dedicated Human Rights Impact Assessments of some potential and actuals operations, particularly in sensitive operational contexts. These assessments related to human rights and communities vary in scope depending on local context and what are deemed as the main salient human rights issues. For example, Total conducted an impact assessment focused on gender, security and conflict issues in local communities in the South Pacific while in a case in Africa the key topics were indigenous people, land acquisition, security and labour rights. The HRIAs were timed so that key findings and Around 75% of companies participating in the Action Platform recommendations could feed into the Environmental and Social Impact on Decent Work in Global Supply Chains have undertaken Assessment process and management plans. HRIAs of one or more of their operations, varying in scope and scale. Most companies are taking a risk-based approach to HRIAs, typically assessing high-risk business partners, such as suppliers of raw materials involved in mining conflicts. Examples of challenges companies mentioned regarding Around 75% of Action HRIAs include difficulties in deciding on the quantity of sample selections, limited ability to observe change, the lack of internal Platform participants expertise to conduct HRIAs and the cost and time required. have undertaken a Human Rights Impact Assessment However, companies also reported numerous benefits of HRIAs, such as improved long-term relationships with partners and suppliers, internal cooperation and peer support for the benefit of a cause that employees identify with, and the benefit of addressing customers’ expectations. The effect of HRIAs on suppliers was also noted by one company, which stated that “when suppliers recognize the business benefits associated with changed behavior, this then creates a convincing case for continued socially responsible behavior.” Another company noted that “after working with one of our supplies in a high-risk industry, we were able to map up to Tier 5 of our supply chain, creating an unprecedented transparency in our supply chain.” 19 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 9. LOCAL PERSPECTIVES: INPUTS FROM THE GLOBAL COMPACT LOCAL NETWORKS Local Network Spain specified that SMEs in particular need more resources and training to enhance their supply chain management. Local Networks identified this deficiency as a key obstacle for successfully promoting human rights and sustainable supply chains. Another prevailing concern was the absence of a universal legal framework that specifies the parameters of sustainable supply chains. This discourages companies from engaging in effective and accurate reporting, which can be instrumental in identifying human rights and sustainable supply chain-related risks. Local Network UK expressed that companies refrain from disclosing more information to avoid exposure to reputational and legal risks. Local Network Russia stated that many leading companies expressed willingness to improve supply chain management systems — including at the global level — but Global Compact Local Networks that there are many difficulties in supply chain monitoring, The Global Compact Local Networks are independent, self- highlighting the need for more competence, knowledge and governed and self-managed bodies that support and work resources. Local Network Japan added that the lack of a closely with the UN Global Compact in advancing corporate consistent reporting mechanism may force companies to fulfill sustainability. The Local Networks help local companies several different requirements, which can make the process and subsidiaries of multinational corporations to understand lengthy, costly and unappealing for companies. what responsible business means within different national, cultural and language contexts, and facilitate outreach, learning, A rising issue found in the Local Networks’ feedback was policy dialogue, collective action and partnerships. The Local related to refugee and migrant workers. Since these groups often Networks in Argentina, France, Japan, Russia, South Africa, do not have access to local registration and social security Spain, Switzerland, Turkey and the United Kingdom rights — and they may not be protected by local labour laws — are participants of the Decent Work in Global Supply Chains they run greater risks of suffering human rights violations. This Action Platform. highlights the fact that these groups are especially vulnerable and deserve special attention in the efforts to advance human Global Compact Local Networks: Japan, Russia, rights and sustainable supply chains. Spain, Turkey and United Kingdom Finally, the Local Networks were optimistic about the use The Local Networks in Japan, Russia, Spain, Turkey, and the of technology and saw it as a promising means to support United Kingdom have provided their insights for this report, and help realize human rights in supply chains. One network having gained knowledge and experience from daily interactions highlighted the International Labour Organization’s mobile with companies leading sustainability efforts in the different apps, which feature a checklist for due diligence to eliminate local contexts. One common concern among Local Networks and prevent child and forced labour. Another example is the was companies’ insufficient knowledge of business and human utilization of digital technologies and artificial intelligence to rights and human rights due diligence in the context of supply ensure the traceability of goods and services in supply chains, chains. While this baseline study showed that more than half and the adoption of facial recognition technology to more of the companies have established human rights policies and effectively identify human trafficking and child labour. 76% of them have previously conducted Human Rights Impact Assessments, the Local Networks indicated that companies still lack a comprehensive understanding of these issues. 20 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT 10. CONCLUSION AND OUTLOOK This report aims to summarize data of bilateral interviews with supplier mapping, challenges and opportunities in developing supply chain, procurement, and sustainability executives of 17 more sustainable procurement strategies and steps taken to of the companies that participate in the UN Global Compact combat pressing human rights issues in supply chains, such Action Platform on Decent Work in Global Supply Chains. Each as modern slavery, child labour, and non-compliance with company is committed to making their supply chains more employment standards. socially responsible and they provided valuable inputs on To advance the Sustainable Development Goals — adhering to the Ten Principles of the UN Global Compact, the ILO Fundamental Principles and Rights at Work and the UN Guiding Principles on Business and Human Rights, and taking into account their interlinkages and reinforcing effects — companies participating in the UN Global Compact Action Platform on Decent Work in Global Supply Chains commit to: COMMITMENT 1: COMMUNICATION COMMITMENT 4: LEADERSHIP Communicate the importance of respecting human rights and labour rights in Undertake efforts to enhance the positive social and labour effects of our our supply chains, engaging our executive leadership, our colleagues and our operations to achieve decent work for all, taking into account the Tripartite suppliers through continuous dialogue. Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration). COMMITMENT 2: TRANSPARENCY Take steps to understand our supply chains, identifying salient human rights COMMITMENT 5: COLLABORATION and labour rights risks, and assessing potential human rights and labour rights Collaborate with others and share experiences to scale efforts to achieve impacts. greater transparency. COMMITMENT 3: ENGAGEMENT COMMITMENT 6: ACCOUNTABILITY Build the capacity of our partners and suppliers in their efforts to ensure Be accountable for our actions by tracking and reporting decent working con-ditions in their operations, giving special consideration on our progress. to the needs of SMEs, and improve the knowledge of workers on their fundamental rights. 21 UNITED NATIONS GLOBAL COMPACT DECENT WORK IN GLOBAL SUPPLY CHAINS: A BASELINE REPORT ABOUT THE UNITED NATIONS GLOBAL COMPACT The United Nations Global Compact is a call to companies everywhere to align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues embodied in the Sustainable Development Goals. The UN Global Compact is a leadership platform for the development, implementation and disclosure of responsible corporate practices. Launched in 2000, it is the largest corporate sustainability initiative in the world, with more than 9,500 companies and 3,000 non- business signatories based in over 160 countries, and more than 70 Local Networks. www.unglobalcompact.org Follow @globalcompact on social media and join the conversation using hashtag #DecentWork. UN Global Compact Team Anita Househam (Lead) Elisabeth Anna Resch Pia Haslauer Angie Hyo Jung Kim ABOUT THE BASELINE REPORT ABOUT THE DECENT WORK IN GLOBAL SUPPLY CHAINS This report was prepared by the UN Global Compact for the ACTION PLATFORM UN Global Compact Decent Work in Global Supply Chains The United Nations Global Compact Action Platform on Decent Action Platform. Work in Global Supply Chains is an alliance of companies The assessment is based on data of bilateral interviews with committed to respecting human rights and fundamental supply chain, procurement, and sustainability executives of 17 of principles and rights at work by leveraging their supply chains the companies that participate in the Action Platform on Decent and taking collective action to address decent work deficits. This Work in Global Supply Chains of the UN Global Compact. platform will build the case for improving decent work in global supply chains and demonstrate how labour rights and human The UN Global Compact would like to thank the following rights are critical for achieving the UN Sustainable Development organisations for their valuable insight and contribution to Goals (SDGs). the report: Accenture, A.P. Moller-Maersk, Assent Compliance Incorporated, For further information, please visit: www.unglobalcompact.org/ BASF SE, Fuji Xerox Co., Ltd., INDITEX, Nestlé S.A., Pernod take-action/action-platforms/decent-work-supply-chains Ricard, Pirelli & C. S.p.A., RELX Group plc, Restaurantes Toks S.A. de C.V., Sakhalin Energy Investment Company Ltd., SAP Ariba, Action Platform Partners Total, Unilever, UPM-Kymmene Corporation, Volvo Cars, Global Compact Network Japan, Global Compact Network Russia, Global Compact Network Spain, Global Compact Network Turkey, Global Compact Network UK September 2018 Action Platform Patrons 22