KnowTheChain, a programme of the Business & Human Rights Resource Centre, published its Good Practice Guide (August 2024). The guide showcases positive practices to address and disclose supply chain forced labour risks, from KnowTheChain’s annual benchmarking of companies in three sectors: apparel and footwear, food and beverage, and information and communication technology (ICT).
Human Level’s Take: Forced labour is a growing risk, worsened by a rising cost of living, economic shocks and inflation, and climate change-induced social and economic upheaval. The greatest risks often lie within a company’s supply chain, where both visibility and leverage can be limited. At the same time, legal requirements for disclosure are increasing, including modern slavery laws, forced labour import bans, and mandatory due diligence legislation like the EU Corporate Sustainability Due Diligence Directive. In its guidance for companies, KnowTheChain points out that human rights due diligence to tackle forced labour in the supply chain can’t be done in a piecemeal way because of the complex nature of the challenge. For example, rights like freedom of association and collective bargaining underpin other human rights at work, making these issues a fundamental component of a modern slavery approach. As another example, buyers’ purchasing behaviours can shape the recruitment practices of suppliers and labour agencies and incentivise the use of contract work, which poses heightened risks to workers. A comprehensive approach to due diligence is part of the solution to these risks. KnowTheChain’s guidance showcases learnings, resources and practical examples from companies to provide direction on where to start.
Key points from the report:
- Why disclosure matters: Public reporting on how a company manages human rights risks in its supply chain is a fundamental part of human rights due diligence and a requirement under the growing body of mandatory due diligence regulations in the EU and elsewhere. Transparency fosters better relationships and trust with stakeholders and signals a willingness to address risks and impacts. But KnowTheChain underscores that disclosure on supply chain risks is not just about adhering to legislation. It’s also an important tool to help companies tackle the challenges of a complex and opaque supply chain. For example, knowing all sourcing locations can help a company to detect unauthorised subcontracting. In addition, with sufficient information about a company’s suppliers and sourcing practices, external stakeholders can help identify human rights risks early on and provide early notifications if suppliers are violating standards, allowing companies to address risks quickly and keep them from escalating. And sharing information about supply chain challenges and practices with peers can help bring attention to shared risks. All of this can also have both operational and reputational benefits.
- Areas where improvement is needed: The benchmarking shows mixed results on companies’ readiness to address the increasing risks of forced labour. For example, 58% of companies conduct human rights risk assessments on issues affecting workers, but action is not a guaranteed outcome. Only 11% of companies report that they are engaging with trade unions to support freedom of association and collective bargaining in supply chains. In addition, while 72% of companies have a grievance mechanism open to supply chain workers, only 18% disclose data on how the mechanism is used in practice. And few companies have conducted a living wage analysis or developed a strategy. Another key topic where KnowTheChain has surfaced lagging practices is responsible recruitment. Many companies have an Employer Pays Principle-Aligned policy to require employers to cover the costs of recruitment, but far fewer companies report on actions to implement their policies in practice (12% in apparel and footwear, 12% in food and beverage, and 13% in ICT). In addition, a minority of companies have conducted due diligence on their labour pipelines to ensure ethical recruitment practices (17% in apparel and footwear, 12% in food and beverage, and 13% in ICT). When it comes to remedy, 18% of apparel and footwear companies disclose a clear process for providing remedy, along with 27% of food and beverage companies and 18% of ICT companies. Further, only a few companies report that they are providing training and capacity-building to suppliers to cascade their own standards (15% in apparel and footwear, 10% in food and beverage, and 18% in ICT).
- Navigating the guide: KnowTheChain’s guide contains a wealth of knowledge to tackle the challenges highlighted above. The guide is designed for companies to narrow in on areas where they need additional guidance and inspiration. The topics covered include: Board oversight (starting on p. 7), Supply chain traceability and transparency (p. 8), Risk assessment (p. 10), Purchasing practices (p. 12), Living wage (p. 14), Recruitment (p. 16), Freedom of association and collective bargaining (p. 21), Monitoring (p. 24), Remedy (p. 25), and Training and capacity-building to cascade standards (p. 28). Specifically, the guide includes performance targets for each issue, including the type and level of public disclosure expected; concrete examples of how companies are taking action on topics in practice; and guidance on where to start, including resources, questions to discuss internally and specific areas to focus on.
