Human Rights Abuses and Environmental Violations in Your Supply Chain?

Achieving timely, accurate, and complete supply chain visibility has been, remains, and will probably always be a top priority for companies.

But can you aspire to have end-to-end supply chain visibility, which is what every manufacturer and retailer wants in order to become more agile and responsive, without also accepting end-to-end responsibility?

I first asked that question in August 2014 in “GM Supplier Factory Explosion: Thoughts On Supply Chain Visibility And Responsibility.” And I’ve continued to raise the question in various posts since then, such as “Forced Labor In Supply Chains: The Problem Persists” from last July.

Therefore, it’s not surprising that this headline from The Wall Street Journal caught my attention last week: “Germany to Make Firms Responsible for Policing Abuses by Global Suppliers.” Here are some excerpts from the article by Petra Sorge and William Boston:

“Germany is set to force companies to screen suppliers for environmental violations and human-rights abuses, such as illegal mining and child labor…Under the bill, any company based in Germany with 3,000 employees or more has two years to set up compliance procedures to monitor and stop abuses within its supply chains. They must also create an alert system that would allow third parties and victims to safely report any abuse…Companies with annual revenue of more than 400 million euros (around $484 million) that fail to meet the requirements could face fines of up to 2% of annual sales. Offenders could also be excluded from public tenders for up to three years.”

“This law will bring nothing but bureaucracy because we will not be able to see what is happening all the way down at the end of the supply chains,” Rainer Hundsdörfer [chief executive of printing machine producer Heidelberger Druckmaschinen AG] said.

Not knowing what happens past Tier 1 suppliers is part of the problem, of course. As I highlighted recently in “VF Corporation: Supply Chain Mapping” (and last year in “Supply Chain Mapping – Insights From Indago”):

Supply chain mapping takes time, money, and resources to do it right, and at most companies, there isn’t the leadership and support from upper management to do it. This lack of visibility beyond Tier 1 suppliers not only exposes companies to greater supply chain risks, it also contributes to ongoing issues related to forced labor and poor compliance with environmental laws.

If your company were subjected to a law similar to the one proposed in Germany, how difficult would it be to comply — that is, ensure no environmental violations or human rights abuses existed in your end-to-end supply chains? What are the main challenges to achieving this objective?

We’re asking our Indago supply chain research community those questions in this week’s micro-survey. If you’re interested in contributing to the conversation and learning what your peers in the industry have to say about this topic, join Indago today! Our members will receive the results on Friday.

As I’ve said before, I believe that the scope of end-to-end supply chain visibility must go beyond the status of orders, shipments, and inventory — it must also include having timely, accurate, and complete visibility to labor, safety, environmental, and legal practices across the entire supply chain. And most importantly, you can’t outsource the responsibility; the buck ultimately stops with you, the brand owner. You have to see and walk your supply chain, from start to finish, with your own eyes and feet.

What do you think? Post a comment and share your perspective.

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If you’re a supply chain or logistics practitioner from a manufacturing, retail, or distribution company, I encourage you to learn more about Indago and join our research community. It is confidential, there is no cost to join and the time commitment is minimal (2-5 minutes per week) — plus your participation will help support charitable causes like JDRF, American Logistics Aid Network, American Cancer Society, Feeding America, and Make-A-Wish.

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