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Mhlnews 11070 Corporate Social Responsibility Folders
Mhlnews 11070 Corporate Social Responsibility Folders
Mhlnews 11070 Corporate Social Responsibility Folders
Mhlnews 11070 Corporate Social Responsibility Folders
Mhlnews 11070 Corporate Social Responsibility Folders

Who’s Responsible for Minding the Supply Chain?

April 4, 2019
Talk is cheap, but most large companies are failing their supply chains when it comes to human rights issues.

People have an almost infinite capacity for convincing themselves that “things have never been this bad before,” even when there’s plenty of evidence that, yeah, this kind of thing—whatever it is—has been going on for a lot longer than you’ve been paying attention to it. What’s clear, though, is that the drive to actually do something about these bad things seems to be overwhelmed by just how large a problem these things are.

For instance, I’m looking at a study called the 2018 Corporate Human Rights Benchmark (CHRB), which looks at how well a large group of global companies (mostly manufacturers and retailers in the food, apparel, or oil & gas industries) are performing when it comes to demonstrating respect for human rights. Each company is graded on how well they do in a range of corporate social responsibility (CSR) metrics based on the UN Guiding Principles on Business and Human Rights. This includes things like child and forced labor, women’s rights, working hours, water use, and purchasing practices. A perfect score would be 100% (i.e., the company has disclosed how it measures every human rights metric on the CHRB list).

Tellingly, no company on the list of 101 companies studied had a score of 90 or above, and only one scored between 80-90% (apparel manufacturer Adidas). Mining companies Rio Tinto and BHP Billiton were the only companies to score within the 70-80% range. In fact, over a quarter of the companies scored less than 10%, and almost two-thirds scored less than 30%. Companies in that less-than-30% range include some well-known U.S. brands, such as Costco, Hershey’s, Kraft Heinz, Kroger, McDonald’s, Mondelez, Starbucks, Target, Walmart and Yum! Brands.

The basic contention of the CHRB study is that companies are doing great at paying lip service to human rights protections, but many of them aren’t doing much if anything to back it up in practice. The study found, for instance, that among the companies they looked at, virtually none of them are demonstrating a strong commitment to ensuring their employees and workers within their supply chains are being paid a living wage. Now of course, this requires a bit of drilldown analysis since every company in the study is subject to minimum wage requirements within their countries of origin, so the argument seems to actually center on whether the minimum wage threshold should be raised, which then gets into a political discussion on the difference between a minimum wage and a “living wage.” Of course, these sorts of studies are highly politicized to begin with, so take that caveat into consideration.

On the supply chain side, the discussion gets murkier, as it raises a question nobody has yet adequately answered: Who ultimately is responsible for human rights abuses at the supply chain’s entry point (e.g., farmers on palm oil or chocolate plantations, workers in electronic assembly plants in the Far East, or garment workers in sweatshop factories)?

“While we see clear progress from some companies, the majority are failing to make the grade,” points out Margaret Wachenfeld, CHRB independent director and co-lead of the CHRB Methodology Committee. “Seventy years after the adoption of the Universal Declaration of Human Rights, this is very concerning. If businesses will not clearly demonstrate their respect for human rights, then governments should step in with tougher laws to protect people.”

Two things stand out in Wachenfeld’s statement:

● That it’s been 70 years that they’ve been talking about this particular human rights initiative, with apparently very little progress to show for it.

● That even after 70 years, some people are still looking to governments to police companies, when if we’ve learned nothing else throughout the 20th Century and now well into the 21st, it’s that governments aren’t exactly the best place to start when it comes to ensuring basic human rights for all the citizens of the planet.

EcoVadis, a provider of sustainable procurement ratings, conducted a separate study of over 20,000 companies, examining how well they’re progressing on adopting the UN’s Global Compact Principles, which are similar but not identical to the aforementioned Guiding Principles (it gets confusing, doesn’t it?). The most telling takeaway from the EcoVadis study is that small and medium-sized companies tend to perform better on addressing CSR issues than do the large global companies, which the study attributes to the smaller companies’ ability to act faster.

Whatever the case, let’s hope that all of these CSR initiatives take root and are led by champions within the companies themselves who will take ownership for cleaning up their supply chain and keeping them clean. If we have to wait for governments and the bureaucrats who run them to fix society’s ills, then we’re all in big trouble.

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