Event

World Economic Forum’s Global Agenda Council on Human Rights Examines Global Supply Chains

Where

London

When

July 22, 2015

In late June, members of the World Economic Forum’s Global Agenda Council (GAC) on Human Rights met in London to advance its initiative to improve protection of human rights in global supply chains. Since fall 2014 the GAC on Human Rights has been working to articulate a new framework for identifying and addressing human rights issues in supply chains that span the globe, supplying raw material and finished products across thousands of miles.

To date, the dominant model used by global companies to address supply chain human rights issues is best described as ‘supplier policing.’ This involves buyer companies establishing a set of human rights standards that they require their suppliers to meet. They then hire auditors to monitor a subset of these suppliers’ operations to ensure compliance with these standards. When risks and violations are found, the primary costs of remedying non-compliance are passed down to the suppliers.

The policing model has significant limitations. First, many of the most serious problems occur deep in buyer companies’ supply chains, far outside the scope of audits. Further, suppliers frequently lack the financial resources or capacity to remedy the problems identified by auditing, a problem exacerbated by the business models of many global companies, who force their suppliers to compete on very low profit margins. Perhaps most importantly, many of the most distressing human rights violations in global supply chains are the result of systemic economic, social and political factors that can’t be fully addressed by individual suppliers or companies, or even a group of companies acting collectively.

Recognizing these limitations, the GAC on Human Rights is working to develop a more effective model for addressing human rights challenges in supply chains.  A better model will focus on industry-wide approaches that consider the full scope of each industry’s supply chain obligations, analyze the real risks in the relevant sector and identify the costs of addressing them. Such a model will also develop comprehensive solutions to human rights issues, relying on a foundation of shared financial responsibility among local suppliers, global companies, local and foreign governments, and international financial institutions.

In the Bangladesh manufacturing sector for example, an effective industry wide approach would involve collaboration between Western and Bangladeshi governments, local suppliers, global apparel brands and retailers, financial institutions, donors and other stakeholders. Together they could address the systemic issues that underlie disasters like the Rana Plaza collapse and Tazreen factory fire – such as poor infrastructure and lack of transparency in indirect sourcing.

The GAC on Human Rights is working to define the scope of companies’ responsibility for problems far removed from them by multiple layers of their supply chain, to compile best practices for assessing the true human rights risks and calculating the cost of remedies, and to propose a fair and effective way in which multiple stakeholders could be brought together to collaborate in addressing these systemic challenges.

In the coming months the GAC on Human Rights will complete its research on these questions and prepare a report outlining the proposed shared responsibility framework to the WEF Global Summit in Abu Dhabi in October. In the second year effort, the GAC will seek to work with other industry-specific GACs to apply this framework to identified industries. This is an ambitious agenda – but one that’s crucial to grappling effectively with the most serious and systemic human rights issues in supply chains.