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Talking Business: Ask questions of your supply chain

Much of the value of a company is determined by how it is perceived and stories about garments being made in North Korea or by underpaid factory workers can do lasting damage.

It is by no means easy to ensure abuses are not happening in your supply chain. Recently, a report accused some of the clothing factories used by Marks & Spencer in Sri Lanka, Bangladesh and India of underpaying their workers. M&S said it ensures its cost prices are high enough to enable suppliers in those countries to pay a fair living wage – but pointed out that it cannot actually dictate that wage.

Last month, Australian surf brand Rip Curl apologised to customers for selling ski jackets made in North Korean factories where there were, reportedly, poor working conditions. Rip Curl said it had not been aware of the situation, and took full responsibility for the “screw-up”.

Both instances highlight that it is difficult to ensure your suppliers are behaving as you want and need them to, let alone the suppliers of your suppliers. Many brands and retailers will be in the same position, with a huge range of stock created by a massive global network. They will only really be aware of their immediate, contracted supplier, with little or no visibility of those further down the chain.

Obtaining reliable information from supply chains is far from easy. Most are increasingly global, complex and dynamic, with each supplier competing over labour costs and logistics. Add to this the fact that most suppliers are unwilling to share information as they seek to protect the identity of their own supply chains, and the task becomes even more challenging.

The issues are not going to go away, however, and the value of brand reputations continues to rise – so action is necessary. Indeed, the Modern Slavery Act 2015 compels companies to report on the action they are taking to prevent abuse in their supply chains.

One option is to take a risk-based approach. The likelihood of human rights issues, environmental impact or animal welfare concerns associated with a material or location can be assessed by correlating data that is available. With this information brands can prioritise products and categories where their exposure to these risks needs to be evaluated, and then put a plan in place to control that exposure.

There will continue to be supply chain scandals, but it is no longer good enough to say “we did not know”. It is not a perfect science, but start asking questions of your supply chain. If the answers are not what you are looking for, you might have found a potential risk to your brand.

Tim Wilson is co-founder and director of supply chain monitoring firm Historic Futures

 

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