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Ensuring the integrity of the supply chain has become a top priority for multinational corporations as they strive to protect their brand names from being linked to unethical and illegal employment practices such as child labor and human trafficking.
To protect this supply chain integrity, a growing number of corporations depend on the services of companies that provide third-party independent audits or inspections of vendors and contractors that supply goods and services. While these inspectors do offer a valuable and needed service, the questions people have begun to ask are: “Who are these inspectors?” and “Who audits them to ensure that they are on the up and up?” The answers are as complicated as the global workplace issues multinational businesses must contend with every day.
“There are close to 9,500 codes and standards that these third-party auditors monitor to ensure suppliers comply with accepted international business practices,” said Craig Moss, director of corporate programs and training for Social Accountability International (SAI) in New York City. “Most multinational ‘brand’ companies have their own codes of business conduct that inspectors will use to ‘audit’ the suppliers. It can be confusing for suppliers and contractors because they are often audited multiple times for compliance with multiple business standards.”
SAI has developed one of the most commonly used business standards for ethical and accepted business and employment practices. The standard, SA 8000, is based on guidelines developed by the International Labour Organization (ILO). Businesses that are certified SA 8000 compliant are setting the bar for all businesses to measure against, according to Moss. Still, the large number of codes and standards creates a complex maze of compliance issues.
Familiar Standards and Codes
However, most international audit and inspection companies are familiar with these varying standards and codes. Typically the codes of conduct of multinational corporations are similar and have slight variations depending on the industry and need of the corporation.
The size and scope of international auditing and inspecting might surprise many who are unfamiliar with the industry. According to Moss, dozens of companies throughout the world offer the services—with approximately 20 major players in the business. Most of the companies are headquartered in the U.S. and Europe but have multiple locations and thousands of employees scattered across the globe. For example TÜV SÜD, one of the largest of these companies, has a staff of more than 16,000 employees who work in dozens of countries.
“It’s definitely a growth industry, because multinational firms understand the value and the necessity of making sure their suppliers are not breaking international law or using forced labor,” said Moss, whose organization develops international business standards and provides training to businesses on how to comply with those standards.
Although the inspecting companies audit for compliance with any number of standards such as workplace safety, quality control and child labor, the international focus on human trafficking and forced labor issues has intensified in recent years.
“Corporate awareness is indeed improving on this issue,” said Aurelie Hauchere Vuong with the ILO’s Special Action Program to Combat Forced Labor. “More and more companies are taking action to prevent trafficking and forced labor in their supply chain.”
Much of this effort involves corporations that are including and adding provisions to their codes of conduct condemning human trafficking and the use of forced labor. Big, well-known corporations can apply the most pressure and help prevent suppliers and contractors from acquiring workers from questionable sources, according to Moss and Hauchere Vuong.
“It really is a matter of economic necessity and incentive. If a supplier or contractor knows that they stand to lose business and a lot of money because they have been participating in questionable employment practices, then those businesses become much more vigilant in curtailing the human trafficking trade,” Moss said.
Multinational businesses that use multiple suppliers and contractors to produce and deliver goods, such as Nike, The Gap, Wal-Mart and Apple, wield a “brand power” that can help effect change, Moss said. In addition, this brand effect works in ensuring that third-party auditors and inspectors conduct fair and ethical inspections.
“Put simply, end-to-end supply chain integrity just makes good business sense,” said Ishan Palit, president & CEO of TÜV SÜD Asia Pacific region. “Consumers are now well informed of its benefits, and demand for ethically produced products has subsequently skyrocketed.”
According to research conducted by BBMG, a brand marketing and research group in New York, 87 percent of consumers said they are more likely to buy from a company that supports fair labor and trade practices than one that does not.
As the pressure for businesses to comply with ethical labor practices intensifies, more businesses are turning to groups such as the ILO and SAI to provide the training and technical assistance they need to ensure that their corporate supply chain complies with accepted business standards.
“The ILO is working to provide technical guidance and training to companies that want to address these fair labor issues,” said Hauchere Vuong. “By enabling staff, managers, buyers and social auditors to detect and recognize forced labor/trafficking situations, we contribute to … better compliance.”
With better training and raised awareness on the issue, pressure to do the right thing has increased globally, but no system is perfect, Hauchere Vuong acknowledged. She added that training and certification programs are the keys to making sure that third-party inspectors and auditors look for the right things and recognize signs of trouble.
While SAI’s Moss said that most if not all legitimate suppliers and contractors have gotten the message and are working to eradicate human trafficking and forced labor, much work needs to be done.
The key challenge, according to Shawn MacDonald, director of programs and research with Verité, a New Hampshire-based organization dedicated to ending human trafficking and forced labor, is ensuring that every part of an organization’s labor supply chain adheres to international employment standards. Often businesses use labor brokers and search firms that in turn subcontract the task of recruiting and finding workers. The multi-tiered system can create deceiving situations in which suppliers appear to comply with proper standards. However, lower-level subcontractors aren’t subject to the same level of scrutiny. This is where problems develop, MacDonald said. In many cases, serious forced labor or human trafficking problems go undetected because inspectors don’t delve deep enough and get an accurate picture of the supply chain, he added.
“It probably appears on the surface that the suppliers and contractors to the brand name corporation are complying with all the employment standards, and most likely they are,” said MacDonald. “Where this gets muddy and complicated are when you look at the subcontractors and labor brokers who might not be following the rules and accepted practices.”
Verité joined with Manpower Group Inc. to create a comprehensive framework for combatting human trafficking. The Verité and Manpower Group “Ethical Framework for Cross-Border Labor Recruitment” offers a checklist of specific standards of ethical practice for firms involved in cross-border recruitment of workers. These standards are designed to protect workers against abuse and, according to MacDonald, will be supported by a verification system that certifies business compliance.
Big Fees Up Front
In many cases, MacDonald said, labor brokers force workers into a lifetime of debt by charging exorbitant fees up front for work visas and guarantees of job placements. Legitimate businesses that hire these workers typically are unaware of arrangements with the brokers.
“So, in effect, the businesses hire the workers and everything looks OK on the face of it, when in reality these workers are so deep into debt with the brokers that they have no hope of climbing out of that hole,” MacDonald said. “These new standards can change that and help companies make sure that their supply chain is free from labor abuses from top to bottom.”
The interest and awareness in standards that ensure the integrity of all sources of labor is growing, MacDonald and others interviewed for this article agree. The challenge is to get everyone on the same page and have companies use the new standards when conducting audits and inspections.
“The ultimate goal is a safe and transparent system for cross-border labor recruitment, which provides workers with the information they need to pursue job opportunities and provide them protection against labor abuses,” MacDonald said.
Bill Leonard is a senior writer for SHRM.
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