Supply Chain Dark Alleys: The Gravest Social Violations We’ve Seen

With one third of companies surveyed either confirming or suspecting modern slavery in their supply chains, how do we take action?

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Grave social and ethical violations occur across the supply chain every day. As you read this blog, adults and children are being forced to work in the dark alleys of the supply chain. People and communities are being discriminated against. And corruption and fraud are thriving in established and third-world countries alike.  

These aren’t hypotheticals. These anomolies are happening right now. We know because we asked.

Our latest research survey found that nearly one third of companies have confirmed or suspected an incident of forced labour or slavery in their supply chains. The actual number is likely larger, considering the sensitivities associated with answering a question about slavery. This finding represents a systemic failure that needs to be addressed immediately,  which requires us all to take a serious and deep look at our ethical sourcing programs.

Nearly one third of companies have confirmed or suspected an incident of forced labour or slavery in their supply chain

“Everyone agrees that these behaviors have no place in our society,” said Michael Ford, Global Lead for EHS and Sustainability at Avetta. “But how many of us have equipped our teams with the training, budgets and resources needed to drive change? Action must start at the top.”

What’s the gravest social violation you’ve ever seen or uncovered in the supply chain?

We asked the question. The answers were alarming, yet not surprising.  

1. Child labour

Child labour was the most frequent social violation reported. Amazingly, only 82% of procurement leaders surveyed by Procurious include supplier clauses that state child labour should not be used in their contracts.

If your suppliers are engaging in child labour and your team hasn’t taken preventative measures, procurement owns some responsibility. 

That may seem bold and direct. Hopefully it’s the honest dose of truth we all need. We’ve been talking about ethics and social responsibility for years. We proudly champion our ESG pledges and commitments. We know right from wrong. Yet we rarely look into the shadows of our supply chain. Few companies invest enough time, money and technology to solve the problem.

The other reality: Every company is at risk. In a recent example, a large CPG company has been  accused of child labour on cocoa farms in Ghana. The company was alleged to be employing child labour after an investigation found footage of children as young as 10 working on cocoa farms.

One of the children at the farm told the story of how she was afraid to speak out. She was asked to help with childcare, but instead, was forced to work long hours and wasn’t allowed to go to school. 

2. Slavery and Forced labour

Even a single instance of slavery or forced labour in the supply chain is too much. Our survey found that 9% of respondents have identified an instance of modern slavery or forced labour in the supply chain. Meanwhile, another 20% have suspected it but can’t confirm it. 

Modern slavery is not an easy problem to solve. Unfortunately, when money and power is at stake, there’s always someone in the world ready to take advantage at all costs.

Still, there are many steps procurement and sourcing leaders can take to make it as hard as possible on bad actors. These include: 

• Developing multi-tier supply chain visibility to see who is working on your brand
• Verifying supplier labour practices and audit results
• Requiring suppliers to offer an easy, practical and safe method for employees to report violations 
• Insisting that strategic partners vet and verify sub-tier suppliers in their own network
• Monitoring chatter — including social media platforms, the news, the dark web and more
• Sharing red flags and suspected violations with industry, NGOs and competitors

“Sharing information is key. The alleys of our supply chain are dark and deep, which makes it impossible for a single company to monitor everything. We need to multiply our reach and share our intelligence,” said Ford.

3. Fraud and Corruption

Fraud and corruption was the second most common violation cited. The Procurious community has experienced many different types, including:

• Wage theft
• Long working hours and unfair working conditions
• Payment disparity
• Bribery

Perhaps one of the biggest and most recent examples of fraud comes from JBS. JBS may not be a household name, but its products are everywhere — the company supplies Primo ham, Huon salmon, and even McDonald’s burgers. 

Bribery played a big role in the company’s growth. In 2020, the parent company of JBS – J&F Investimentos – pleaded guilty to U.S. foreign bribery charges and paid $128.25 million in fines. This is in addition to a $1.85 billion fine in Brazil for its role in corruption scandals against Brazil’s former president, Michel Temer. J&F’s top executives admitted to bribing more than 1,900 politicians to fuel business ventures. 

Fighting Back: Structural Issues and Best Practices 

Unfortunately, there’s no single solution to eradicating bad actors in the supply chain. But as procurement leaders, we have the power and influence to drive change and hold businesses accountable. 

Our starting place should be visibility. We found that more than half of organisations only monitor 10% of their sub-tier suppliers. Naturally, it’s difficult to identify ethical violations when procurement only monitors a fraction of its supply base.

In terms of sourcing best practice, our survey found that third-party supplier audits and contractual KPIs and incentives for positive supplier performance were the top two strategies for improving the ethical performance of supply chains. It’s important to empower your suppliers to speak up when they see something instead of hiding because they don’t want to risk losing your business. 

Evaluating your suppliers upfront is also essential. Robust verification and due-diligence during the selection and onboarding stage can help avoid ethical sourcing violations in the future. 

Ethical sourcing violations may seem insurmountable. However, with the right team, strategies and technology in place, your organisation can make a difference. 

Check out our recent report on ethical sourcing to learn more: Using Procurement’s Power for Good: A Global Approach to Ethical Sourcing