Should HR have an influence over supply chain decisions?

A new report by international aid agency Baptist World Aid has unveiled issues within the supply chains of the global retail industry.

But can HR influence the procurement of its company’s suppliers?

According to Kate Nicholl, director at The Faculty, “it’s almost in [HR’s] best interest to know what’s going on and to start putting a spotlight on it”.

Baptist World Aid’s report, Behind the Barcode: Ending Worker Exploitation, revealed that although over half of retail companies have fully traced their final stage manufacturers, just 9% have fully traced down to raw materials.

Researchers also discovered that only 14% of companies are paying some form of living wage, and just a third of companies have a functioning grievance mechanism for overseas workers.

There have been highly publicised supply chain exploitation cases over the past year, including Panorama’s exposure of the conditions at Pegatron, a Chinese factory that manufactures Apple products, and the Four Corners documentary on the exploitation of working holidaymakers in Australia.

According to Steve Shepherd, employment market analyst at Randstad Australia, there are several practices that organisations should adhere to across all levels of their supply chains.

These include:

• Fair and transparent hiring frameworks
• Quality control of all suppliers, including management of the supplier selection process in some cases
• Contract management support and legal counsel to make sure all partners and clients comply with employment laws and regulations
• Compliance monitoring and management with labour and immigration laws
• Validated supplier hiring practices
• Supplier performance management and process for the removal of non-compliant suppliers

HR’s involvement in the monitoring of the supply chain can also simplify some aspects of their job. For example, constructing Corporate Social Responsibilities (CSRs) is made easier – and a genuine mission.

Nicholl warned that once these standards are set, they must be sustained.

“There’s a difference between calling yourself compliant and passing yourself off as a leader in sustainable sourcing practices,” she said. “You need to be sure you can stand by it if you have put it out there.”

HR checklist

HR professionals should look out for the following warning signs that supply chain partners may be exploiting workers:

• Workers are not provided with legally compliant contracts
• There are multiple employment agents and labour brokers in the recruitment supply chain
• Workers are fraudulently charged fees for travel, health checks and work documentation
• Wages are underpaid, delayed or withheld, or there are excessive or illegal wage deductions
• Workers are required to stay in company or broker controlled housing and are prevented from entering or leaving the premises freely
• Discipline and termination practices are physically abusive or humiliating
• Employees engage in excessive overtime beyond legal or code of conduct limits
• Early termination results in monetary penalties or the withholding of wages
• Undocumented migrants are threatened with notification of the authorities if they leave employment
• Workers are forced to pay financial deposits or security fees as “runaway insurance”