How do we protect the weakest?

Managing modern slavery risks in supply chains during COVID-19.

When the COVID-19 pandemic hit the world in early 2020, it had a massive impact on supply chains, known as ‘a global supply and demand shock’. Changes in consumer behaviour, from panic buying toilet roll, to no longer eating out and a surge in demand for personal protective equipment (PPE), meant that supply chains had to change, and rapidly.

Research by Dr Martin C. Schleper and colleagues has revealed that the shifts in demand patterns, disrupted supply flows and weakened risk management caused by COVID-19 had implications for workers’ vulnerability to exploitation - modern slavery being the most extreme form of exploitation.

Demand and supply

For some businesses and institutions – including the UK’s National Health Service – the urgent new or increased need for certain products, such as PPE, required rapid new suppliers to be found. This urgent extension of suppliers meant that there was little opportunity for comprehensive modern slavery risk assessments and checks.

For other products, such as clothing, demand collapsed. Orders were cancelled and payments withheld, sometimes for products that were already on their way, leaving businesses with unsellable stock and idle capacity in their supply chains. Industries predominately based in less well-regulated countries, with already high risks of labour exploitation, were mostly left alone to shoulder the burden of the shock, potentially leaving workers and middle managers without an income and / or at more risk of exploitative employment practices.

Modern slavery and disruption of usual mitigation mechanisms

Prior to the pandemic, despite policy and law advancement over the past years, the G20 countries alone imported products at risk of being made by slave labour worth $354 billion annually (Global Slavery Index (GSI) 2018) and it was estimated that 40 million people worldwide were living in modern slavery. Whilst there is no globally agreed definition of modern slavery, it includes servitude, forced labour, and human trafficking from which victims are unable to leave their situation of exploitation, controlled by threats, punishment, violence, coercion, and deception.

Detecting, preventing, and mitigating modern slavery in supply chains has always been a challenge for businesses and it is recognised that modern slavery may be present in every supply chain: from the clothes we wear, to the food we eat and the digital devices we use every day.

Traditionally, given the widespread prevalence of modern slavery in supply chains, businesses have taken a risk-based approach, identifying where they are more exposed to modern slavery in their supply chains and where they have opportunities to reduce and mitigate this risk.

Due to travel restrictions during the pandemic, physical audits of suppliers and their workforces were impossible and, in many businesses, staff across the organisation were moved to other functions focussed on business continuity, thus reducing organisational capacity to detect and remediate instances of labour exploitation.

This led some supply chains to become less transparent altogether and tracing risky supplier behaviour, such as unauthorised subcontracting of orders, became more difficult due to resource constraints and policy-induced mobility restrictions.

With physical distancing and other lockdown measures in place, it also became much more difficult for victims of modern slavery to access support and disclose their situation.

Time for change: leading the way

“Whilst the COVID-19 pandemic has impacted on working conditions and workers’ rights in upstream supply chains, this crisis has certainly also disrupted the “common wisdom” of doing business and human interaction in general, and may thus represent a window of opportunity to rethink current supply chain designs and trade relationships,” explains Dr Schleper.

For example, consumer power, if purchasing behaviour is permanently orientated towards ethical values, could act as a means to reduce and even avoid labour exploitation. But, it remains an ideal.

However, existing sustainable supply chain management approaches do demonstrate their benefits, argues Dr Schleper. Firstly, the value-orientated and long-term supply chain management necessary for sustainability proves beneficial in the response to volatile and extreme events, such as COVID-19 and reducing modern slavery. Collaboration with external stakeholders is crucial for sustainable supply chain management. Finding and working with new suppliers at short notice can be more safely achieved if these are already supplying other businesses (e.g., competitors or supply chain actors in your own network).

Secondly, participation in sustainability initiatives and industry consortia (e.g., Responsible Business Alliance, Roundtable for Sustainable Palm Oil) allow firms to indirectly manage lower-tier suppliers through the implementation of industry-wide standards and guidelines, or even to directly exchange auditing and assessment information.

Thirdly, information exchange and collaboration involved in sustainable supply chain management approaches, such as with unions, NGOs, and other expert stakeholders increase supply chain transparency and allow for a proactive detection of early warning signals on deteriorating conditions even when physical audits are disrupted.

And finally, in risk management in general, studies conducted after the 2008 financial crisis have shown that strategically formulated social and environmental practices that are based on long-term relationships and commitments – rather than mere tick-box compliance exercises – can significantly increase organisational resilience and thus better prepare for these exceptional states.

“So far, supply chain resilience has taken a largely supply continuity view, but COVID-19 may show us that supply chain resilience goes hand in hand with environmental and social sustainability. The time to prove that proactive, value-oriented, and long-term supply chain management is a superior risk management approach than traditional approaches is now!” Dr Schleper concludes.