The OECD published a long report entitled Due diligence guidance for responsible supply chains in the garment and footwear sector. I discovered it thanks for Sophie Pruvost.
It is written with the production of garments and shoes in Bangladesh, China, India, Marocco, and other countries. I have to say, most of its content is applicable to all types of products.
I found an interesting table starting on page 59 — ‘Factors that may affect the nature and extent of due diligence in relation to supplier assessments’. Here are the first 3 factors.
Many high-risk suppliers
With a view of working towards assessing all existing higher-risk supplier, the enterprise may prioritise the assessment of higher-risk suppliers that are most significant in terms of the size of the enterprise, percentage of product that the enterprise sources (or countries in terms of the percentage of sourcing); where the gravity of impact is expected to be the most severe; or where harms may be irremediable.
Enterprise lacks leverage with a direct supplier
There are many instances in which an enterprise may lack leverage with its direct supplier, for example (a) the enterprise is smaller than its supplier; or (b) the quantity the enterprise sources from the supplier is limited. In such cases, the enterprise has difficulty gathering information from the supplier, accessing the facilities of the supplier, or convincing its supplier to participate in an a facility assessment. Nonetheless, the enterprise holds a responsibility to conduct due diligence. In this case, the enterprise may:
- Increase its leverage with its supplier, such as increasing orders, moving towards longer-term contracts, publicise the supplier’s corrective action Plans, etc. (where feasible)
- Pool leverage with other buyers sourcing from the same supplier, for example by aligning on activities, timelines and follow-up measures included in the supplier’s corrective action plan
- Over time, only pre-qualify and engage with suppliers that are willing to undergo assessments. [..] The enterprise may also direct sourcing towards suppliers that have been assessed by credible sector or multi-stakeholder initiatives.
If a high-risk supplier for severe harm is unwilling to undergo an assessment, the enterprise should consider disengaging from the supplier.
Enterprise sources through an intermediary (e.g. buying agent)
The enterprise has a responsibility to conduct due diligence even if it is sourcing through an intermediary.
The enterprise may conduct due diligence in accordance with this Guidance, or the enterprise may require that its buying agents assess the suppliers that they source from. In this case, the intermediary may include the cost of assessing suppliers into its pricing framework.
The enterprise may provide its support to its buying agents to assess suppliers; for example, by facilitating introduction to sector-wide or multi-stakeholder initiatives that assess suppliers. […]
The report also insists on the importance of two key concepts when evaluating the risks inherent to a company’s supply chain.
Traceability is the process by which enterprises track materials and products and the conditions under which they were produced […] through the supply chain. It’s important to note that traceability as a tool may help an enterprise gain information on upstream actors, however, an enterprise cannot stop at traceability. […]
Engagement with ‘choke points’
‘Choke points’ may be identified using a number of considerations, such as:
- Key points of transformation in the supply chain
- Stages in the supply chain that generally include relatively few actors that process a majority of the commodity
- Stages in the supply chain with visibility and control over the circumstances of production and trade upstreamBy definition, an enterprise shares some of the same upstream suppliers as the enterprise operating at a choke point in its supply chain. However, the enterprise operating at the choke point likely holds greater visibility or leverage over those upstream suppliers. If an enterprise can reasonably determine that enterprises operating at choke points in its supply chain are conducting due diligence on their upstream suppliers, then the enterprise can likewise reasonably determine that risks of adverse impact linked to its own upstream suppliers have been identified, prevented and mitigated.
The enterprise may:
- Identify suppliers operating at choke points in its supply chain for products that are linked to severe impacts upstream (i.e. beyond where the enterprise has visibility)
- Verify that enterprises operating at choke points are identifying, preventing and mitigating harms linked to their suppliers
Example choke points in the garment and footwear supply chain may include:
- Global commodities merchandisers (e.g. for cotton and rubber)
- Exporters, processors, wholesalers (e.g. for fragmented supply chains)
- Chemical plants (e.g. for synthetic fibres)
- Smelter and refiners (e.g. for metals)