Transparency in the supply chain is essential for sustainability and transparency.
It is gaining in importance with tighter regulation and reporting
From a reputational issue, to a legal requirement. This is a short summary
After much discussion, we identify the key elements that must be considered.
Best practice, environmental impacts, modern slave trade and
Human rights. We highlight changes in regulations and provide information.
As an in-house counsel, you can take practical steps
Your board should be able to manage risks and offer advice.
Self
Transcript
Sarah Riding: Sarah, Hello!
Riding, I’m part of the commercial team, and as
You can picture our team as a living supply chain.
Contracts and issues currently. Supply chain issues are not currently being addressed.
remained far from the headlines in recent years and with the current
Uncertainty, we see challenging times ahead for a while
ahead. We have also got the ESG agenda.
This is becoming an increasingly important aspect of life.
Despite organisations lip service to this, there is still a lot to be done.
There are stricter regulations and it is important to follow them.
It is important to make this a priority within organizations. Strong ESG focus
This has been shown to improve supply and investor confidence.
Chain transparency, competitor advantage and enhanced
brand.
This panel is made up of several of my colleagues and me.
We will discuss key sustainability issues and focus our discussion on them
Contracts, environmental impacts, modern slavery, and human rights.
We’ll be highlighting new and changing regulations, as well as some practical suggestions.
You can help your board and manage your risk by taking these steps. You can find out more here.
Ben Stansfield, a planner and author, is the person I am introducing to the panel.
David Lowe, environmental lawyer, is here to discuss modern environmental issues
Slavery; and Kieran Lard from the public legal and regulatory team
It is important to pay attention to the human rights aspects.
Before I go, I want to briefly focus on
These are some of the most important points that relate to supply contracts. It is obvious
We are currently in the period after Covid.
Supply contracts and organisations are the focus of a lot.
They are keen to future-proof them and build accordingly
It’s a window of opportunity for pushing, and resilience is key.
The sustainability agenda. I’m going to just look at a
There are a few practical steps you can take to get started and things to think about.
When you’re looking for supply contracts.
The first is that any sustainability strategy must be developed.
To go all-inclusive across the supply chain. There’s obviously
There are many opportunities available at all stages of a supply-chain cycle, including
Production, sourcing, logistics, and the end of product life are all covered.
It is important that in-house lawyers are included in this agenda.
These obligations can be passed on to your supply contracts. It’s
It’s not about the overarching obligations.
Your own factories and premises, but clearly thinking about
These can be used to spread the word throughout your supply chain. These are just a few of the many ways.
We are seeing that there are obligations within the organization.
Contracts or within supplier codes. So it’s
It is important to look at contracts from a sustainability perspective.
Perspective and making them the best they are from it
agenda.
The second one is really connected to the first, so make sure you are familiar with it.
These objectives are measurable. There are no vague phrases.
Contracts, making sure there are things like KPIs
Reduced packaging, you know what kind of carrots or sticks have?
To ensure that those obligations are met, make sure you have your contract.
meaningful?
The third one is from COVID. We saw many of these.
Some suppliers may be risky, there are not enough site audits, and there is no oversight.
Monitoring is important, but it’s really about building in an effective system.
Governance clauses should not be used as a boilerplate but must be actually written.
It should be possible to make it workable from an ESG and sustainability perspective.
Well, think about what reporting, monitoring, and what
Meetings and the audit rights that you want to flow into them.
Your sustainability agenda.
The last point I make is more of a observation.
So I think that where we saw contracts performing really well, it was coming out.
COVID was that there had been strong supplier engagements.
It’s a traditional way of thinking about relationships.
Again, you want things such as supplier days to build those.
relationships.
So, my two main takeaways are really any of your
If suppliers’ practices are risky, they will ultimately be deemed unacceptable
To be the risky practices of your own organization, so think
Find out how to tail them in your contracts.
As I said, it is important to ensure that contracts are as good as possible.
This could be possible from a sustainability perspective.
If I pass the issue to Ben, Ben will examine it from the perspective of the
environmental perspective.
Ben Stansfield: Sarah, thank you.
Hello, everyone. Environmental issues have been a direct issue in the past.
Emissions are so emissions to land and water. However, this has changed in recent years
Environmental issues have changed a lot and are now more important than ever.
We are more concerned about climate change and its effects.
This is a very important aspect. So I’m going talk to
You can learn a bit more about the prevalence and importance of environmental reporting
Disclosure has really risen in the past 18 years.
24 months, and highlight a couple new laws in environmental protection
These areas will have an impact on supply chains.
For a while, I thought there was a view that if you own a business,
The environment wasn’t directly affected by the actions of the individual.
You know that these issues were beyond sight, beyond mind. But
As a result, consumers have become more sophisticated
We’re more interested in the environment impact of the
Businesses supply change An environmental requirement…
There are many environmental laws which must be complied with
It is possible to produce and publish very detailed environmental reports.
Websites for organisations and even businesses
Aren’t subject to the relevant requirements?
They are not on a voluntary basis like their competitors or because of their
Their stakeholders could be their employees, their customers, or their consumers.
are demanding it. We’re seeing employees demanding it.
Work for companies and customers that are environmentally conscious
Wanting to purchase green services or greener products. There are many options.
A significant push is needed at the moment to tell others and disclose.
To address environmental issues in a transparent manner
Basis, and not just the impact that your business or product has on the environment.
The environment, but also the impact of climate change on you.
That is what investors use to be able compare stocks.
Compare investment opportunities and so on.
So where does this data come from? It must come from somewhere.
Your supply chain has to originate from deep within.
Also, consider your supply chain. These reports are often prepared on an
Annual basis, but it’s not worth waiting until the last month or so
It may take several weeks to get it ready before the deadline. So a modern supply
Contract must be very specific about the environmental data.
Consistency in the information required, and the timing
It, and you know that you are a large company.
You will need to research all of your suppliers and make sure you are comparing them.
You can be certain that the piece is consistently updated with information.
We’re seeing two new laws in the area of legislation.
There are a few very high-profile pieces of legislation that are certainly worth mentioning.
The EU, but also the UK, which I believe is going to have quite an impact.
Dramatic approach, a dramatic transformation in the way businesses deal with
The supply chain must consider environmental issues.
My first example is about rainforest risk commodities. The
A proposal has been published by the EU or the Commission
Regulation and the UK has introduced powers, The Environment Act
21. Businesses that use commodities will be required to comply with 21
Soya is typically grown in rainforests.
These include palm oil, leather (beef, leather), cocoa, beef and pulp, as well paper.
Industries that will be most affected by the changes in the food and beverage industries
Not only the leather-based all-tex sector, but also the leather-based alltex sector.
If you are using these commodities, import them
If you use products that contain these commodities, you will be charged for them.
You have a lot of responsibility for your due diligence. I guess
It was possible to say that your supplier will be contacted previously.
Follow local laws.
To comply with laws they were subjected to in their own right
jurisdiction. There were voluntary industry standards.
We’ve entered into contracts and I believe we’re now going have to
You can go further. It is now an obligation to
Manufacturers and importers to be monitored and thoroughly investigated
Do not accept as factual what their suppliers are saying.
These commodities will have a significant impact on the environment.
The rainforest.
We might see drone manufacturers flying in the sky.
I was amazed at the changes in the rainforest boundary. I
Think about the fact that you can’t contract any longer.
out of compliance. You will need to accept that.
You can take responsibility for your supply chain.
It is being done properly. There are some significant benefits.
Fines and the EU are talking about 4 percent of European turnover
I think it was a bit burned by some of the things.
I believe the EU have done a good job with the timber regulation over the past few years.
This is something we will be taking very seriously going forward.
My second example is the new directive that I propose to address
corporate sustainability. This will require large amounts of money.
Businesses that exceed a certain threshold and operate in certain areas
High-risk industries, such as agriculture or minerals, are at greater risk.
To mitigate and investigate, do your homework.
Take into account the environmental impact of your own actions.
operations, but also within its value-chain. We are going again
to face some serious fines. We might get some.
Different implementations across the EU will determine how this will be done.
There is no clear proposal for something similar in the
UK, but it’s almost certain to happen.
What I would conclude is that environmental
Reporting disclosure is now part of everyday life. It’s the norm. Those
Reports will need data. Data can only come from
Your supply chain is important so make sure you have contracts that deal with it.
New rules are coming down the pipe that will ensure that
You cannot contract out of your environmental rights.
You can make that oversight.
Sarah: Thank you, Ben. Human rights are a key component
Issue for the ESG sustainability agenda. Kieran, would that you?
These points should be taken into consideration
Kieran Laird: Thanks, Sarah. Hello,
everyone. It’s becoming more common to recognize this fact these days.
Many of the actions taken by companies have an impact on the rights of their employees.
Customers, their workers, and the communities where they operate.
That applies not only to the work of companies but also to their employees.
To any human rights concerns that may arise in their supply chains
If things go wrong, there could be serious commercial consequences
wrong. Despite that, it is still a positive development in comparison to other issues.
That’s what we’re discussing today – Ben, for instance, you’ve
Just heard about the environment – there is actually
Inadequacy of hard law in relation human rights and supply chain management
The UK.
What is there instead is a lot more soft law.
I refer to international standards and guidelines.
How companies should operate within this space. The most important thing is
These are the UN Guiding Principles on Human Rights (GP). Now, the UN
All businesses, big and small, are eligible for GPs, regardless of size.
They can be found in one country or cross borders. What they say is what they do.
A company should do three things to make sure they are successful.
It does not infringe upon human rights anywhere and everywhere
it does business.
The first thing they should do is to create a policy.
Respect human rights is the second thing it should do.
Do your best to prevent, detect, and mitigate any potential problems.
It can have adverse human rights impacts on its own business, but also on others.
The company’s business relationships, like its supply, can result in its ability to generate revenue.
chain. A third option is to have a mediation process in place.
to address any adverse human rights impacts it may have
Either contributed to or caused itself.
The UN GPs do not have legal binding power, but they are legally binding.
Do is to create a culture that it is recognized and respected.
Recognized that companies have some human rights responsibilities
Second, to create a set concepts that governments can use.
Around the world, there are many people who can help put into practice hard law
obligations. As I have said, there isn’t a lot of.
UK supply chain and human rights obligations under the hard law
rights, one exception being modern slave labor that David’s going
I’ll talk about that in a moment, but it’s not the same.
Other jurisdictions
We just heard Ben talk to us about the Europeans.
Draft directive from the Commission, and one of its components.
To require companies to adhere to human rights is what we are going to do
It’s important to be diligent in their supply chains.
Companies based in the EU as well as companies that sell goods are both eligible
services to the EU and the European Commission thinks so
It’s going to capture around 4,000 third country headquarters
companies. The directive draft draws on the
Concepts found in the UN Guiding Principles around
Due diligence in relation to human right, and the
Details of the directive will be updated as it passes through the regulatory process.
Legislative process, but Ben says it will be law in the next
An additional year or two.
So, I think the key takeaway from the human rights perspective is
First, we are seeing an increase of hard law in relation human.
Rights and supply chains in different jurisdictions around the globe
Secondly, even if there is no hard law, these are still available.
These issues are very important as reputation damage can be devastating.
When human rights issues go wrong, this can have serious consequences.
Commercial consequences
Sarah: Kieran, thank you. David, Kieran just
We touched on modern slavery, that’s an important area to be.
Think about it.
David Lowe: Modern slavery is a fact
Good example of hardlaw, as Kieran mentioned, and human right, much of
It is not a law in the UK, but he cited modern slavery as an example.
As the law of the land.
First, it is just.
It is called modern because of its modern look. It is identifying.
Slavery exists even if it is not immediately apparent
It’s done by coercion and control.
Are having their salaries taken off, and their passports kept?
They are kept in houses and brought to work.
There’s often a perception that modern slavery is somehow a form of slavery.
It occurs somewhere else, and it’s assumed to have happened in.
For example, South Asian garment factories. But it doesn’t happen here
The UK.
Some of the most successful prosecutions in the UK are
Picking fruit in an apple orchard or bed-making facility in Kent
A high-street brand was prosecuted by its subcontractor.
Modern slavery and the exploitation of its workers or a
Three workers at a chicken-processing plant are available for work
Every day, they were found to be in prison and had been released.
Their passports were taken. It is here, it’s here in the UK.
It’s not a distant possibility in international supply
chain.
Despite that, there is some law in the UK.
There is a Modern Slavery Act.
Corporate obligations are very restricted and only applies to
Large companies are those that are defined as such by the Company Act
Companies and large companies simply need to publish
An annual statement on modern slavery and their supply chains
Each year and to publish it on their site. A good example of this is a
Fully legal compliant modern slavery statement would read “I
Don’t care about modern slavery’. This is fully legal
compliant. It’s a statement.
It’s a story about slavery that is published on the website once per year.
This is why it’s so important to remember that nobody wants to.
You should make a similar statement because it will attract attention.
Attention, of demonstrating that we don’t take modern slavery serious.
Therefore, you should think carefully about your modern.
Slavery statement: It must be made so that others can read it.
Its risk of damaging the environment is negligible if taken with a reasonable degree of seriousness
your reputation.
And that’s my opinion, the real test of modern slavery is to
Consider how you would like to be viewed if you were asked.
You may have discovered modern slavery in your supply chains. What would you like?
to be seen by the outside? The chicken’s example
Processing factory prosecution is a good illustration because actually
The manufacturer emerged looking very good in that instance. They had
The processes that supported employees in processing were in place
To raise concern with HR, plant to whistleblow
They realized that these three gentlemen were coming into work.
They wore the same clothes every day, but they never spoke to each other.
Anybody, they were all taken in the same minibus to work.
They went home in the minibus they shared, but never went to a pub on Fridays.
Night or payday. They thought it was strange and unusual.
They felt secure enough and were trained to raise it.
With their HR team. The HR team had policies and processes in place
To investigate the matter and then to bring in enforcement
The police are also included in these bodies.
Yes, modern slaves were possible.
They had been recruited, but they had responded in a really great way
They took it seriously, which I believe is a good sign.
The kind of business that anyone would love to feel like they are in.
Modern slavery must be treated seriously.
Boohoo and its infamous “Stay” is a prime example of how you can go wrong.
Leicester garment supply chain. Now Boohoo didn’t do anything
illegal. It was fully in compliance with the Modern Slavery Act.
The company paid its employees the right amount so that they were fully compliant with their obligations.
law. However, concerns about the supply chain led the to a
They had to invest heavily after a significant drop in the share price.
A large investigation is required to make changes in the supply chain.
Therefore, you should not plan and think ahead.
The reputational impact can cause severe damage to the
organisation.
Don’t just have a modern slave statement.
You should tick the box, because it will eventually cause problems.
Keep in mind that the UK government has published
Consultation to determine how they will finalize the requirements
Therefore, the modern slavery declaration must be able to reach certain criteria
Specific issues are addressed in that statement. It’s not yet law, but it’s
It is likely to become law in the next year, but it will happen.
Tougher environment
What should you do? As a first step, you should assess the situation.
risk. Do you see a higher risk in your supply chain?
Modern slavery: Are you at risk? You must start somewhere, and you should.
Concentrate on the most risky areas. For example,
Gowling took a look at the supply chain. We are a professional
Services firm, naturally we have a simpler supply chain, but it is much more complex.
It is not a high-risk area for modern slavery, but it is something we are aware of.
Identified that if there’s a risk, it’s
Going to be one of the lowest paid employees of subcontractors.
Maybe cleaning or security and facility management.
So, after identifying that area as a potential risk area, we engage with it.
These suppliers and asked them: “Well, what do I do to make?”
You are certain that there is no modern slavery. What are your recruitment methods?
How do you manage temporary workers?
Your modern slavery statement. Can you work with us to create our own?
What is modern slavery policy? That’s one example of how every
It should be approached by business. That means that it must be done.
Supported by due diligence, questionnaires, and the right to do
Audits and training for your procurement staff are also available.
Training your HR team and raising the bar.
You can share the issue profile with the entire organisation so you can say,
If something happens, “We did our best, we trained the
Right people, we tried raising the profile, and we did put in place
whistleblowing arrangements’ etc.
Contract terms are important to me as a contract lawyer.
Part of this, but it’s only one part of it. You should of
Consider what you should avoid in your contracts.
The issue should have arisen in the first place to show that you did the
Do the right thing, and then respond if necessary. That’s it.
You should ask the supplier to agree to all laws. Keep in mind, however.
Remember that compliance with the Modern Slavery Act doesn’t mean you’re doing anything.
Annual statement, it is not always going to address the
Actual behaviours you are trying to address and how you might
You should enforce stricter policy requirements on suppliers
You can do more than that. The audit rights, you’ll most likely want some normal
Notice audit rights, but remember that you have the right to appeal.
Be suspicious of modern slavery activity in that organization
You will also need a audit without notice so that you can be sure.
You can literally go to the location and inspect it if necessary
to.
All of this should be combined by a policy.
You probably already have several relevant policies.
It just might need an overarching policy in order to tie it all together. And
The last thing, however, is clearly the legal bit.
Modern slavery Statement that combines all these aspects.
Because you have to do everything, I deliberately said it last
It will be possible to combine it in a modern slavery if someone else does not first.
statement.
Modern slavery is hard law, but it’s still limited.
The law of the land. Reputation is the biggest risk.
Ask yourself this question: How do you want to be perceived?
If modern slavery is discovered in your supply chains, what should you do?
SarahDavid, thank you. There’s obviously
There are many important themes and insights that can be gleaned from the diverse practice.
There are many areas. One thing that I am very aware of is that
We’ve included lots of points for people who should be thinking back.
It may be beneficial for each of us to have a similar organization.
Areas that are just to be giving, you’re sure, one point to keep in mind
I suppose that my perspective is in terms of contracts.
It’s about focusing your attention on the window of opportunity.
We have the new focus on supply chains, building in, and we are now.
You can have the resilience to ensure that all your supply contracts are in order
They should be as sustainable as possible.
well. Ben, is there a particular problem in your area?
Ben: No business is perfect in every aspect
It’s important that we pay attention to environmental issues.
You are doing your reporting and disclosure.
To be open and honest with your suppliers and to encourage them to do the same.
You must be open and honest with them.
It is almost as much a supply chain thing than a cooperation agreement.
Just to work together to raise standards.
Sarah: Thank you, it’s perfect. Kieran, a
Human rights perspective
Kieran: I believe companies are often unaware
Where to begin with human rights? The first step is often to
Try to identify the most serious human rights risks in your area.
particular business. Think about, for example, the types of
The types of entities with whom you have a business partnership,
You and your suppliers can learn from each other and create business models that work where you are.
Your suppliers and the types of services and products they offer
You and your suppliers must agree on the supply. Once you have figured it out,
If you are unsure about the risks, then you can take a look at what
These risks can be mitigated or prevented by you.
Sarah: David, in terms modern
slavery.
David: I think. Ask yourself what you would like.
Your organisation should examine how it responds to modern slavery
incident was to be created and then work backwards.
“That’s how I want it to look if the worst happens.” What is it?
What is the most important thing I should do to be able provide that answer?
to say that I have done to mitigate and limit the
opportunity for this to occur in the first instance and what have i done?
set up to allow me to reply?
Sarah: Thank you all. We’ve given so many.
There are important points you should all consider in terms of how
Legal functions can help an organization with its legal needs.
ESG and sustainability are important topics. This is an important issue.
It’s not going anywhere. It’s not something that we can just sort of ignore.
Do not tick more boxes. It must be a priority.
Your focus should be within your organisation. We are grateful.
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