Regulation has mandated human rights as a key factor in procurement. However, it is procurement sourcing decisions, not just policies or disclosures, that determine whether business risk is meaningfully reduced rather than simply reported.<\/p>\n
Human rights factors are often framed purely as risk, but when prioritised appropriately can unlock valuable business opportunities.<\/p>\n
With human rights being a critical sourcing topic for many procurement teams, how can they leverage sourcing decisions to benefit from these opportunities?<\/p>\n
An estimated 28 million people remain trapped in forced labour globally, with c.63% exploited in private sector supply chains. Despite decades of voluntary corporate commitments, this figure is only increasing. This gap between commitments and reality has led to a shift in the regulatory landscape.<\/p>\n
Once voluntary, mandatory corporate human rights due diligence laws have now increased globally. Between 2011-2023, over 1,000 ESG policy interventions were introduced worldwide, representing a 155% increase from 2001-2010. This means ethical sourcing has shifted from being just the \u2018right thing to do\u2019 into a legal obligation.<\/p>\n
New and emerging regulation requires companies to identify, prevent, mitigate and remediate human rights risks across their value chains. Non-compliance can result in financial penalties, director liabilities and import bans or detained goods.<\/p>\n
Whilst mandatory requirements are more recent, this regulatory momentum builds on longer standing global voluntary frameworks (such as the OECD Due Diligence Guidance for Responsible Business Conduct). This positions human rights due diligence as a continuous, risk\u2011based process, rather than a one\u2011off compliance exercise.<\/p>\n
Regulation is now commonplace and this builds on the basis that companies should employ a risk-based approach. What does this mean in practice for procurement teams?<\/p>\n
Firstly, it is important to note that regulation only acts as a \u2018floor\u2019 for company actions, defining minimum acceptable standards and guiding principles to be followed. However, too often procurement responses interpret this to mean limited generic supplier codes of conduct, siloed onboarding questionnaires and periodic audits with insufficient follow up or corrective action. Used ineffectively, these tools create documentation but rarely reflect how risk is built into day\u2011to\u2011day sourcing decisions.<\/p>\n
This is crucial because human rights risk is highly contextual. Two suppliers may operate in the same country and industry, yet pose very different risks, depending on how you buy, not just who you buy from.<\/p>\n
For example, take the scenario of two factories in the same country selling to buyers with short lead\u2011times. Last\u2011minute order changes and pricing below the cost of production are far more likely to rely on excessive overtime and temporary or brokered labour than a competitor supplying the same market under longer\u2011term stable contracts. In this case risk is driven by purchasing practices and commercial pressure applied upstream.<\/p>\n
This can be apparent within food and beverage supply chains. For West African cocoa, child labour risk is not only linked to the geography, but also to purchasing models characterised by short contracts, seasonality and sustained pricing pressure on smallholder farmers. However, the rollout of community-level monitoring and remediation (such as the Child Labour Monitoring and Remediation Systems by the International Cocoa Intiative), paired with longer-term sourcing commitments and stable volumes from buyers, have led to more effective procurement models. These provide more sufficient predictability and leverage to sustain engagement at farm level.<\/p>\n
To gather an initial risk picture, a generic country or industry heatmap can be a good start. However, to gain a more holistic supply chain specific picture, it\u2019s vital to look at how a supplier\u2019s risk profile interacts with factors such as spend, leverage and purchasing decisions.<\/p>\n
This includes more human rights-based factors such as:<\/p>\n
This should be employed continuously and proactively across the procurement cycle and not just at onboarding or reactively when a risk occurs.<\/p>\n
Alongside more procurement-based sourcing considerations such as:<\/p>\n
The output of this provides a holistic set of sourcing situations where human rights risk intersects with business exposure and procurement leverage.<\/p>\n
However, this still frames human rights exclusively as a business risk. What opportunities can this holistic approach unlock for your business?<\/p>\n
Moving beyond siloed and generic risk assessments and policies to take more of a holistic procurement approach enables human rights to become a driver of business opportunities including:<\/p>\n
Human rights is now a mandatory part of procurement for many businesses worldwide, and regulation stipulates taking a risk-based, continuous and prioritised approach. Integrating this risk approach with your specific procurement context means a better ability to focus resources on suppliers that need it most and where you are most likely to be able to create change. Doing so unlocks multiple business opportunities, including operational resilience, improved foresight and a better license to operate.<\/p>\n
However, procurement rarely optimises for a single variable. Cost, quality, speed, innovation, capacity and geopolitical factors all compete for attention, and human rights can lose out without a practical way to assess the trade\u2011offs.<\/p>\n
Furthermore, risk management must run across the full procurement lifecycle, not just supplier onboarding. This requires collaboration across sustainability, procurement, suppliers, legal and other buyers in the ecosystem.<\/p>\n
In the second part of this series we will explore how procurement teams can balance these trade-offs and work within this ecosystem in practice.<\/p>\n","protected":false},"featured_media":40001,"template":"","categories":[],"region":[240,360],"class_list":["post-39998","article","type-article","status-publish","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n