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  • Writer's pictureJeremy Conradie.

The EU Ban Forcing a Supply Chain Rethink

Judith Richardson, Head of Sustainability at Argon & Co (who are a global management consultancy that specialise in operations strategy and transformation) explains why firms are rethinking supply chains after a European Union ban on products made with forced labour.

In April, the European Parliament gave its final approval to a new regulation enabling the EU to prohibit the sale, import and export of goods made using forced labour.

It means member state authorities and the European Commission now have the right to investigate suspicious goods, supply chains and manufacturers.

If a product is deemed to have been made using forced labour, it will no longer be possible to sell it on the EU market (including online) and any shipments of this relevant products will be intercepted at EU borders.

She explains that to eliminate unethical labour practices from the supply chain, companies need to understand their supply chains – then firmly push for compliance across their entire supply base. This means probing beneath the surface of their supply chains to truly understand them, identifying potential exposure to risk and prioritising areas for action. On the first, there are considerable hurdles because of how complex multi-tiered, global supply chains are. The incoming standards set the expectation to have visibility beyond just tier-one or tier-two suppliers alone.

By analysing risks, organisations can predict potential disruption and make tangible changes to prepare. This could mean identifying high-risk factories and implementing new standards and checks and balances, or deciding to exit certain locations. However, launching in new locations does bring its own new operational complexities and risks.

She says, supply chain leads need to consider this at a strategic level to ensure the right focus. Honing in proactively on unethical labour practices from suppliers and sub-contractors allows for effective risk management, optimisation of processes and responsiveness to market dynamics and incoming regulations. 

Mandatory disclosure of information and inputs ensures transparency and accountability throughout the supply chain, helping to enhance trust and facilitate collaboration among partners. But real enforcement mechanisms are critical to ensuring policies are not just words, but hard actions. Firms should conduct regular audits of their contracts, approaches and policies to ensure they are aligned. This can also involve creating a ‘carrot and stick’ approach, with incentives for adherence and penalties for failings, to promote compliance.

Lastly, she says that collaboration – internally within organisations and externally across the value chain – will be key. Industries aligning on common standards means there is no space for rogue actors in the value chain. Customer expectations which are reinforced at every link in the chain ensures responsible standards are magnified. Firms can look to forge coalitions and partnerships to protect their reputation and ensure they set, rather than follow, the standards.

Source: Supplychaindigital

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