Mapping and reporting on the value chain means getting beyond tier 1 and 2.
In an increasingly interconnected global economy, the impact of our consumption and investment choices goes beyond traditional economic considerations. Two critical challenges facing humanity today are biodiversity loss and modern slavery, both of which have far-reaching implications for our planet and society. These issues are intricately linked to the value chains of products and services, directly influencing the choices consumers and investors make.
This blog delves into the reasons why these pressing concerns should be at the forefront of business procurement decisions, and viewed across the organisation as core business risks.
Biodiversity Loss: A Crisis of Our Time
Biodiversity refers to the variety of life forms on Earth, from plants and animals to microorganisms. However, human activities such as deforestation, habitat destruction, pollution, and climate change have contributed to a drastic decline in biodiversity. The World Wildlife Fund estimates that the global wildlife population has plummeted by 69% between 1970 and 2018, underscoring the magnitude of the crisis.
Consumers, awakened to the significance of biodiversity loss, now seek products that have minimal environmental impact. A survey conducted by Nielsen in 2018 revealed that 81% of respondents felt strongly that companies should help improve the environment. With the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF) last year, the four goals for 2050 and 23 targets for 2030 illustrate the direction of travel and the need for procurement managers to interrogate their supply chains beyond tier 1 and 2 more intensely. Target 7, for example, covers the reduction of pollution from excess nutrients, hazardous chemicals and plastic.
Modern Slavery: An Invisible Supply Chain Crisis
Modern slavery, a grave violation of human rights, refers to the exploitation and coercion of individuals through forced labour, human trafficking, child labour, and debt bondage. Shockingly, an estimated 40.3 million people are trapped in modern slavery globally, according to the International Labour Organization (ILO). The United Nations emphasizes that this issue is intricately linked to supply chains, as exploitative labour practices often hide behind complex networks.
Consumer awareness about modern slavery has amplified the demand for ethically sourced products. A survey by OpenText reported that 53% of UK consumers said they would never buy from a brand again if it were accused of working with unethical suppliers, while the Ethics Markets Report 2022 said spending on ethical products grew by almost 35% in 2021, to £141.6 billion from £106bn the previous year.
Investors, too, are recognizing the financial risks associated with modern slavery within companies they invest in. Reports suggest that companies with poor labour practices are more likely to face reputational damage, legal risks, and supply chain disruptions. As a result, investors are factoring in labour rights and social impact when making investment decisions.
A recent report by Walk Free - the Global Slavery Index 2023, dives into the matter and presents a country-by-country and industry breakdown which may surprise readers. The report found that the climate crisis is also a human rights one, with the associated effects pushing millions of people into precarious situations from forced labour, debt bondage, human trafficking and forced marriages.
The Global Slavery Index also highlights the industries most associated with forced labour, such as the charcoal, cattle and palm oil sectors. The latter an unintended consequence of decoupling from fossil fuels. Risks are also been seen in the solar energy value chain and cobalt artisanal mines. The need to include just transition measures, such as ensuring decent work for all in the transition to a low-carbon economy, is included in international treaties but has yet to be fully realised.
If we look at the locations of our Associates, in the UK, for instance, the report estimates that 122,000 people (1.8% of the population) are in modern slavery: in New Zealand, 8,000 people (1.6% of the population), in Canada 69,000 people (1.8% of the population) and in Kenya 269,000 people or 5% of the population.
Procurement Managers: Catalysts for Change
Procurement managers hold a crucial role in shaping sustainable and responsible supply chains.
As businesses respond to consumer and investor demands for sustainability, Procurement Managers have the power to influence procurement decisions by investigating and verifying supply chains free from modern slavery.
By actively collaborating with suppliers to identify and mitigate biodiversity and modern slavery risks within their supply chains. This proactive approach can lead to more resilient supply chains and improved brand reputation, making the business more appealing to both consumers and investors.
Transforming the landscape of consumer choices and investment decision
Consumers are increasingly demanding sustainable products, while investors recognise the significance of ESG factors in their portfolios. Procurement managers can be the driving force behind these changes, playing a pivotal role in ensuring that supply chains are ethically and environmentally responsible.
As the urgency to address global issues like biodiversity loss and modern slavery heightens, collaboration between stakeholders - consumers, investors, and businesses - will be essential to drive positive change and create a more sustainable and just future for all.
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