New EU law requires firms to check suppliers’ human rights standards

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EU lawmakers have unveiled a proposal to ensure that large companies operating in the EU are checking that their suppliers are not using child or forced labour, that that they comply with environmental standards. The new Corporate Sustainability Due Diligence proposal means that EU firms will have to make sure their immediate and sub-tier suppliers comply with human rights standards, workplace health and safety, and environmental rules – including pollution, CO2 emissions, and biodiversity loss.

However, research from Ivalua shows organisations are unprepared:

  • Suppliers don’t have plans in place to eliminate below minimum wage pay (77%), child labour (76%), unsafe working conditions (75%) or unreasonable working hours (78%)
  • 58% of European suppliers said buyers rarely or never include responsible labour practices in contracts or agreements
  • Less than a quarter of suppliers (25%) say they are being routinely measure on carbon emissions

Alex Saric, smart procurement expert at Ivalua made the following comment:

“When you consider that research has shown only 47% of European suppliers are frequently asked by large companies to provide proof they aren’t employing child labour, and just 24% are measured on carbon emissions, then there is clearly room for improvement around ESG standards. The European Union’s Corporate Sustainability Due Diligence proposal will act as a catalyst for organisations to do more, increasing accountability for supply chain standards.

To ensure the level of transparency that is needed for better decisions and increased control in complex, global supply chains, organisations need to ensure they take a holistic approach and equip themselves from a compliance, process and technology perspective. This will help ensure there is regular communication and assessment of suppliers to evaluate and improve carbon emissions, while also identifying and ceasing to work with suppliers that have sub-standard labour practices. However, this requires a smart approach to procurement, one that can facilitate collaboration with suppliers and offer actionable insights on ESG standards to drive continuous improvement to supply chains.”