In response to COVID-19, companies worldwide are taking urgent action to shore up their supply chains and cut any costs they can live without. Companies should, however, exercise caution where money-saving efforts impact on human rights, with the potential for reputational, legal and financial damage in the future.
Prior to the onset of the coronavirus pandemic, many global businesses were making commendable efforts to address the human rights footprint of their operations. Many are now subject to national legislation requiring them to take steps, or report on steps taken, to identify and mitigate human rights related risks in their supply chains (including the French Duty of Vigilance Law and the UK’s Modern Slavery Act). Initiatives such as the Corporate Human Rights Benchmark allow investors, NGOs and consumers to monitor the performance of large companies against a number of human rights related indicators. Businesses have increasingly been encouraged to take the time to investigate their supply chains, monitor their business partners, respond to and remedy grievances and learn from any issues they encounter.
The temptation in today’s environment is to take the foot off the pedal on business and human rights due diligence. Companies taking emergency measures to ensure the long-term survival of their business, in circumstances where they are struggling to maintain active operations, may view supply chain risk management as an optional extra that can easily be curtailed and, if necessary, restarted later.
However, when they emerge from the pandemic, businesses may find their investors and consumers expressing concern at the way in which they handled the crisis, particularly where the choices of large multinationals have such a profound impact on the lives of those who work for them or in their supply chains around the world.
Events over the past few weeks have shown the potential of the pandemic to create new human rights risks, or amplify existing ones. To name a few:
- To the extent that companies or their suppliers continue to work through the pandemic, what measures are in place to ensure their workers’ safety?
- How can companies effectively monitor human rights compliance in the supply chain where ordinary methodologies (such as site visits) are impeded by travel restrictions and social distancing?
- For businesses that have experienced a sudden uptick due to the pandemic (or may do so post-crisis), how are workers in the supply chain being protected in the face of a significant and sudden rise in demand? Might they be pressed to work excessive hours or in unsafe conditions by companies keen to cash in?
- Where companies experience a sudden drop in demand, what is the knock-on effect of any order cancellations or reductions? How will workers throughout the chain, especially those in low income countries whose livelihoods depend on such business, be supported through the pandemic?
- Where companies need to source new supply routes quickly, how can suppliers be brought onboard as soon as possible without compromising on human rights due diligence?
- Are companies risking inadvertently infringing privacy rights by developing, using or promoting contact tracing apps? Apps designed to identify individuals potentially infected with COVID-19 can play a vital role in the battle to contain the virus; but whether a business is helping to develop an app, or simply promoting its use by its workforce or suppliers, it should ensure human rights and privacy law concerns have been properly taken into account.
Multinational companies cannot be expected to address all of these issues single-handedly, particularly against a backdrop of unprecedented economic and societal conditions. However, the potential long-term consequences of ignoring such risks are already visible. A number of organisations have created trackers to monitor the response of big business – good and bad – to the COVID-19 pandemic, both in respect of their own employees and their wider supply chains. While many businesses are receiving praise for initiatives to support key workers or to manufacture much-needed personal protective equipment, for example, others are coming under scrutiny for all the wrong reasons. Such scrutiny is only likely to intensify when the crisis abates.
The garment industry is a helpful case study. Clothing supply chains are typically rooted in jurisdictions with low labour costs where a significant portion of the population depends on the textile industry for employment. Early attempts to exercise force majeure clauses and cancel clothing orders from factories in such countries have been met with criticism by the press, NGOs and consumers. Some large brands have now attempted to alleviate the potential impact of their cost-saving by, for example, pledging to honour existing orders (H&M; Inditex; Marks & Spencer); supporting factory workers financially through the lockdown period (Primark); prioritising payments to small and medium-sized suppliers (L’Oréal; Unilever); or even shifting their business to producing personal protective equipment (Burberry).
Measures such as these, combined with additional (or even continued) due diligence into complex supply chains, may create new headaches for companies already struggling to adapt to the current crisis. But even if businesses need to adapt their current approach, at least considering these issues now will help demonstrate – both now and in the future – that human rights impacts were not forgotten in the heat of the crisis.
Help is out there: a number of organisations have developed rapid human rights due diligence tools for companies considering urgent operational changes as part of their COVID-19 responses. Such tools may help companies in considering whether their usual due diligence processes can still be performed, albeit in a curtailed or expedited fashion; for example, by prioritising due diligence on high-risk operations, or by replacing pre-contractual due diligence of new suppliers with early monitoring and more frequent reporting. Where businesses are continuing to operate in the lockdown, new COVID-19-specific due diligence could be developed to assess in a handful of targeted questions whether workers are at risk.
Whatever routes are chosen, companies should be clear on the choices made and the reasons for them: they are likely to be called on to defend them in the future.
We discuss these and related issues further in our Business as Unusual blog.