Your unrestricted access to Commercial Risk, Commercial Risk Europe and Global Risk Manager will end soon.

Supply chains suffer decline in labour and human rights, warns Verisk Maplecroft

A global drop in labour rights is making it “more difficult than ever” for businesses to maintain responsible supply chains, with exploitation of workers most severe in Asia’s manufacturing hubs, according to Verisk Maplecroft.

Publishing its Human Rights Outlook 2021, Verisk said brands face increasing exposure to declining labour rights, with ethical supply chains also complicated by the pandemic, natural disasters and human rights violations.

During the past five years, Verisk has tracked a decline in risk indices for child labour, wages, discrimination, forced labour, health and safety, and exploitation of migrant workforces.

“When you drill down into the individual issues making up the labour rights landscape, the complexities facing global supply chains are as varied as they are challenging,” Verisk said.

It found 40% of the world’s top 100 cities for foreign direct investment are rated as high or extreme risk for human rights, with Turkey’s Izmir and Istanbul posing the greatest risk.

Sofia Nazalya, human rights analyst at Verisk Maplecroft, said companies must future-proof their human rights exposures and step up due diligence.

“The pandemic has not only upended traditional human rights due diligence, it has forced companies to rethink the fundamentals of sourcing low-cost labour from countries that have been devastated by the ensuing socioeconomic fallout,” said Nazalya. “Add to the mix a political and human rights decline in key sourcing locations, and a perfect storm arises for responsible procurement.”

Verisk has downgraded Cambodia, Vietnam, Myanmar and Bangladesh in its Modern Slavery Index from high risk to extreme risk. Of the 198 countries featured in the index, 30 countries are now categorised as at extreme risk of modern slavery, up from 25 in 2017.

China was already considered extreme risk and brands with operations in Xinjiang are running reputational risks amid the global backlash over the treatment of its Uyghur population, Verisk said.

“Xinjiang is now a ‘no-go’ for responsible sourcing,” the company continued. “Pressure on brands sourcing from the region is building, but at the same time Beijing will be hostile to companies divesting from Xinjiang,” added Nazalya.

“Even without explicit bans, the reputational risks of being linked to Xinjiang are likely now too great for companies to bear. Additionally, as investors increasingly incorporate ESG strategies into their investment formulas, any dealings in Xinjiang are also likely to create material risks,” she said.

Myanmar, Sri Lanka and Indonesia led a decline in Verisk’s occupational health and safety risk index during Covid-19. “Even with increased vaccinations, the prospect of improved occupational health and safety in Asia remains dire,” Verisk warned.

Back to top button