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A Toolkit for Responsible Businesses
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Using Risk and Impact Assessment Information

Your social compliance team should have an information system to manage all of its data.  All mapping and risk and impact assessment information should be entered systematically into this system and updated on a periodic basis.

Almost every risk and impact assessment exercise in any industry will uncover some risks of labor abuses, and possibly some adverse impacts you have already caused.  You will then be faced with decisions about what to do to mitigate or remediate them.

  • If your risk and impact assessment reveals that your company is directly contributing to or causing adverse impacts or risks through your own sourcing or other practices, your first step should be to remediate these impacts and tackle these issues internally.  As difficult as this process may be, you will not be able to manage external risks effectively if you cannot first manage internal ones.
  • If your company is exploring sourcing from a new area, your risk and impact assessment should reveal whether or not the risks are too great.  If there are substantial risks, this merits strong consideration of whether your sourcing needs can be met elsewhere. If the risks are ones you are willing to take, your next step is to find suppliers that will participate in your social compliance program and work with you on continuous improvement.  Those commitments should be codified in your contracts with suppliers; many companies require new suppliers to meet defined social compliance benchmarks before they can sell to the company.  
  • If you are sourcing from an area with high levels of subcontracting, you may choose to limit how much production your suppliers can subcontract to outside entities.  This limitation must then be included in contracts, and in turn monitored and enforced.
  • If your risk and impact assessment focuses on your established group of suppliers, your next steps will depend on those suppliers’ performance.  If egregious labor abuses are taking place or are at risk of happening, you should attempt to work with the suppliers to remediate the abuses or improve their policies and processes.  If your company does not have sufficient leverage with a supplier to change its behavior, you may attempt to increase your leverage by collaborating with other buyers or by offering capacity-building as an incentive.  If the supplier does not respond to these efforts, you should consider terminating your sourcing relationship, while at the same time taking into account the impacts on the workers of ending the relationship and attempting to mitigate those impacts in the process.

In some cases, a risk and impact assessment will identify a specific underlying cause of labor abuses, and stakeholders may also suggest ideas for mitigation.

In Their Own Words

Consolidating Production Centers

“Some companies, operating in industries or countries where various stages of the production process lend themselves to subcontracting and home or piece-work, may find themselves in a situation where work is being done by thousands of disparate individuals at the village or household level over a widely dispersed geographical area. This can make it virtually impossible for a company to keep track of who is doing the work and under what conditions. The risk to the company is that it does not know, and cannot monitor, whether workers are being exploited in the production of its products. To address this problem, certain businesses have elected to impose greater control over their production process by building centralized factories, centers or depots where workers are brought in to do their work, whether stitching, weaving, cutting, etc. This type of consolidation allows companies to more readily regulate working hours and conditions, better track the locations in which their products are manufactured and prevent the employment of children in the production process.”

Source:  International Finance Corporation Good Practice Note: Addressing Child Labor in the Workplace and Supply Chain, 2002.

Example In Action

Motorola Solutions: “Solutions for Hope” Project

For over a decade, the trade in minerals has fueled armed conflict and human rights abuses in the eastern Democratic Republic of the Congo (DRC).  Tantalum, a mineral mined in this area, is used to manufacture electronic capacitors for consumer electronic products such as mobile phones and computers.  In 2011, Motorola Solutions launched the Solutions for Hope Project, a pilot initiative to source conflict-free tantalum from the DRC to be used in the company’s products.  This project works with key suppliers to create a closed-pipe supply line, with all actors from the mine to the end user identified in advance.  The project helps Motorola Solutions demonstrate compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations, which require U.S. companies to disclose the use of certain minerals in their products, including tantalum.

Learn more about the Solutions for Hope Project.

In general, your responses to risk and impact assessment information should center around the impact on workers.  In the early days of social compliance, companies that identified egregious labor abuses or serious risks in their supply chains tended to terminate sourcing immediately from the suppliers in question.  Such actions sent a strong message to suppliers about compliance, but also had devastating consequences for workers.  There is a growing trend in social compliance toward capacity-building and development of long-term relationships as a way to improve compliance, rather than immediate termination because of the negative effects on workers.  Capacity-building and relationship-building usually entail some company investment in training and support for suppliers.  However, many companies are adopting a model of upfront investment in building capacity of vendors, agents and suppliers, and then holding them responsible for social compliance performance—a model that can prove cost-effective over the long run.  These and other training and communication issues are discussed in Step 4, Communicate and Train Across Your Supply Chains.

When you invest in a risk and impact assessment and uncover risks and mitigate them, do not forget to communicate about these efforts.  Stakeholders who contributed to the risk and impact assessment deserve a “feedback loop” on how their information was used.  If you took action on information that came from an existing complaint process or mechanism, you should report on your actions.  Information on your risk and impact assessment and mitigation also belongs in your company’s public reports.

Finally, risk and impact assessment activities should be ongoing, and you should update mapping information regularly in your information system.  Social compliance risks change over time as the environment evolves and your company’s operations change.