COVID-19: Ethical Dilemma Reveals Weaknesses in Supply Chain Due Diligence

April 24, 2020 Sylvain Guyoton

Every evening all over the world, people step to their windows and balconies to applaud our front-line heroes -- the medical staff and those who are supporting them with food and services -- for their courage to put their own lives at risk to fight this virus. But few of us may be aware that there are other workers, hidden in the depths of the supply chain, who may be toiling in slave-like conditions to make the supplies that enable these heroes to continue their work. Herein lies an ethical dilemma which we must confront, even more so once this crisis passes.

Sacrificing Human Rights to Save Lives?

One case in point: Manufacturers of medical grade gloves have been overwhelmed by an induced demand due to the fight against the coronavirus (in some cases up by 100%). Fulfilling those orders is made even more challenging because factories have had to reduce their production capacity in order to respect health and social distancing guidelines. But the COVID-19 shock has diverted our attention from the fact that  rubber glove manufacturing has been fraught with human rights abuse accusations for years.  A recent example of enforcement action was in September, 2019, when Malaysian rubber glove manufacturer, WRP, was subject to an embargo by American authorities for suspected forced labor conditions. This is just one of many examples.

Fast forward six months to the midst of the Coronavirus crisis, and we see that, on March 23, the United States revoked the Withhold Release Order, explaining that WRP was no longer producing rubber gloves under forced labor conditions. The UK government has a similar dilemma with a manufacturer called Supermaxx, also from Malaysia.

Did these companies suddenly improve their labor conditions, encouraging European and American buyers to place new orders for  their products? Or, did the authorities simply close their eyes to these alleged violations in order to respond to the lack of protective equipment? If you are obliged to choose between increasing the number of COVID-19 victims, and the risk of maintaining relationships with companies that may not entirely meet international standards, the ethical dilemma is obviously settled in the direction of saving lives. When “the ship is sinking,” you no longer question the context in which the life jackets were manufactured.

This Dilemma Could Have Been Anticipated

But, as we advance through this COVID-19 crisis, and as business evolves into a New Normal, an essential lesson must be imbibed: the need for multinationals to carefully select their suppliers with regard to human rights issues. According to the ILO, more than 40 million people are victims of modern slavery. However, sub-contractors cannot start being audited only once thousands of lives are at stake. It needs to be anticipated. The efforts are still insufficient: The 2019 Sustainable Procurement Barometer (developed in partnership with the NYU Stern Center for Sustainable Business) reveals that even if 64% of large, multinational groups have a supplier code of conduct, only 38% of them evaluate their partners every year. And once there is a shortage, the buyers’ only solution is to bypass their principles of corporate social responsibility (CSR). This may further imperil companies from a legal standpoint, as the regulatory landscape on supply chain due diligence has been accelerating over the past five years. Now, finally, laws such as the French “duty of care” (devoir de vigilance) of parent and subcontracting companies, adopted in 2017, and the UK Modern Slavery Act enacted in 2015 are today taking on their full meaning. 

Globalization Will be Down -- But not Out -- So Supply Chain Due Diligence is Essential

In the past few years, Donald Trump’s war on cross-border trade raised the question on whether globalization was over. Coronavirus accelerated the desires of states to become self-sufficient. On March 31, Emmanuel Macron wished for a “full and entire independence” for France in terms of protective masks. Although economies will proceed to a rebalancing in favor of shorter supply loops because for so long they leaned toward everything global, they won’t all become local after the coronavirus. Local and global will remain two sides of the same coin whose tensions we have to learn to better manage. Medical gloves will continue to be sourced at the other end of the planet because the plantations of trees necessary for making rubber are mostly present in tropical regions. Just like for certain raw materials used in medical appliances, we will continue to be dependent on countries that are “at risk” on human rights issues. The key will be to develop effective sustainable procurement programs, that employ the best data and tools available, to build a supply base that minimizes risk of disruption while also guaranteeing decent work conditions all along the chain.

As we wait for COVID-19 to pass, while applauding front-line medical staff, let’s also not forget to pay homage to the invisible heroes, the workers around the globe who make protective equipment for our nurses and doctors. 

To learn more about how the impact from the COVID-19 crisis cascades globally across supply chains -- and challenges that business will face in return to normal, read our infographic on the Four Phases of COVID-19 Supply Chain Responses.

About the Author

Sylvain Guyoton

Sylvain Guyoton is Senior Vice-President of Research at EcoVadis since its founding in 2007. He brings almost 20 years of experience in Sustainability and CSR. At EcoVadis, he oversees rating operations and methodology development, and sits on the Executive Committee. Sylvain holds an M.S. in Industrial Management from Cranfield University and an MBA from INSEAD.

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