Suppliers aren't enforcing sustainable sourcing, says Ivalua

Research from Ivalua, a leading global spend management cloud provider, has revealed 58% of European suppliers said buyers rarely or never include responsible labour practices in contracts or agreements. 

The report also identified a lack of consistent monitoring of labour standards. Only 50% of European suppliers said that they were asked by their buyers to provide proof that they protect against unsafe working conditions. 

These figures were even lower for other labour standards, such as:

• Child labour (47%)
• Modern slavery (45%)
• Below minimum wage pay (42%)

This report is based on an April 2021 study of 300 suppliers. The research was conducted by Coleman Parkes and commissioned by Ivalua. Suppliers who provide materials and services to multinational organisations were questioned, from across the UK, France, Germany and Switzerland.

Disappointing sustainable sourcing results

The study set out to explore labour standards throughout the supply chain. The findings show that buyers are not enforcing standards for responsible labour practices, with over 78% of European suppliers reporting they don’t have fully implemented plans in place to detect and eliminate modern slavery in their supply chains.

Additional statistics from the report include: 

• 24% of UK suppliers have fully developed and implemented plans to mitigate the risk of fines due to the proposed changes to the Modern Slavery Act.
• Just 8% of suppliers said buyers always include responsible labour practices in contracts or agreements.
• 77% of suppliers believe responsible labour practices can also give them a competitive edge.
• 86% of UK suppliers see responsible labour practices as a competitive advantage, compared with 71% in France and 70% in Germany – suggesting that UK buyers are putting more plans in place to address ethical labour than other European regions.
• The majority of suppliers are not fully prepared to root out unethical labour practices and do not have plans in place to eliminate below minimum wage pay (77%), child labour (76%), unsafe working conditions (75%) or unreasonable working hours (78%).

ESG strategies should be strengthened to create positive change

With regulations becoming tougher, and responsible labour becoming a more pressing concern for policy makers, investors and consumers, organisations are increasingly recognising the need to work alongside suppliers to improve their labour standards. 

This means collaborating with immediate suppliers – as well as their suppliers’ suppliers – to drive long-term positive change.

“Combatting poor labour practices must not be treated as a “box-checking exercise”. As regulations get tougher, organisations must keep track, as the business impact of unethical labour standards can be extremely damaging,” commented Alex Saric, CMO at Ivalua. “The responsibility to tackle unethical labour practices extends to the entire supply chain, from buyers all the way to downstream suppliers. But change starts at the top, and buyers need to start the conversation with suppliers early to make it clear that poor labour practices will no longer be tolerated. Incentives could be offered, but the message should be clear: we will only work with suppliers that have certifiable labour standards.”

The responsibility to identify and eliminate unethical labour falls on every tier of the supply chain. But Saric believes that buyers must bolster their ESG strategies to drive meaningful change and reduce the risk of non-compliance

“Organisations must have adequate data to identify and avoid partners with unethical labour practices”, continued Saric. “They require 360-degree visibility of their immediate suppliers, sub-tier suppliers, and subcontractors. To do this, organisations must have the right tools in place to ensure the reliability of data, and facilitate timely and effective decision-making. Otherwise, instances of poor labour standards can easily slip through the net.”