How effective are your labor rights due diligence tools?
- timnicolle7
- Sep 29
- 5 min read
Updated: Oct 8
Many companies are recognising that they have legal, compliance and reputational risks arising from their supply chains - especially when it comes to how workers are being treated.
No company wants to profit from lower prices based on forced labour or bad labour practices in the supply chain.
With new legislation and increasing public awareness of the issues, business is generally putting more effort into understanding how workers are being treated by suppliers.
But how effective are these efforts to police labor rights in the supply chain?
This post describes a methodology to assess how effective different due diligence tools might be for worker rights. Of course, it is not just what tools you use, it is also how you use them - specifically how you respond to issues that get identified.
We are also planning shortly to publish a free app that can be used by anyone for such an assessment (more on this at the bottom of the post).
Effectiveness matters for worker rights
As we pointed out in a post a few months' ago, you may be increasing your legal, compliance and reputational risks if:
you have a public, zero-tolerance approach to labour rights abuses in your supply chains, and
this is not backed up with an effective regime.
That original post can be read from this link: click here.
Theory: measuring the effectiveness of labor rights tools
This formula captures a way to measure how good your tools are to manage the labour rights risks in your supply chains.
Baseline Risk + Detection + Response = Managed Risk
What do we mean by these terms?
Baseline risk is the risk you inevitably have given the suppliers that are in your supply chain and where they are located.
Managed risk is the risk you end up with given the effectiveness of the tools you use and how you use them
Detection means the tools that you use to monitor how workers are treated in supply chains and how effective those tools are at identifying labour rights abuses
Response means the effectiveness of the corrective actions that you take to deal with adverse findings; in the context of your tools,
it is how effective those tools are at supporting sustained remedy, and
how effective those tools are at encouraging good conduct from your suppliers.
It is important to note that it is a combination of monitoring (detection) and corrective actions (responses) that mitigates risk.
The level of attention suppliers that receive can be directly proportional to how seriously they take the implementation of appropriate labour rights policies.
We use the word "effective" a lot
Yes, that's right. There is no point putting effort into the process of managing the risks if those efforts are not effective.
Detecting issues is pointless if there are not effective strategies to respond to the issues that are uncovered.
It is the combination of these two steps (detection and response) that delivers effective management of the risks to worker rights.
How can we measure "baseline risk"?
Your business will have an existing supply chain and will be sourcing goods and services from suppliers.
You will have a "baseline risk".
This is the risk that you inevitably have when you are relying on third party suppliers - as nearly every enterprise does.
It's possible to assess that baseline risk using well-known international indices and to come up with a measure. Risks will vary by geography, industry and even by product. But, at a macro level, we can observe that some countries are known to be more risky than others because, amongst other things:
There may be no strong rule of law
Workers have poor access to representation
Wages can be low and workers tend to be low skilled
There is some reliance on vulnerable workers (migrants, female workers, younger workers)
Forced labour and labour rights abuses are being publicly reported
You inevitably have a baseline risk. Whilst geography is not the only factor, it is a good place to start.
We can come up with a country-based measure of that baseline risk by mapping your specific supply chain against reputable international data sources.
How do we measure effectiveness?
That's really hard.
We know some strategies are likely to be ineffective and others are likely to be more effective.
For example, simply asking suppliers whether they are implementing good policies and procedures for labour rights is not likely to be effective. Suppliers are unlikely to tell you that they are failing to follow good policies and procedures.
There is very little data available to help us here.
There are quite a few studies that clearly show social audit and supplier questionnaires are not effective at uncovering many types of labour rights abuses.
There is a widely-held appreciation that asking the workers directly is likely to be more effective, provided this can be done with proper safeguarding of individual workers and vulnerable groups, and with guaranteed anonymity.
What we actually need is a way to benchmark different detection tools and the support that they give to different response strategies against each other.
This can then enable us to understand their relative effectiveness and the value for money that they might offer.
What are the different strategies?
We can identify 6 different detection tools that are available in combination to support ethical trading:
Continuous workplace monitoring (like Ask the workers)
Worker feedback surveys (many providers)
Unannounced social audits
Announced or self-arranged (by suppliers) social audits
Supplier questionnaires (SAQs) backed up by evidence of practice or compliance
Supplier questionnaires (SAQs) not requiring evidence
These tools have different levels of capability when it comes to detecting or raising findings that labour rights are not being observed.
Some of them are likely quite effective (eg: continuous workplace monitoring by asking the workers directly) and some might be quite ineffective (eg: asking suppliers to own up to breaches).
There are many response strategies that can be used in combination to deal with findings that emerge from the tools. Whichever strategies might be used, the key questions are:
How well do the tools support sustained remedies?
How well do the tools reinforce the requirement for good conduct by suppliers?
Each of the 6 different tools will contribute some level of effectiveness to the management of the baseline risks that you inevitably have in your supply chain.
Can we measure this?
Yes.
So how do we move forward?
Watch this space.
How about a free, easy-to-use tool that lets you, the user:
put in your own assumptions to arrive at a global model of labor rights risks
set up your own supply chain to arrive at your own, specific "baseline risk", and
add the tools that you use and your view of their effectiveness at:
detecting risks
supporting sustained remedy
encouraging good conduct by suppliers
and this allows us to:
calculate your "managed risk" using the approach described above
and even optimize your tools strategy based on the assumptions you have made.
Coming shortly: a free, interactive tool that you can use to do this!
If you would like to be on our shortlist to be notified when the new app becomes available, please use the email link below: