A recent survey by The Economist found that 71% of 853 top executives believe their companies’ responsibility to protect human rights extends beyond compliance with labor laws. Yet, similar companies have few Key Performance Indicators that correlate with how they address forced labor in their supply chains. A recent survey by CERES found that only 40% of 600 top companies had a policy that explicitly prohibits suppliers from using forced labor.
Unlike environmental issues, few companies have instituted measurable practices that relate to social issues to which they could be connected. For many companies, quantifying improvements on environmental targets, such as a reduction of greenhouse gas emissions, correlate directly to cost reduction and can be easily measured. Measuring social indicators is still an extremely nascent effort, which contributes to weak associations between improving labor conditions and the financial benefit for business to do so.
When measuring their social impact, companies are stuck in an infinite loop, where they don’t manage what they cannot measure and they cannot measure what they aren’t managing. However, the emerging trend of regulated transparency may break this cycle.
In 2012, the little-known and underreported California Transparency in Supply Chains Act took effect. It required 2,600 companies doing business in the state, with global sales of over $100 million and classified as retail sellers or manufacturers, to report on how they manage their supply chains to prevent slavery. Today, the law is influencing similar reporting efforts around the world. Since 2012, three other transparency and reporting measures have been introduced or have passed: the UK Modern Day Slavery Act, the EU Directive 2013/34/EU, and the US Federal Business Supply Chain Transparency on Human Trafficking and Slavery Act.
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