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Bar Association warns corporations: Clean up supply chains

Article by: JIM SPENCER , Star Tribune

Updated: November 29, 2014 - 2:00 PM

Bar Association initiative focuses on human rights.

WASHINGTON – By year’s end, chief executives at all of America’s Fortune 500 companies — including 18 in Minnesota — should get a letter signed by the president of the American Bar Association.

Commit to ending human-rights abuses in your supply chain, the letter will say.

Even though a recent U.S. Supreme Court decision has made it harder to hold U.S. companies liable for child labor, slavery, human trafficking and dangerous working conditions among their suppliers, the risks to corporate brands grows by the day, said Chris Johnson, the former general counsel of General Motors North America who heads the ABA business section’s supply-chain initiative.

“Regulation is increasing,”
Johnson said. 

“Litigation is increasing. It’s astounding to me that companies don’t get out ahead of this. It’s a time bomb.”

Some companies have tried. Johnson credits Starbucks, Microsoft and Coca-Cola with setting examples in assessing and addressing the risks of human-rights violations in their supply chains.

Many of Minnesota’s major multinational businesses also have entered into programs aimed at reducing human-rights abuses in supply chains. Best Buy Co. Inc., for example, participates in two such efforts, the Electronics Industry Citizenship Coalition and the Conflict Free Sourcing Initiative, spokeswoman Amy von Walter told the Star Tribune.

Industry collectives are a common buffer against accusations of human-rights abuses for all manner of businesses, but especially for electronics manufacturers and distributors like Best Buy.

 The term “conflict minerals” became an alarm bell in 2010 when the Dodd-Frank Wall Street reform forced makers of certain electronic products to report to the U.S. Securities and Exchange Commission (SEC) the use of minerals that might have been mined by exploited workers and/or used to fund terrorism. 

Such disclosures can potentially hurt manufacturers’ brands and the reputations of the companies that sell them.

Meanwhile, Minnesota-based agricultural giants Cargill Inc. and General Mills Inc. face activists’ charges of child labor and forced labor among farmers who supply cocoa to their vast distribution and food production networks. Each company emphasizes the need for suppliers to respect human rights in the production of all raw materials, not just cocoa.

General Mills says it is “advancing responsible sourcing practices across our supply chains to respect human rights.” 

Both companies belong to the World Cocoa Foundation, whose members train farmers and pay them a premium to grow and harvest in ways that encourage good production without relying heavily on child labor.

Still, Cargill currently is embroiled in a federal lawsuit that seeks to hold the company responsible for the alleged abduction of children who claim to have been held captive and made to work without pay on cocoa farms that supplied the agricultural giant.

Target Corp.’s vice president of global affairs now holds a director’s post in the Alliance for Bangladesh Worker Safety, an organization formed in July 2013 in reaction to the April 2013 collapse of an eight-story commercial building that killed 1,100 workers making products for U.S. retailers. 

Target has said it was “not directly involved with the tragedy,” but is “committed to being part of the bigger solution.”

Nevertheless, the formation of the alliance was a response to disaster, not a move to prevent it, Johnson said.

That seems to be the rule for U.S. companies, he explained. They remain reactive and not pre-emptive in handling possible human-rights abuses in their supply chains. 

In fact, Johnson said, a recent study by the ABA and Arizona State University, identified some Fortune 100 companies that do not have supply-chain policies.

The ABA seeks to change that corporate mind-set.

“With a company, you have to have a business case,”
Johnson said.

“You can’t just say, ‘It’s the right thing to do.’ ”

So his message is direct, using the Bangladesh disaster as an example: Why would you want to wait to have your products
“found in the rubble along with 1,100 bodies of dead workers?”

The letter he has drafted and that Bar Association President William Hubbard will sign calls on CEOs at all of the nation’s major companies to articulate specific refusals to tolerate human-rights abuses in their supply chains by conducting risk assessments of potential abuses and pledging to fix any problems that those assessments reveal.

Minnesota Fortune 500 companies that responded to a Star Tribune request for information about their supply-chain policies cited variously worded endorsements of fair labor practices, diversity and respect in the workplace, and prohibitions of human-rights violations in their supply chains.

Hormel Foods Corp., for instance, specifically and formally states that it
“does not tolerate” child labor and forced or involuntary labor.

In addition to such proscriptions, what the bar association now seeks of all U.S. companies is aggressive monitoring and enforcement. Johnson says the ABA will gather the best practices from across the country and incorporate them into a public database.

Ecolab Inc., a Minnesota Fortune 500 company specializing in water, hygiene and energy technologies and services, offers one model. The company demands that suppliers abide by United Nations and International Labor Organization human-rights guidelines.

The bar association thinks strong, comprehensive efforts may be the only way private corporations can head off more government regulation, not to mention lawsuits.

“This is a growing issue,”
Johnson said. “And we think companies should deal with it.”

Jim Spencer • 202-383-6123

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