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When it comes to corporate social responsibility (CSR) global supply chains can be difficult to manage and despite numerous attempts to improve transparency and ethics, there is still much work to be done. With human rights breaches continuing to be uncovered, a number of governments across the globe are implementing new laws to try and push forward progress.
In March 2017, the Assemblée nationale (the French National Assembly) introduced new legislation around defined duty of vigilance for parent companies and their subcontractors. Although the law is currently going through the parliamentary process, if it does come into force it will have a significant impact on the role of procurement.
The legislation states that firms carrying out all or part of their activity in French territory shall establish mechanisms to prevent human rights violations and damages to the environment throughout their supply chains. While principally aimed at French companies, with at least 5,000 employees with a head office located in France or 10,000 employees when a head office is located outside of the country, this does also include international companies that operate in full or in part on French territory. It is estimated that up to 200 companies will be affected by the new law.
If organisations don’t comply with the law, they could face fines of up to €30m.
Procurement functions in organisations that meet this criteria will need to prepare plans to be able to prove that they are actively trying to combat such labour abuses so as to avoid persecution, brand damage or extensive fines.
Will it work? The UK introduced similar legislation in 2015 with the Modern Slavery Act, but new research suggests that so far it has had only limited impact. A study by supply chain software provider Segura Systems found that where 80 of the top 250 retailers were expected to publish their Modern Slavery Act statements on or before 31st January 2017, almost half of them had failed to meet the deadline.
There could be several reasons for this. The difference between France’s proposed legislation and the UK’s is that the latter doesn’t enforce any financial penalty on organisations that don’t comply.
Although the power of such legislation is sometimes questionable, procurement should be using these laws as an opportunity to fine tune its policies and improve transparency in their supply chains. Acting as a stable example in these unpredictable times will further demonstrate the crucial role that the function plays in the business.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.