Amid the accusations and finger pointing at Hyundai for child labor violations, there are seven important and urgent lessons for supply chain leaders. Let me unpack them:
1. Almost all multinational companies today are prioritizing human rights risk. It is (or should be) a boardroom-level discussion for every company because of the level of reputational risk. And as more legislation is put in place this increased compliance risk further increases the reputational risk.
2. This type of risk has traditionally fallen within the purview of legal and compliance functions and more recently ESG groups. But leading companies are adding this expertise to their supply chain teams. If it is necessary to quickly sever ties with a supplier, that is both an operational risk and a reputational one.
What you can’t see can hurt you.
3. Analyzing Human Rights risk at the “country level” is a helpful filter but it is not enough. Child labor is most prevalent in low-income countries, but it is by no means only a low-income country problem.
4. Using traditional ‘media monitoring’ is important but it is not enough. It is necessary to use built-for-purpose analytics that combine human and artificial intelligence to also monitor non-traditional digital and non-digital sources of information. In Hyundai’s case there was a public, digital record of a problem on August 22nd when the Department of Labor filed a complaint against SL Alabama LLC over child labor violations.
5. Some of the finger-pointing is towards intermediaries. In supply chains, by definition, there is nearly always an intermediary, but this is no longer being taken as an excuse by both the public and by government agencies; the recent UFLPA legislation is an example. Knowing your sub-tier supply base is no longer just valuable, it is necessary, and the technology exists to take on this significant challenge.
Ok, now what?
6. Knowing that there is a problem is the first step, but simply cutting ties with a supplier does not address the root cause. Hope for Justice is a great example of an organization that companies can partner with to make an impact in addressing this enormous challenge.
7. We as consumers have an important role to play. We cannot preach “Planet, People, and Profit” if we as consumers are not prepared to act differently. It’s hard to do because of the opaque nature of what we buy but we need to be more aware and ask more questions.
This case offers supply chain executives an opportunity. It would be naïve to think that this problem can easily be solved, but it would be wrong to look the other way just because it’s hard.