The complex nature of supply chains can make it hard for construction firms to detect exploitation. Three experts discuss how best to combat such unethical behaviour.
26 September 2017
Ursula Hartenberger: It’s very simple: not respecting labour rights in the supply chain equals disrespecting human rights. Fortunately, we are living in an age where such incidents and practices come under public scrutiny. Perceptions among market participants and end-users of what is and isn’t acceptable are definitely changing. A consideration of labour supply chain ethics needs to be part of a surveyor’s professional due diligence towards the client.
Mike de Silva: At a basic level, this is about risk and reputation management. Do you want to be on the front pages because you failed to recognise that there was an ethical risk in your supply chain? Higher-risk areas need to be identified. This is not about striking suppliers off your supply chain, but getting them to recognise the inadequacies in their due diligence and committing to doing something about it. If we just strike them off, they will graduate to the lowest common denominator and find a buyer.
Jacqueline Glass: Wherever you are, there are risks. If you don’t understand them, you have a risk to your reputation at the very least, let alone a risk to your legal position and your licence to operate. Those in sectors where this has not yet been encouraged have an advantage: to be clean and robust is a good statement to be able to make.
Ursula Hartenberger: We would all agree that forced or child labour, or the absence of health and safety provisions, are not right – so how can we accept it from a professional perspective? Members need to get this across to their clients.
Mike de Silva: I would hope that people will start to think beyond the boundaries of their job site and consider more altruistically the conditions of workers abroad.
Jacqueline Glass: The problem of external, complex supply chains is not unique to construction. Companies such as Amazon and Alibaba have enormous supply chains.
Mike de Silva: I don’t believe there is any deliberate connivance here. The problem is that for too long it has been put in the “too difficult” box. This is why I feel strongly that collaboration and a common voice is so important.
Jacqueline Glass: You need to make it very clear to your suppliers that you are only dealing with trustworthy sources. Also, you need to transfer some of the responsibility for working with trustworthy sources to both your second- and third-tier suppliers. You can’t be in all places, but you do have to make a strong point about not being shy to withdraw from a supplier or from a market if the ethical standards are sub-optimal.
Ursula Hartenberger: The challenge is the industry is very fragmented. This fragmentation of the value chain and the lack of dialogue leaves a lot of space for malpractice. As a starting point, organisations need to have a clear code of ethics or a policy in place that communicates their commitment both to their employees and stakeholders. As a next step, it is very important that they actually implement and enforce these codes and policies.
Jacqueline Glass: It’s very much about identifying risks and supply-chain mapping. Companies need to do this robustly with experts.
Ursula Hartenberger: Traceability of materials is a big issue. With food, we can now often trace country and supplier. Why not do the same with construction materials? We already have a sustainability hallmark with wood – this could be extended to include responsible labour practices.
Mike de Silva: The whole industry needs to work together. The client has a role to play and can lead on this. This really is an area where consistency and collaboration are vital elements. This is a long game, but we all need to remain committed to it.
Jacqueline Glass: It’s not going to happen overnight. The aim is to help and support, not to hack your supply chain to pieces. Work with the people that you want to work with to produce good things, and get them to understand that this really matters to your organisation.
"Organisations need to have a clear code of ethics in place and it is very important that they actually enforce these policies." - Ursula Hartenberger, RICS
Jacqueline Glass: We don’t really know and that’s the scary bit. However, it undermines confidence in the industry. My worry is that even a few isolated headlines back up negative images of the sector, which isn’t helpful. If we don’t have a robust position, those isolated stories will be damaging for the industry.
Ursula Hartenberger: Parts of the industry already have a dubious reputation because of ongoing issues with transparency and corruption. But we also need to be realistic about pointing the finger at certain countries.
Unfortunately, this kind of supply-chain exploitation is not only happening in markets we might describe as “emerging”. In the past few years, there have been reported cases of migrant workers being exploited on construction sites in Germany, which is not necessarily a country that one would associate with modern-day slavery. So this is a challenge for the whole industry, regardless of location.
Jacqueline Glass: I see it in terms of PR risk: nobody wants an exposé on a completed building – it’s incredibly disruptive and can be very costly, both in terms of that building and loss of business. It’s also about attracting people to work for you. This is the sort of thing that is going to make your company appeal to younger people.
Mike de Silva: Reputational issues could impact on share price if you are a quoted company, but even for private enterprises it could compromise the willingness of others to do business with you. It’s not acceptable to turn a blind eye to this anymore. It is not a defence to say we didn’t know there was a problem because we didn’t even look. But we must also recognise that this is a complex area. If, when an issue comes up, organisations are able to demonstrate they have understood where the risks are and are starting to address them with their supply chains, we should cut them some slack.
Jacqueline Glass: There will always be different cultures. If you go into this with an open mind you are more likely to make progress, but you have to understand the culture you are going into. The fashion industry is sourcing from all over the world but they will have agents on the ground, getting to know factory bosses and the circumstances of the workers so that they can devise improvement plans that are suitable for that culture. Understanding culture is really important – this is a matter of negotiation with real people, face to face.
Understanding global supply chains is extremely difficult, so I would want to refer to an expert because they will understand conditions on the ground. Transferring from one supply chain to another has to be done with a great deal of caution. Also, if you don’t buy, somebody else will. They don’t have to sell to you. We have purchasing power, but there is also selling power.
Ursula Hartenberger: If you are sitting in a headquarters in London, it’s very obviously difficult to know what’s happening in a country thousands of miles away. Apart from global non-governmental organisations [NGOs] such as Amnesty International and Human Rights Watch, who can help with the initial overall risk assessment for markets, local NGOs on the ground can be very valuable partners.
Mike de Silva: I would reiterate my point about collaborative working. In the globalised marketplace, it’s about building relationships with clients and bringing issues to the agenda, and hopefully influencing local behaviour. Over time, this can start to influence practices in other parts of the world.
Ursula Hartenberger: If we just abandon these markets because we consider them to be hopeless cases, their ethical track record will never improve. If we don’t bring standards to these countries, we are also effectively keeping loopholes that stakeholders who want to take shortcuts on human and labour rights can channel things through.
But this is a much longer-term project. It is about raising awareness within companies operating in these countries and possibly collaborating across sectors, because a lot of the supply chain issues will be the same.
Mike de Silva: This is a tougher question. Shunning them is the easy solution, and it is effectively closing our eyes to the problem. My view is that engagement is the best way forward. If we say that we will shun certain countries, we would potentially have a fundamental problem in terms of supply.
Jacqueline Glass: The UK is not squeaky clean, so expecting others to be is not reasonable – this is a matter of negotiation and maybe you can come to terms with the working practices of another country or region. If you don’t like the look of it, don’t shun but engage.
Real estate has taken active steps to prevent labour force exploitation, thanks to an initiative between RICS and the United Nations Global Compact.
The institution published a comprehensive resource – Advancing Responsible Business Practices in Land, Construction, Real Estate Use and Investment – in mid-2015, setting out the industry’s response to the UN Global Compact’s principles for raising the bar in terms of environmentally and socially responsible practices.
The first step is for a company to frame its own policies. These should include measures to prevent forced labour and trafficking.
The resource urges companies to encourage suppliers to develop their own internal labour and human rights policies. A way of giving teeth to this approach, the document suggests, is to stipulate that firms will only do business with suppliers with a proven track record on meeting acceptable standards on workers’ rights.
Tangible steps to implement these policies include developing ethics training programmes that should be scheduled for the first few months of employment. In addition, companies can set up an “ethics hotline”, which will enable supply chain misdemeanours to be reported and potential ethical dilemmas aired.
As leader of Loughborough University’s Action Programme on Responsible and Ethical Sourcing, Jacqueline Glass has developed a simple, “starter for 10” manifesto on supply chain risks.
She suggests construction companies and developers could look to fashion companies and retailers, who have been grappling with labour supply ethics for many years. Specialised supply chain auditing companies have developed in the sectors, which Glass urges firms to use.
In addition, by using certain supply chain auditing software, invoices will not be paid unless the supplier has been pre-approved.
“People soon wake up if they don’t think they are going to get paid – attaching assurance to financial systems in a business is really powerful,” says Glass.
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