The Retailer Spring Edition 2022


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Daphne Guelker Responsible Sourcing Advisory Manager UL

S ocial and environmental sustainability increases long-term business viability and results.

As social practices and environmental sustain ability grow as topics of concern, organizations continue to grapple with the most meaningful ways to capture, measure, respond to and report on social and environmental performance across the supply chain. Audits and supplier self-as sessments have long helped monitor social impacts, but they lack complete visibility and objectivity and require additional meaningful interventions to drive improvements. To make measurable and credible progress, manufactur ers and retailers should partner with a trusted third party that can provide responsible sourcing capabilities at both the facility and supply chain level as well as product-level environmental and sustainability certifications. Sustainability experts at UL, a global safety science leader, suggest several actions com panies can take: • Establish grievance mechanisms – Companies, communities, institutions and non-governmental organizations all play a role in establishing effective grievance mechanisms that should pro vide clear channels for raising concerns, offer easy and confidential accessibility, document and analyze reported infrac tions over time to identify patterns and/ or recurring violations, and provide for investigation, resolution and restitution. Companies can offer some grievance mechanisms in the way of policies that protect whistleblowers and confidential hotlines. However, multistakeholder mechanisms may offer more effective grievance channels. Consider collabo rations with civil society, labor unions, industry trade associations and other institutions that can offer extrajudicial support for remediating social griev ances and preventing environmental contamination. Multistakeholder collaborations have the added benefit of addressing human rights and sustainabil ity violations across entire industries and communities.

• Engage with local communities – This can help lay a foundation for fair and equitable treatment of workers and greener environmental practices through education and local action and better understand regional culture, challenges and economic situations to uncover the greatest risk areas and prevalent issues in that region. Partnerships with local authorities, institutions and civil society can reveal vulnerable populations and keep a watchful eye out for violations. • Take remediation action – Companies should conduct a root-cause analysis to identify causes of social injustice and environmental contamination and invest in remediation. In many cases, root cause analyses and remediation actions will enhance social and environmental impacts and may yield cost savings. • Evaluate company policies for unin tended consequences – A company’s practices may inadvertently trigger the use of unfair social practices and environmental contamination in the supply chain. For example, short product release cycles may pressure suppliers to deliver new products in an extremely short time frame, incentivizing the use of undeclared subcontracting, child labor or excessive overtime. Time pressures may also result in less attention paid to con servation and sustainability efforts. The immense pressure to maintain low costs may result in the use of inferior materials or lower-expense resources, which may prompt the use of unfair labor practices or present health risks to workers as well as environmental damage. By carefully considering how policies can inadvert ently encourage unfair labor practices and sustainability shortcuts, companies can reduce unintended consequences. The prospect of overhauling processes to incor porate social and environmental due diligence can feel daunting. However, this investment also pays other dividends in reduced rework, brand trust, and greater supply chain resiliency.

As environmental, social and governance (ESG) reporting continues to gain momentum glob ally, companies have made significant progress tracking and documenting environmental and governance practices. Heightened awareness of issues like wealth disparity, discrimination, unhealthyand unsafeworkplaces, andviolations of fundamental human rights has been escalating the need for companies to address the social pillar of ESG. Consumers report interest in purchasing from companieswith positive human rights practices, investors incorporate ESG factors into their risk analyses, andnewhuman rights duediligence and supply chain transparency laws emerge globally. At the same time, a trend is towards making human rights due diligence mandatory and enforceable, as shown by UK’s Global Human Rights SanctionsRegulations 2020and theDutch Child Labor Act 2019. In Switzerland, Germany andNorway, legislation on transparencyand due diligence in the supply chain is also emerging. Rarely, however, do the critical links between human rights due diligence and ESG draw any recognition. Yet, as the UN Environment Programme notes, “Human rights and the environment are inter twined; human rights cannot be enjoyedwithout a safe, clean and healthy environment; and sus tainable environmental governance cannot exist without the establishment of and respect for human rights.” Attention to labor andhuman rights throughout a value chain can positivelyamplifyenvironmental outcomes.As it turns out, treating people fairlyat work can contribute to higher levels of hopeful thinking, which, in turn, makes employees more likely to engage in environmentally responsible behaviors at work. In short, attending to the S of your corporate ESG program can have posi tive and potentiallymore lasting E impacts than addressing the E alone.

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