The Auditing and Governance of Third Parties - Practices by Multinationals in Southeast Asia
In late November of last year, Nestle admitted finding cases of slave labor and other human rights abuses within its supply chain. These revelations were recently made public as part of a Nestle commissioned report by Verite.
Nestle’s bold move of putting their hands up and admitting they found these abuses within their supply chain has been commended. The CEO of anti-slavery NGO the Freedom Fund Nick Grono commented;
“You’ve got one of the biggest brands in the world proactively coming out and admitting that they have found slavery in their business operations, it’s potentially a huge game-changer and could lead to real and sustained change in how supply chains are managed.”
The three month long report had some frightful findings; Workers working under debt bondage of their employer, living in degrading conditions and working to the point of exhaustion.
Unfortunately these abuses aren’t isolated incidents. Recent reports by SPERI (January 2016) and Greenpeace (November 2015) indicate a lack of third party governance being conducted by large multinationals. The report found that the multinational corporation decides how far into its supply chain it wishes to audit, this means that often an audit will only go as far as its suppliers. However they may not look into the sub-contractors and workers on the payroll, where the exploited worker is often found. “Some evidence suggests audits have worsened conditions by shifting problems further down the supply chain.” In some cases, human rights abuses were unearthed only months after the sites in question had successfully passed audits.
One could be skeptical over Nestle’s timing of said revelations, Nestle is currently in court over completely separate allegations of child slavery in the Ivory Coast.
Regardless of motive, these findings suggest that multinationals may not be fully aware of the extent of their third party network. These cases highlight the importance for multinationals to fully govern third parties and conduct thorough due diligence and auditing of all third party partners.
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