Back to basics: What is supply chain capacity building?

In supply chain risk management, we often talk about how to identify and monitor the risks in supply chains. But once identified, what actions should be taken to ensure those risks are effectively mitigated? Cue: capacity building.

Supply chain capacity building encompasses how organisations empower their own employees or their supply chain partners to improve working conditions and enhance productivity, sustainability, and company culture. This benefits the entire value chain- from supporting worker retention, satisfaction, and overall operational efficacy.

Capacity building is becoming mandatory, not just recommended

Due diligence laws like the United States’ Uyghur Forced Labor Prevention Act (UFLPA) and Australia’s Modern Slavery Act note that implementing practices to mitigate human rights and environmental operations is crucial and should be included in public disclosures. While implementation and regulation of these laws has previously been vague, newer supply chain regulations are becoming more stringent with these requirements. Laws like the German Supply Chain Due Diligence Act, Canadian Fighting Against Forced Labor and Child Labor in Supply Chains Act and the EU’s proposed Corporate Sustainability Due Diligence Directive (CSDDD) specifically outline the requirements for companies to impose these remedial efforts and review their efficacy annually.

 

 

Germany Supply Chain Due Diligence Act	EU CSDDD	Canadian Fighting Against Forced Labor and Child Labor in Supply Chains Act
– If a human rights or environmental-related violation is uncovered, the entity must take immediate remedial action to prevent, end or minimise the extent of the violation -The efficacy of the remedial action must be reviewed at least once a year and on an ad hoc basis when necessary	– The core elements of this duty are identifying, bringing to an end, preventing, mitigating and accounting for negative human rights and environmental impacts in the company’s own operations, their subsidiaries and their value chains. – These duties include setting up and overseeing the implementation of the due diligence processes and integrating due diligence into the corporate strategy	– Companies must report their steps taken during the financial year to prevent and reduce the risk of child labour and forced labour and the measures taken to remediate any of the risks found – Companies must also report on the training that was provided to employees on forced labour and child labour policies

 

 

Know your supplier, empower your supplier

The ambiguity of the how for implementing these practices may leave companies confused on the correct action to take, or which measures to apply. Supplier engagement and capacity building can take shape in many forms, but a key component is through supplier training programmes.

We repeatedly encourage supply chain managers to “know their supplier,” as preventing future risks involves having further visibility over operations. With knowing your supplier comes then aligning your supplier with the values and commitments to your organisation.

Supplier training is an efficient way to promote overall site improvement and to support your due diligence efforts. Supplier training promotes:

• Better understanding of risks and best practices: Suppliers will learn how to better manage risks and issues that arise and will be empowered to facilitate better working conditions.
• Compliance with regulations: Suppliers will be educated on expectations and requirements and will be better prepared for site assessments.
• Risk remediation: Suppliers will be educated on how to uniquely manage their workforce and implement grievance mechanisms to identify specific risks and gain the trust of their employers.

Know your supplier, empower your supplier

As organisations learn to comply with the new era of due diligence, the one learning that has become clear is due diligence no longer lies at the entity level. Due diligence requires engaging every component of the wider supply chain, getting everyone on board with the organisation’s sustainability commitments and targets.

At LRQA, we’ve built a specialised eLearning course library and comprehensive learning management system (LMS), enabling our customers to independently deploy digital supply chain training programmes. Our course library includes hundreds of animated, interactive courses that help brands and suppliers understand their ESG risks, promote sustainable and compliant practices throughout the supply chain, and remediate issues where they are found. System dashboards and reports enable customers to monitor the progress of their training programmes and disclose how they are educating their company and suppliers about critical ESG topics.