Keeping supply chains ethical and sustainable amid COVID-19

The pandemic has put global supply chains under stress and we need to be watchful that ethics and sustainability don’t fall by the wayside

By Dr Medo Pournader and Dr Franz Wohlgezogen, University of Melbourne

The COVID-19 pandemic has brought out the best in many people, but the economic hardship and opportunity also risk bringing out the worst – especially in the world’s stressed supply chains that we rely on to deliver our raw materials, goods and services.

Human rights groups and researchers are warning that a combination of increased unemployment and new demand for labour in expanding areas like personal protective equipment (PPE) and agriculture means there is a real risk of increased worker exploitation and even slavery.

Sudden surges in demand, like that for PPE supplies, puts pressure on the supply chains. Picture: Getty Images

In the global apparel industry, which has been heavily criticised in the past for exploiting factory workers, thousands of people have already lost or are at risk of losing their jobs because of the pandemic.

History tells us that significant disruptions leading to major economic downturns tend to put substantial stress on supply chains to reduce their costs.

The 2007-2008 Global Financial Crisis showed us that ethical and environmental obligations often get cut when businesses in different parts of the supply chain try to protect their bottom lines or cut corners to capitalise on sudden surges in demand.

In Australia, major retailer Woolworths has already raised its own concerns over increased cases of modern slavery in supply chains during the COVID-19 pandemic as the demand for certain products like paper towels and PPE witnessed a substantial spike.

And amid a rush to expand iron ore production following strong demand in the wake of reduced output in Brazil, major Australian miner Rio Tinto has been condemned for failing to protect Aboriginal heritage sites.

The potential for ethical and environmental failures has been heightened by COVD-19 making supplier auditing extremely challenging due to travel restrictions and international border closures. This only increases the risks of modern slavery, corruption and environmental pollution by suppliers.

The economic downturn from the pandemic has increased unemployment, making workers more vulnerable to exploitation. Picture: Getty Images

Supply chain companies themselves may have less time and resources dedicated to sustainability initiatives such as modern slavery reporting.

This environment for exploitation is made worse by governments relaxing or ignoring the protections that are already in place. For example, the US Environmental Protection Agency has relaxed environmental regulations and considered no penalties for noncompliance during the COVID pandemic.

Such regulatory relaxations have historically proven to be extremely difficult to undo.

The full extent of the pandemic, and of pandemic recovery efforts on sustainability are still uncertain. Encouraged in part by the new Biden administration in the US, there is renewed global momentum for more ambitious policy and regulatory efforts to protect environmental sustainability and avert climate change.

Yet, there is a risk that governments faced with a severe economic downturn may reduce or delay their investments or commitments for years to come.

McKinsey Global Institute has warned that a ‘zero-sum mentality’ about economic recovery after COVID-19 may lead to deeper national rivalries instead of international cooperation.

The Biden administration’s focus on climate change is encouraging, but there are concerns that a “zero-sum” mentality among countries could dilute ethical and sustainability protections. Picture: AAP

Further, many social sustainability issues such as modern slavery are lacking the same global momentum and coordination we are seeing in climate change.

Governments in the UK and Australia have enforced their Modern Slavery legislation, but the effectiveness of these laws in reducing modern slavery across global supply chains remains to be seen.

To ensure an inclusive and green recovery, public and private sector leaders need to intensify their efforts to gauge and report on their extended supply chains’ sustainability performance.

The media and social activists also need to continue to keep a watchful eye for sustainability infringements in the absence of comprehensive supply chain audits and to cultivate an active public debate about how to build back better.

Academic researchers can also contribute to this public debate by closely examining the lasting impacts of COVID-19 on sustainability in supply chains.

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