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Despite the popular belief that slavery is a thing of the past, it is estimated that it affects around 50 million people globally. Human exploitation for labour and other forms of modern slavery are embedded within the supply chains of many of the products and services that we choose to consume regularly, whether we are buying clothes, electronics, or even a bar of chocolate.
This is becoming an increasing concern for business as well. Mounting pressure from both legislative bodies that introduce new regulations and a new generation of consumers, who seem to be willing to pay more for sustainable products, signals a need for a change.
In this episode of the Sustainability Matters podcast, host Bruno Sarda explores this topic further with Tom Veit, CEO of Asahi Global Procurement – a large Japanese consumer goods company, and Kate Skattang, Director in the Climate Change and Sustainability Services practice at Ernst & Young, Australia. The guests discuss the challenges posed by the issue of forced labor across global supply chains and the recent legislative changes that compel organizations to scrutinize their procurement.
Tom and Kate share industry insights about how EY teams worked with Asahi Global to create their own human rights due diligence framework, emphasizing the importance of a top-down approach as well as putting people first across all areas of business processes.
Key takeaways:
Protecting human rights is a fundamental responsibility for companies, as forced labor impacts tens of millions of people globally.
Leadership commitment is essential for prioritizing human rights and implementing effective due diligence frameworks within organizations.
Recent laws, such as modern slavery regulations in the UK and Australia, or Corporate Sustainability Due Diligence Directive (CSDDD), are driving companies to assess and proactively disclose human rights risks in their supply chains.
For your convenience, full text transcript of this podcast is also available.
Tomas Veit
We cannot do what we plan to do on our own. We need all these suppliers in our chain to really help us on the journey because without them, we cannot change what's physically happening on the ground.
Bruno Sarda
Hello and welcome to the EY Sustainability Matters podcast, our regular look at ESG [environmental, social, and governance] and sustainability topics and how they impact businesses around the globe. I'm Bruno Sarda, EY America's Climate Change and Sustainability Services leader and your host for this series. Thanks for tuning into our podcast. Today, we'll talk about the pressing and complex issue of human rights in global sourcing and supply chain management.
It's estimated that around 50 million men, women, children, globally are affected by forced labor. In some ways, it affects all of us daily as consumers, whether we're buying things like clothes, electronics, or a bar of chocolate. Laws exist, but they're inconsistent and imperfect. So, how do large companies navigate that risk and implement mechanisms such as due diligence with their supply chain partners?
What are the drivers behind the efforts that many companies around the world are ramping up to tackle human rights issues in their value chain? And how could a change in supply chain practices actually affect companies' culture? To discuss this topic, I'm delighted to be joined today by Tom Veit, the CEO and Chief Procurement Officer at Asahi Global Procurement, a part of the Asahi Group, a large Japanese beverage and food company.
Also, with me here today is my colleague, Kate Skattang. Kate is a director in EY Australia's Climate Change and Sustainability Services practice and was part of the work the Asahi did to conduct the human rights risk assessment, develop human rights strategies, set targets and design the Asahi human rights due diligence framework. Tom, Kate, welcome to you both.
Kate Skattang
Thanks for having us.
Veit
Thank you. Good morning, everyone.
Sarda
Kate, if I can start with you, can you summarize some of the global pressures that exist for companies to assess human rights and sustainability risk, and implement due diligence in global value chains?
Skattang
Yeah, I think there's been a lot of change that we can observe, maybe, over just the last 10 years in terms of pressures globally that are encouraging organizations to take action around due diligence, particularly for human rights and sustainability issues in their own operations as well as their global value chains. Particularly around human rights, around 10 years ago, we saw the introduction of the modern slavery legislation in the UK.
And then a similar law [was introduced] here in Australia a couple of years later. And these laws require organizations over a certain size to assess the risk of modern slavery in their operations and in their supply chain and then to publicly disclose on that risk and what they're doing about it. And then, in similar laws in other countries in the US, we saw trade bans on products made with weaker labor.
And now, we're seeing an introduction of the European legislation, which is well known around the Corporate Sustainability Reporting Directive and then with that, the Sustainability Due Diligence Directive or the CSDDD. And we can observe here is a shift toward mandating due diligence. So, it's not just around disclosing on risk, it's around requiring organizations to work with their global operations and their third-party business partners to understand what their risk and impacts are on human rights and on the environment.
And then, to have the policies and the engagement mechanisms and action plans to address that risk, and then to report on that program and the effectiveness of that program. So, it does have some effect toward you driving change because it's focused on action rather than just necessarily on disclosure. But broader than just on legislation, there's also a growth around the types of benchmarks that we can see in this space. So, there are some organizations like Know the Chain or the World Benchmarking Alliance .
And these organizations, they analyze global companies' policies and disclosures as well as global media around their human rights performance. And then, they give them global scores and publish those in reports. So that can really make organizations accountable for their performance on addressing their negative impacts on workers and operations in their value chain.
So these types of pressures come together to raise awareness within organizations and also within consumers, and really create some pressure that then needs action to be taken.
Sarda
Thanks for that overview. Before we go to Tom, you've mentioned various rulemakings around the world on this topic. Do you see companies taking different approaches in how they respond, maybe, by sector or geography at a high level, or is there some consistency there?
Skattang
I think it's definitely raising the level of awareness around human rights risks and issues. And, I guess, encouraging that conversation at the most senior levels of leadership in an organization. And so that does have an impact on driving change from the top, which is a really beneficial thing.
And also, in terms of the way that companies then address that problem can vary depending on what the risk or the material areas of risk are. So, for organizations that do have a high-risk value chain, and Asahi would be one of those of having an inherently high-risk value chain, there's a lot more action and focus in that space. But then for others, they may stay more toward just high-level disclosure and taking more of a compliance mindset in terms of the action that is taken.
Sarda
Well, Tom, let me turn to you, thank you so much for joining us for this conversation. Asahi has put significant effort into establishing human rights risk management and due diligence processes. So, can you talk us through the drivers, motivation, and maybe even leadership principles that are behind this?
Veit
Sure. So starting with the key drivers, I think it's the importance of the topic as such — for us as human beings, for us as a function and for us as a business. Using the vision statement from our responsible procurement, “respect and inspire” is just speaking on its own. It's about how we are able to protect and respect human rights, while creating inspiring and empowering supply chains. So, I think the first one is the importance of the topic.
Second is our starting position. We knew since the beginning of 2023 and 2024 that we are pretty aware on how to manage these risks associated with human rights. But the standards were different across the world, and we wanted to just increase the bar and ensure that we are treating human rights in our supply chain properly across the board.
And the third one is the commitment from our leadership team. I think we are really privileged that we are a company that has very strong leadership support in case of human rights management.
Sarda
Thanks for sharing that. That's a very good foundation when you go from principle to practice. You have a very interesting role. You're the CEO of Asahi Global Procurement, and you also oversee sustainability across the company. Can you share the strategic decision drivers to structure the function that way?
Veit
Yeah, so our function is responsible for some part of sustainability that is touching our supply chains. So, for instance, we are speaking about the climate change, so Scope 3 [emissions – ed.], we are speaking about sustainable agriculture, circularity, or for instance, human rights. Why are we structured that way? I think it's just because we can influence so much stuff in the era of environmental and social sustainability. And then we created our function.
We integrated sustainability in all the seven strategic pillars of our organization. We integrated sustainability into the first P that is speaking about purpose. We integrated sustainability and the focus on human rights into our people section. That means not only how we are structuring our teams, how we are integrating sustainability into the accountabilities for every single member of our organization, but also how we are assigning the competencies, including the one associated with sustainability to every member of our team.
We integrated sustainability consciously into our processes and base of working and standards, but also into our policy landscape and controls that are monitoring and measuring our performance and our compliance. We also integrated sustainability and focus on human rights into our platform landscape in order to ensure that we can increase the transparency, efficiency and proactivity of all the service lines that are associated with our procurement organization.
We integrated sustainability as a topic also into our 360-degree partnership scheme, which is part of our foundation. This is giving us a unique opportunity to really shape the way how we are partnering internally within the Asahi procurement organization, within the Asahi business, but also externally. Externally with our suppliers, but also with communities, with external support partners who are helping us on our journey, or other alliances that are helping us to become a better procurement organization.
Last but not the least, we integrated sustainability into the entire chapter that is speaking about performance, giving us a unique opportunity to [not only] measure where we are [today] versus yesterday, but also versus others. That means gives us clear understanding where our current organization is from the maturity perspective, including the human rights management versus other FMCG [fast-moving consumer goods] companies or other procurement organizations we want to ask to compare with.
Sarda
Thanks for sharing that. We often talk about the importance of integrating sustainability and I think that sounds like a very comprehensive approach, so, very well done. Back in 2023 actually, you initially came to the global EY organization and Kate and her team for some support on this journey you're on. What was that problem statement you were working on at the time?
Veit
I think our biggest challenge was that we were new in the era of global procurement organization. So, we knew that in certain markets and regions, we were very good in human rights in the region program. But in some others, we were very far from what we can call best in class, or world class procurement maturity. And that's why we decided that we would like to really change it and we wanted to roll out the first-ever, in the Asahi context, global human rights due diligence program that is really robust, comprehensive, modern, agile, and gives a chance in a relatively short period to introduce what others were building over the last decade. And for that, you can do it on your own, but you never know what you are missing. And that's why we decided to use external expertise and someone who has the industry knowledge.
And that's why we ran the open tender to select the external partner who can help us in our journey to create the first-ever human rights due diligence program for our external supply chain that will give us a chance to cope with this risk properly, and will give us a chance to complete this work in a reasonable time frame. Because we were starting as an organization and as a business relatively late versus the other companies on the market.
Second, naturally, to do it, considering our size and complexity, we were short of the competent resources. That's why increasing the capacity for these programs through the external partner was another reason to do that.
And third, we wanted to just accelerate it. Just imagine, other companies were building such frameworks since 2010, some others even from 2005 or even earlier. So, our ambition was very high. We got less than 12 months to make this happen without sacrificing the quality of the final deliverable. So, we used the external party also to ensure that the entire process is really accelerated, and that we can learn from the mistakes of others to make our final product even stronger and better.
And when it comes to sustainability and human rights, our goal was not only to do the right things, it was also about doing them the right way.
Sarda
For sure. Well, Kate, going back to you then, what approach did you and your team take to take this and support Asahi in what Tom was just describing?
Skattang
Yeah, it was a really big program that Asahi was looking at undertaking. The initial steps that we took was to undertake a risk assessment of human rights potential, and inherent human rights risk and impacts in their organization as well as in their value chains.
So, in terms of looking at their current state around the policies and processes that are undertaken to identify and manage risk, and then also with their supply chain, we need to look at the key categories that they buy and the suppliers and their global geographic locations.
What the inherent risk might be in terms of suppliers that might be of the highest risk that Asahi would want to start focusing some of their engagement with. This in order to work with those suppliers to understand what those suppliers are doing in their own operations and in their value chains to manage risk, and how Asahi can partner with them to build and improve on that.
So, we worked with Asahi from then [on] in a working group to create a program around human rights due diligence and risk management to build a strategy with some key targets. And a lot of the documentation can then form the backbone of that to make sure that it's well implemented globally, and that all of the key stakeholders globally, including supplier stakeholders, are well engaged and informed.
And then, we also have a team who are helping now, given that we're well into the implementation stage of that, to then train and roll that out to suppliers. But it was very much led by Asahi and their thinking around the goals of where they wanted to be and the aspirations that they have around human rights due diligence and where the focus needs to be.
And we supported with uplifting the resources to be able to achieve that in quite a short space of time. And it's very inspiring in terms of what Asahi has achieved, and the level of commitment to that aspiration from the top of the organization, as Tom mentioned before, all the way through to operations and really, the ground level and farm level.
Sarda
Yeah, thanks, Kate. And speaking of ambition, Tom, what targets, how have you determined the ambition and the goals that you've put in place to improve human rights in your value chain? And how are you able to measure progress against these targets?
Veit
I think it's moving back to the general ambition of our organization — that means to create the world best-in-class procurement capability or procurement organization that also works for sustainability and human rights programs, because the ambition was absolutely the same.
As mentioned by Kate, I think for us, it was very important to, with the support of our partners from EY, to create for the first time, the maturity assessment of our organization from the human rights perspective that would give us a clear understanding of where we are short and what should be our focus areas, moving forward. But also, shaping clearly our ambition and our targets for the coming five years helped us a lot to ensure that we can convey the key messages, including our overall ambition, to all our employees within our organization and beyond, as also to our suppliers who are part of this program.
We are also exploring what our options from the platform perspective are and how to really digitalize the human rights due diligence program in the context of Asahi. And it was a very special element of our capability framework, giving us a better understanding on how to shape this part of the quadrant that is speaking about the digitalization and automation that can help us to manage all our suppliers through the newly installed program.
And the piece that I should maybe start with is about our people. How to really ensure that we can really train all our people in the newly rolled-out human rights due diligence program. How to ensure they really understand what matters most, what are our focus areas, and what we want to achieve as an organization.
That's why, in the very early days, once the program was completed and officially deployed, we trained a few hundred of our people across the world just to ensure they have the full understanding of what the program is about. And we have done the same with our suppliers.
For the first time, we virtually trained more than 300 suppliers in Japan in a very special market. We have done it virtually with very positive feedback that we received immediately right after the session and in the following days and weeks from many of our suppliers. And that was nicely linked to the first pillar of our capability framework and that's the strategy partnership, because we cannot do what we plan to do on our own.
We need all these suppliers in our supply chain to really help us on the journey because without them, we cannot change what's physically happening on the ground.
Sarda
And you mentioned earlier how this seemed to really come from a place of just the value system of your organization, from the leadership on down — that this really is driven from a place of purpose. But would you say that the newly implemented due diligence processes themselves have prompted any cultural shift within the organization regarding, maybe, the importance of more ethical supply chain practices, and if so, how?
Veit
This definitely increased the awareness of the risk in the area of human rights. And as I mentioned before, when we completed the first maturity assessment, we learned what some others already knew. That means, we were very strong in some of the markets and in some of the regions, mainly in the case of Southeast Asia or Australia and New Zealand.
But in some other parts of the world, the risk associated with the human rights was not perceived with the same level of intensity. And I think our program helped to open the eye of our colleagues across the world on what really matters most, what we should do differently and how we should really approach this very special agenda that we have on the list from the sustainability perspective.
We brought even many of our colleagues to the concrete location in Southeast Asia just to give them the personal experience. To give them the feeling of how it looks when they are really visiting the palm oil plantation or any other type of the agriculture field, when they are speaking to the workers on the ground and when they are seeing what are the conditions our suppliers are experiencing.
And then, I think, that was one of the game changers, ensuring that people are not only reading about certain stuff that are happening but are really experiencing them on the ground and not only in the negative way, but also in the positive one. In many cases, you associate certain types of agriculture with a lot of risk, but when you are approaching some of our preselected suppliers, you learn that you can do it right if you're really focused, not only as an employer, but also as a customer. And we are, in many of these cases, customers to our suppliers who are farming in the different corners of this planet and producing different commodities for our manufacturing sites.
Sarda
Thanks for sharing, that's powerful. And speaking of powerful, you mentioned a few minutes ago the importance of making this flow into your platform and digitization and leveraging technology, not just for scale, but also for measurability and accountability. Can you tell us more about the technological tools that can help support due diligence and supply chains? Nowadays, a lot of talk about AI [artificial intelligence]. Did AI play any role at all in this transformation?
Veit
Starting from the last part of your question, definitely. GenAI [generative AI] will play an important role, but it's too early for us. We are using tools that are having embedded AI and GenAI, but not concretely for this particular area, but there are very high expectations that some of our tools that we generally expect to deploy later this year will help us with many stuff that will replace what the human beings do.
Actually, we are working very closely with EcoVadis using their electronic platform that is helping us a lot to simplify that part for us, but also for our suppliers. And we really expect to deploy one of the modules from SAP AriVad that will help us to manage the risk and integrate at the end the EcoVadis inputs into our end-to-end platform ecosystem. That will help us to link risk with category management, with sourcing, with contracting and will create the ecosystem where all that information is connected and interchanged.
Sarda
Thank you. So maybe the last question directed at you both. Kate, you mentioned earlier that there's this rising wave of regulation that is now moving beyond disclosure and really pushing into due diligence. So many companies have not started on this journey and are nowhere near where Asahi is today. What advice would you give to companies that are much earlier in the process, frankly, to what they should do, how they should prioritize and/ or accelerate more robust human rights practices in their supply chains?
Skattang
I'd suggest to start much the same way as Asahi did to undertake a dedicated assessment about where you sit today. So, to understand your maturity around not just how you comply with the legislation but the effectiveness of the business systems and due diligence activities that are being undertaken in order to be able to identify risk around human rights and environmental impacts, how those risks could be prevented and mitigated, but also how to engage with stakeholders meaningfully. So, your workers in your operations, workers in your value chains, peer organizations as well, to collaborate together around how to drive change more broadly in higher-risk sectors.
So, I think it's a long journey to get toward having a really effective operational due diligence process that is targeting all of the highest areas of risk. But starting with understanding your current baseline and where your strengths and weaknesses sit, and undertaking some peer benchmarking is a really good place to begin to move from and actually build an effective framework upon.
Sarda
Tom, anything you'd want to add?
Veit
Building on what Kate mentioned in our case, and what I would recommend also, is to get the support, and I would say the commitment, from your top management. Prioritize risk, segment the suppliers that matter most in this particular area because there are so many stuff that we can do that, at the end, if you would like to do everything with everyone, it's almost mission impossible.
That was also our approach, recommended by EY, to really to focus on the high-risk suppliers before we will really do and work with others. Whatever you will create as a part of the human rights due diligence program, try to integrate into your current ways of working; otherwise, you will kill your people. And when we created our Human Rights due diligence Program, it was also valid for other chapters of our organization.
We used the so-called test-and-learn phase. That means start small and scale smart. And that's exactly what we are doing right now with Kate and the team in the area of human rights due diligence. So last year, we opened the door to roughly hundreds of suppliers, high-risk suppliers. We tested for the first time the new human rights due diligence program within the Asahi context.
And we just used it as a test-and-learn phase, giving us a chance to really test how it works within our context, how it works with our suppliers and what we need to do differently just to make it really scalable. And when seeing the learnings from the last year, I was very confident to move this year to business as usual. That means to enter another few hundred of suppliers as a part of the second wave, to do the first deep dive with the Tier 2 suppliers. And again, we touch the Tier 2 in small, it was a small sample. It was again, a very small start. And once we will test that it's working, we will go bigger.
And the last piece is about really continuous improvement. Whatever we are doing, we are still learning that could be done slightly differently. We can integrate or introduce new technologies. We can change and simplify the processes and standards for us or for our suppliers.
And I think sometimes, we are missing the user experience as center of everything we are doing. And that's our core focus this year, just to ensure that everything we created and deployed last year is also respecting those who are really working with this human rights due diligence program in our case. That means not only our team, but also suppliers who are definitely an important part of our program.
Skattang
Yeah, I think you really do want to get to the point where you've built these processes and they're embedded into the systems to the extent that everybody in the organization, not just procurement and sustainability, but everybody sees it as a part of their job to consider this risk lens over the decisions that are being made and the choices that are being made. And, when the program has been successfully embedded like that, then everyone takes accountability and has the tools to be able to do that.
Sarda
Well, thank you both, Tom, Kate, thanks for this insightful conversation but, I think, actually very actionable advice for others to follow. And Tom, I really like what you said earlier about fundamentally at the heart, you know, we are people first, and these are fundamentally human issues, and we can't look away until we know we've done what we can so that all people can live and work freely and safely to build systems and operations and pathways for accountability and for helping the organization achieve its highest potential and its mission in the most ethical and responsible manner possible. So very inspiring to hear all you've been doing at Asahi. So again, thanks for joining.
As I said at the beginning of this episode, this is the EY Sustainability Matters podcast. You can find all past episodes of the show on ey.com or wherever you get your podcasts. Thanks for listening. If you enjoyed this episode of Sustainability Matters, we'd love for you to subscribe. Ratings, reviews, and comments are also always very welcome. You can listen to previous episodes, like the episode where we explored sustainability in the music industry recently, or our most recent one where we discuss how to navigate sustainable development in a volatile political climate.
Please also visit ey.com where you can find a wide range of related and interesting articles that will help put these bigger topics in the context of your business priorities. I look forward to welcoming you on the next episode of Sustainability Matters. My name is Bruno Sarda. You can find me on LinkedIn. Feel free to connect with me there. Thanks so much for listening.