Supplier Vetting: What to Ask About Labor Risk

Current workforce demographics including age, tenure, nationality, and gender.

This should include seasonal, temporary, contract, and subcontracted workers. This basic data will give you insights to craft smart follow up questions. For example, does the workforce skew young? That may be an indicator that this company supports the local community by helping young adults enter the workforce, or it could mean that there is hidden discrimination against people for their age or health status. Is the average tenure long? That may be a sign of an excellent employer; or it could be a sign of coercion if the workforce is largely migrants. 

Request a narrative describing labor-management relations.

Is there a union or a non-union committee? How does management receive and process grievances or suggestions from employees? This response will tell you a lot about the company culture. Any guarantees that there will never be a union is a big red flag! On the flip side, the existence of a union isn’t a guarantee that workers are treated well, especially in certain contexts where unions aren’t always independent or where union corruption is common. You can also do desk research to verify the responses against publicly available information. Search engines can reveal some information, along with news stories, local NGO websites, social media, and local government databases. The Business & Human Rights Resource Centre’s company database is an excellent resource (and a good reminder of why it is best to be proactive).  And remember, technology is improving access to information in other languages every day. 

Ask for summaries of any labor inspections or third party audits conducted in the last five years, including any key findings. 

Audits tell only a partial story and a labor inspection is only as good as the labor inspector and the overall state of governance in the factory’s location, but they can still be informative. If a supplier is honest and reveals past issues, you can follow up to find out what strategies they have put in place to prevent the issues from recurring. Past mistakes don’t automatically mean you shouldn’t do business with them. On the other hand, a squeaky clean record is an indication that something is potentially off - perhaps they aren’t being forthcoming with you or their third-party audits are not credible. 

Request copies of policies covering:

freedom of association and collective bargaining, child labor, forced labor, conditions of work (hours, wages, occupational safety and health), discrimination, and harassment. At a minimum, every link in your supply chain should have these on paper and they should mean something in practice. This includes your company. These can be bundled into one document or split apart. Good ones discuss general principles, better ones do so in a concrete way. Make sure it includes a clear explanation of at least: what the company aspires to, what behavior is prohibited, and a clear path for accountability.

Entry-level wage for a new employee at the lowest level.

This is a quick way to assess compliance with minimum wages and to evaluate the living standards of the people who will be brought into your supply chain if you make a deal. Some employers might proactively include additional information in response to this question, to ensure that you evaluate them based on their entire benefits package and average/median wages rather than examining the lowest wage on offer in a vacuum. 

Offer an opportunity for the supplier to share anything proactively that could come out during the vetting process. 

This is an opportunity for a potential supplier to be forthcoming. If you find something during your research that isn’t disclosed here, then you have a strong clue about what kind of a long-term partner this supplier would be. 

None of this requires a lawyer to ask. But if the answers raise questions you don't know how to weigh, that's a good time to call one.