Point de vue

From the corporate duty of vigilance to social procurement strategies

Ensuring a just transition along the supply chain

Article written by Céline Kochinyan, Lou Blanco, Jules Chaillé, Ema Darthiail and Eugénie Duféÿ from Sustainability team.

With over 2.8 million deaths per year related to professional activities in the world1 and 4.9 million victims of modern slavery in 2021², it has become impossible to ignore the hazardous nature of working conditions in some supply chains. New scandals regularly question the role of purchasers in improving the working conditions of their suppliers. Cases such as Foxconn (2010), the Rana Plaza accident (2013) or the exploitation of the Uyghur community (2019) have led lawmakers to impose new constraints in order to ensure the respect of labor and human rights worldwide. In this increasingly demanding environment, purchasers must accept their social responsibilities.

Addressing challenges related to the environmental transition of supply chains requires the Purchasing function to bear the responsibility of a just transition, which implies safeguarding the rights, means of subsistence and decent employment opportunities of all workers faced with the transformation of economies and ways of working.

Increasing regulatory pressures to address the challenges of a just transition in supply chains

The French law on the corporate duty of vigilance (2017) extended companies’ scope of responsibility to their entire supply chains. Henceforth, eligible companies have the legal obligation to prevent and stop any infringement of fundamental freedoms, health and security caused by their activities or those of their direct and indirect commercial partners. This regulation will soon be applied at the European level via the proposal for a European directive on the duty of vigilance3 submitted by the European Commission in February 2022. Meanwhile, the Commission sent purchasers a strong signal by suggesting, on September 14th, 2022, the prohibition of any product made from forced labor4 on the European market.

Furthermore, a European social taxonomy5 could soon establish a classification of companies’ activities to guide investments toward those that most contribute to Europe’s social goals, defined in three categories: decent work, adequate living standards and well-being, and inclusive and sustainable communities and societies.

Simultaneously, norms developed by the European Financial Reporting Advisory Group (EFRAG) in the context of the Corporate Sustainability Reporting Directive (CSRD)6 aim at enriching companies’ extra-financial reporting. From 2024 onward, eligible organizations will have to publish sustainability reports addressing several pillars of the just transition, including:

Such regulatory evolutions encourage the Purchasing function to consider three major social challenges in supply chains : labor rights, diversity and inclusion as well as the importance granted to territories and local communities.

The expertise provided by specialized local partners, non-profit organizations and social economy players is henceforth becoming essential to build and deploy relevant roadmaps that efficiently adress the large panel of challenges related to a just transition.

Incorporate a social strategy into the purchasing process

Efficient levers exist at each step of the purchasing process to mobilize the entire supplier panel in favor of a social procurement strategy. Purchasing categories should be mapped to prioritize the progressive deployment of relevant levers.

Definition of the needs and supplier sourcing

During this first phase of the purchasing process, purchasers may adopt various commitment levels. The most accessible consists in sharing their social strategy through requirements specifications and considering the specific social challenges related to the purchased good or service’s industry and country of origin. Purchasers may also invite potential suppliers to present their own social strategy during requests for proposals. Going further, purchasers may act to facilitate small businesses and social economy actors’ access to requests for proposals, through institutional partnerships (for instance in France, the “SMB Pact”) or public platforms. The “Inclusion Market” is a solid example of a platform developed by the French government that lists 8,000 inclusive businesses.

The French Ministry of the Economy and Finance published a guide dedicated to the social considerations of public orders

The French Ministry of the Economy and Finance has recently published the 2022 edition of its guide on the social considerations of public orders7, that is meant to help purchasers identify the most virtuous suppliers, especially considering support given to the occupational integration of people excluded from the workforce, fair trade and gender equality.

Contractualization of social commitments

Similarly, the integration of social commitments into contracts binding purchasers and suppliers may materialize in various ways. The easiest consists in asking suppliers to sign a charter of social commitment as an appendix to their contract. More ambitious purchasers may devise social performance contracts to grant suppliers a bonus or a penalty depending on their performance regarding predefined social goals, that would be verified yearly during business reviews. Finally, another possibility is to transform the contract’s format to adapt to the specificities of each service: contract simplification for small and medium businesses, three-party contracts, multi-year contracts…

For instance, in France, the City of Lille wished to mobilize its cleaning services suppliers on the matter of workplace wellness. A social performance contract was drafted to encourage the supplier in implementing the necessary measures to improve workers’ well-being, in this case measured monthly through absenteeism rates. This contractualization modality enabled a decrease of absenteeism rate by about a third.

Service realization and monitoring

Structuring a clear governance with regular discussions between purchasers and suppliers is an essential condition for the success and efficient monitoring of projects. It may also be relevant to support stakeholders’ skills acquisition through awareness-raising and acculturation to the industry’s social challenges, through contributions from local experts on the territorial footprint of projects. Finally, some organizations commit to an even stronger reinforcement of their social impact by deploying multi-party projects, in partnership with suppliers and specialized local partners (for example UEBT or Ecocert), meant to address the specific social challenges faced on the field and make supply chains more resilient.

For example, the L’Oréal Group adopted such an approach in 2014 when it developed its “Solidarity Sourcing” program, which aims at helping individuals in circumstances of vulnerability to access stable employment and decent wages. In this context, L’Oréal launched a sustainable sourcing field project in Burkina Faso that supports the financial empowerment of shea nuts pickers. In total, 35,426 women have benefited from this program since 2021.

Supplier evaluation

Supplier evaluation is a key step to review the supplier’s social performance and highlight its commitments. Following an impact measurement approach, purchasers may define relevant indicators and collect corresponding data to measure the social impact generated by projects, as well as include social criteria in suppliers’ performance evaluations. Going further, purchasers willing to support their partners may establish action and mitigation plans in order to align the supplier’s performance with the goals set in their social strategy. Engagement actions such as responsible suppliers trophies or creating links with social impact players tend to encourage suppliers’ skills acquisition on social challenges.

In October 2020, Air Liquide’s Group Purchasing Department organized its third “Business Meeting” for the adapted and protected work sector. Among the hundred guests, 10 organizations that provide assistance to people with disabilities in the workforce had the opportunity to introduce their achievements with the Group’s subsidiaries. Following this event, 80% of participating organizations have been able to initiate or renew their commercial relationship with the Group.

Our conviction: social procurement strategies are key to build resilient supply chains

Co-construction initiatives are especially relevant, not only to maintain a high level of standard regarding companies’ social performance and anticipate their regulatory compliance, but also to build strong relationships with partners, multiply the social impact of deployed projects and strengthen the resilience of supply chains. Purchasing is no longer a simple business relationship but a true long-term investment that involves many stakeholders.

Feedbacks show that developing social procurement strategies enable an improved understanding of supply chains and facilitate reporting. By supporting new actors’ access to requests for proposals, purchasers diversify their supplier panels, reduce shortage risks in their supply chains and capture potential innovations. Social procurement strategies hence become real vectors of performance.