Sedex guidance on COVID-19
Guidance for buyers: managing impacts of COVID-19 in your supply chain
This guidance details Sedex’s recommendations and tools to support businesses to manage the impacts of COVID-19 in their supply chains.
We recommend reading the Guidance for Employers as well as this guidance, as it is these standards and recommendations that businesses should assess against and support their suppliers to adhere to.
This guidance covers three areas of activity:
- Understanding risks to suppliers and their workers because of COVID-19.
- Managing your purchasing practices to minimise and avoid exacerbating the negative impacts on health and income to workers.
- How to manage your existing audit and compliance programmes during COVID-19 outbreak and global recovery period. In development, to be launched shortly.
All three areas are ongoing processes that can and should take place simultaneously.
Human rights risk assessment on the impact of COVID-19 on workers in business value chains
This section explains the principles of risk assessment and how to use Sedex tools to determine where the impact of COVID-19 may be most severe and where businesses should focus their activities.
What is a risk assessment?
The aim of a COVID-19 risk assessment is to understand risk to people (such as workers becoming ill with COVID-19, losing employment and/or not earning enough money to live on) and the probability that these impacts might occur.
The aim of risk assessment is to identify the possible risks, then to grade and prioritise them by their relative importance. This provides a framework for businesses to take action to reduce the likelihood that these hypothetical problems, particularly the most serious ones, will actually occur.
With COVID-19, key risks to people are:
- People getting sick and/or dying
- People not having enough money to survive (due to job losses or reduced wages)
- The inability to meet international labour and environmental standards due to increased pressure on their business
Who is most at risk?
The impact of COVID-19 will be felt the hardest by those who are already vulnerable to financial or health shocks.
Doing a COVID-19 risk assessment will help to consider vulnerable businesses and people. We include vulnerable businesses in the risk assessment because the impacts of business closure will significantly impact workers within them – for workers who lose their jobs, the economic impact can be more harmful to themselves and their families than the threat of COVID-19.
Therefore, buyers have a responsibility to:
- identify those businesses that are likely to be at risk of closing
- take steps to mitigate any negative impact buyers may cause through their purchasing practices.
REMINDER: The previous section considered vulnerable people. These include:
- Those without established or regular contracts or in the informal economy e.g. Gig workers, zero hours contracts, self-employed or seasonal workers
- Those with existing or underlying health issues,
- Those earning low wages
- Those in accommodation linked to employment, those living on their own (and may be vulnerable during periods of mandatory isolation) or in very crowded homes.
- Those over 60 years old
- Women and / or those with caregiving responsibilities
- workers who organize or raise grievances
- Indigenous communities
- Groups who are subject to cultural and legal discrimination
- Groups who live or work in densely populated areas with limited ability to isolate
Vulnerable businesses include:
- Those selling non-essential goods and services
- Service providers that rely on being “on site” and will be affected by state enforced restrictions on movement
- Those reliant on exports
- Those with existing liquidity and cashflow challenges
- Those whose customers offer poor payment terms and do not approach supplier relationship as a partnership
The steps involved in a risk assessment are:
This guidance will pull out the key elements of this relating to COVID-19, rather than explain each step of a risk assessment in detail.
For more information on the steps involved in a broader human rights in the supply chain risk assessment, please see the following guidance: Sedex Guide to Risk Assessment in Supply Chains
1. Map your supply chain
Use existing tools such as your suppliers on the Sedex data base or your own internal supplier lists to understand where your suppliers are located.
Consider the scope of your risk assessment. All businesses and workers in global value chains are likely to be impacted by COVID-19, from warehouses and logistics providers, to cleaners, security and other service providers, to agriculture and manufacturing. However, some businesses and people are more vulnerable to its impact than others.
Include all businesses you work with and your business leverage, including:
- Service providers
- Goods providers
- Suppliers of goods and services that you sell to customers
- Suppliers of goods and services that you do not sell to customers
2 .Review high level risks:
While people and businesses in all countries are likely to suffer, not everyone is equally at risk. There are various external drivers of risk that can contribute to a range of adverse impacts – for example at a country or sectoral level. These include:
- Spread of COVID-19 in the country and region. Sedex recommends that members refer to the World Health Organisation (WHO) for country specific guidance and insights on the spread of COVID-19. You can find the WHO COVID-19 dashboard here.
- Governance e.g. inadequate labour protection – where labour legislation is weak or not enforced
- Economy e.g. high levels of poverty
- Social e.g. discrimination against women or minorities
- Demographics e.g. substantial internal or external migration
- Sector risk e.g. widespread use of low skilled, seasonal or agency labour
While COVID-19 may be prevalent in most countries, the businesses and people most impacted will likely be those with less state protection, in countries with higher levels of poverty. It is also likely that more impact will be felt by the businesses and workers that rely on low skilled, seasonal migrant labour.
Key Questions to ask:
- How severely is COVID-19 impacting sourcing countries/regions?
- Does the state provide a safety net to businesses and workers who need it in these countries i.e. will the government provide sufficient/insufficient income to ensure workers can survive if the business fails?
The Sedex Risk Assessment Pre-screen tool provides risk information at a country and sectoral level. Use this to determine where workers are likely to be at greatest risk of exploitation. Pay particular attention to those countries with higher risk scores in the labour standards and health and safety pillars, as this will help you to understand where workers are most likely to already suffer from poor working conditions which may be exacerbated by the covid-19 outbreak.
For a practical guide to using the Pre-screen tool, visit our Radar Guidance document.
See below for an example of the report:
3. Understand what is happening at a supplier level
Businesses will be impacted in different ways due to COVID-19 and, as discussed above, some businesses are more vulnerable than others to its impacts. Be aware that this situation can change quickly as the impacts of COVID-19 are felt and then as businesses start to recover from it. Keep lines of communication with suppliers open.
First consider business ability to continue operating and cashflow:
- Is the supplier able to operate and for how long?
- Does the supplier have sufficient cashflow to pay workers?
- Is the supplier experiencing a drop in demand, little change, or an increase in orders?
- What product do they make – will demand for the product continue or will they divert resources to other “essential” products.
- Are there sufficient workers to do the jobs needed? OR are there too many workers for demand? And what action will they take to manage this?
Next consider situation at the site, for example:
- Do they provide accommodation to workers?
- Do they use subcontractors?
- Do they rely on migrant labour and is this workforce still available or have they returned to hometowns?
- What types of workers do they employ?
- What contracts are workers employed on?
- How do they recruit workers?
Then consider if they have the resources (staff and skills) to manage the impact of COVID-19:
- Presence and skills of Human Resources and Health and Safety staff
- Presence of health and safety committee
- Understanding of how to protect workers from COVID-19
- Actions taken to mitigate health impacts on workers from COVID-19.
Key Questions to ask:
- Which suppliers are able / unable to weather the economic impact of COVID-19?
- Which workers are likely to be working and living in safe / unsafe conditions?
- Are workers current wages sufficient / insufficient to provide a financial safety net if the business needs to reduce staff or close?
Because the nature of COVID-19 impacts businesses differently, the best thing to do is have conversations with your suppliers to understand how COVID-19 is impacting them and what they need from you as a buyer in order to survive. See the next section for related information on Purchasing Practices.
4. Prioritise your risk
To do this consider the following:
- Scale: How grave or serious the impact would be – remember that the impact of COVID-19 will be felt the most by those who are most vulnerable to financial or health shocks – i.e. the poorest and least healthy.
- Scope: How widespread would the impact be – is it all your suppliers in 1 country or only specific suppliers?
- Remediability: How hard would it be to put the situation right or reverse it? For example, is it an employee death due to COVID-19, or unpaid wages which could be compensated?
Key Questions to ask:
- Where will the impact of COVID-19 be the most severe?
- And where will it impact the most people?
5. Consider leverage
Finally, consider your ability to address these issues and where you have most influence. For example, you will have more leverage where you have:
- A direct contractual relationship
- Significant commercial relationship
- Long term relationship / potential for long term relationship
In these cases, the supplier will be more impacted by your decisions. Maintaining contracts and supporting the supplier through the COVID-19 outbreak could have a significant positive impact, while cancelling contracts will significantly increase the risk of business closure and heighten risks to workers. See the following section on Purchasing Practices for further information.
There are also ways to increase your leverage, for example if you are aware that certain suppliers in Bangladesh or Cambodia are particularly vulnerable, but you have little leverage, you can collaborate with peers who also source from these factories or the same sector to take collective action to mitigate country-wide risks to workers and businesses.
Key Questions to ask:
- Where will my business decisions have the biggest positive and negative effect on my suppliers and their workforce?
The rest of the document will explain the actions you can take to manage risks in your supply chain and reduce the impact of COVID-19 on your suppliers and the people in your supply chain.
There are 2 areas where you can make significant impact in your supply chain.
- Your purchasing practices.
- Your audit and compliance programme