Rethinking the company’s purchasing model is now widely understood to be a necessary component of effective human rights due diligence. Far from being only a supplier’s concern, supply chain labour rights conditions, including those that increase vulnerability to forced labour, are shaped significantly by the buyer’s purchasing practices.

From order predictability, lead time, and pricing that accounts for the payment of living wages, to contractual arrangements that share the responsibility for the management of human rights risks clearly and adequately between the buyer and supplier, the buyer’s purchasing model plays a crucial role in enabling—or hindering—suppliers’ ability to meet the buyer’s human rights standards.

This is increasingly reflected in regulatory texts, notably the recent EU Corporate Sustainability Due Diligence Directive.

For companies looking to take their first steps on the journey to reassessing and improving their purchasing practices, the process can appear daunting. In this blogpost, the team at KnowTheChain draws on eight years of assessing company disclosure on purchasing practices, conversations with company representatives, and input from experts, to suggest tried-and-tested first steps to move towards responsible purchasing practices (RPP):

• Build a conversation between procurement and human rights/sustainability/ESG teams: Taking effective steps to adopt responsible purchasing practices requires buy-in from and collaboration between procurement and human rights teams within the company. What we heard from companies is that a useful first step can be to enable honest discussions, facilitating understanding of each other’s work, goals, KPIs, and day-to-day challenges. This could take the form of organising a brief workshop or meet-up (in-person, where possible) aimed at forging a personal connection and understanding each other’s usual day-to-day work. Companies have expressed that having this solid basis of understanding was helpful in making the subsequent collaboration on RPP friction-free.

• Build clear channels for collaboration between procurement and human rights/sustainability/ESG teams: After building the initial understanding of each other’s work, it is essential to establish how the collaboration will be structured – is there going to be a standing working group with representatives of both teams? How will we ensure that human rights teams have regular access to the relevant data (see below in “Internal data”) to analyse it from a human rights standpoint and incorporate it in their human rights due diligence disclosure?

• An active C-suite is essential. First, ensuring leadership understands the potential human rights impacts of procurement practices and their relevance to human rights due diligence will provide increased support, opportunity, and resources for this cross-team collaboration. Second, it is necessary to empower the procurement team to consider factors beyond price (human rights risks or “risks to people”, as opposed to merely risks to business). The UN Guiding Principles definition of human rights due diligence makes clear that it concerns risks to people, over and above risks to business resulting from human rights harm. In the long run, effective due diligence thus requires that procurement decision-makers are enabled and mandated to take this form of risk into account in their day-to-day work.

• Institutionalise human rights training for procurement teams: as the understanding of business responsibility changes, so does the “usual” way of doing business. To reflect that, procurement teams should receive regular, effective, tailored, and in-person training on responsible purchasing and the impact of purchasing practices on human rights in the supply chains*.
• Internal data gathering and analysis: To assess the state of a company’s purchasing practices and their potential impacts on suppliers’ capacity to provide working conditions compliant with international standards, as part of the human rights due diligence process, the human rights teams will need access to data related to the timing of order placement, changes and cancellations, as well as costing and pricing, which typically sits with procurement teams. Relevant data includes: % of orders placed late, % of orders changed after an order is placed, # of days between the last change and shipment, minimum and average lead times provided to suppliers, length of supplier contracts, % of orders for which wages and other labour costs (such as wage increases) are isolated or ring-fenced, and % of suppliers paid in full within 60 or 30 days of delivery. Where the company shares forecasts with suppliers in advance, tracking the differences between forecasts and final orders is also useful.

“Disclosing your Better Buying^TM score publicly and/or communicating on your website how you have used the scores to improve purchasing practices is also a great way to improve stakeholders’ confidence in your company’s commitments.”

• Supplier ratings collected by the Better Buying Institute via its twice yearly surveys provide an invaluable source of information about the impact of buyer’s purchasing practices on the ground. Better Buying™ provides a channel for suppliers to safely and anonymously communicate feedback to buyers, thus ensuring you have the most accurate, honest data available to understand your purchasing practices. Disclosing your Better Buying^TM score publicly and/or communicating on your website how you have used the scores to improve purchasing practices is also a great way to improve stakeholders’ confidence in your company’s commitments. Better Buying™ invites ratings from suppliers in April (Better Buying Purchasing Practices Index™) and October (Better Buying Partnership Index^TM) with the ratings cycle for the latter opening in just over a fortnight.
• Responsible contracting with suppliers: the Responsible Contracting Project provides resources, including drafts of model contract clauses which can be adapted to different jurisdictions. The resources are a helpful starting point for understanding the rationale behind, and practical implications of, adopting “shared-responsibility” clauses in contracts with suppliers. These can provide a useful basis for initiating internal dialogue with colleagues from Legal. Additionally, the Project provides workshops and individualised gap analyses for companies.

You can find the above steps, and much more, in the newly released KnowTheChain Good Practice Guide. The Guide is a practical resource for companies and investors, outlining concrete steps for companies to carry out effective human rights due diligence in their supply chains. It provides clear guidance, data, and concrete examples of good practices adopted by peer companies for 10 thematic areas: Board Oversight, Supply Chain Transparency, Risk Assessment, Purchasing Practices, Living Wage, Responsible Recruitment, Freedom of Association and Collective Bargaining, Monitoring, Remedy, and Supplier Training. It is modular and each section is fully self-contained, allowing teams to refer to specific themes based on need. It will be useful both to companies with robust supply chain human rights programmes looking to improve in a specific area and for teams taking their first steps on human rights due diligence, as it relates to purchasing practices and beyond.

KnowTheChain is a resource for companies and investors to address forced labour risks in global supply chains. KnowTheChain benchmarks leading companies across three high-risk sectors: Apparel & Footwear, Food & Beverage, and Information and Communication Technology since 2016, assessing companies’ public disclosure on supply chain due diligence efforts. It is a programme of the Business and Human Rights Resource Centre.

*Better Buying Institute’s e-Learning course. The Five Principles of Responsible Purchasing^TM, is suitable for everyone in a buyer company. To find out more, email Leonie Abraham.

Better Buying’s Fall ratings cycle, The Better Buying Partnership Index^TM (BBPI) opens for ratings on October 1st. It’s free for suppliers to complete, and 100% anonymous. The survey link will be shared on the Better Buying^TM website, Linkedin and X, from October 1st. Further information for suppliers is available on the Suppliers Page of the Better Buying^TM website. Companies wishing to onboard for the BBPI and receive a report about their own company’s practices, still have time – contact Leonie Abraham asap for details.

Brand and retailer companies looking for information on the benefits of subscribing with Better Buying^TM are invited to visit the Buyers Page on the Better Buying^TM website.