Diligent dialogue: How public buyers and tech resellers are advancing social responsibility in the supply chain

Common challenges

The severity and prevalence of human rights issues in the electronics sector are profound. Understandably, the expectations regarding ethical sourcing, proactive risk mitigation, and accountability for harms are also high. In the case of public buyers, these expectations come from governments, taxpayers and civil society organisations. For resellers, they come from clients and shareholders. Ensuring that the workers and local communities in the supply chain are safe, treated fairly and able to exercise their rights, is in everyone’s best interest. But this is easier said than done.

Like other downstream actors, public buyers and (most) resellers are removed from the manufacturing, mineral extraction and transformation processes that happen in the supply chain. They have limited visibility into the chain itself and the human rights issues that might arise therein. In this respect, they are largely beholden to the brands whose products they respectively buy and sell to share information.

Compared to brands and manufacturers, individual public buyers and resellers also have less leverage to directly impact change in the supply chain. They do not generally have direct business relationships with upstream suppliers—like contract manufacturers, smelters or mining companies—and their (indirect) spend with these parties is tiny relative to that of major brands.

These challenges create an incentive to exercise leverage collectively and coordinate due diligence activities to maximise the individual influence of each party. But what does that mean in practice, also bearing in mind the constraints in copetition and public procurement law?

Harmonization and advanced notice of requirements

At the simplest level, public buyers and resellers need to be pulling in the same direction. Unfortunately, the proliferation of social requirements imposed by public buyers and the short notice ahead of their introduction makes this difficult. The former pulls the market in different directions, making it hard for bidders to know which capacities and tools to invest in. The latter leaves them little time to prepare to meet new requirements. Because resellers depend on brand cooperation to meet certain social requirements, having adequate lead time is crucial.

In their first meeting, participants pinpointed factors contributing to these obstacles. Some were internal. For instance, for large public authorities, inconsistent approaches across functions and teams are an issue. Other internal factors included the relative priority of other considerations (e.g., competition, price) and insufficient knowledge about human rights due diligence among those responsible for preparing tenders and bids or managing contracts. Among external factors, the group identified differences in national legislation, competition between public framework authorities, limited peer exchange and the absence of good practice guidance.

The participants acknowledged that some of these factors are outside of their control. However, they were able to identify actionable next steps to address those within their respective spheres of influence:

• Communicate early: use market dialogue and engagement, policy notes and e-procurement platforms to communicate new social requirements as early as possible and signpost high-level due diligence priorities.
• Improve contract management: maintain a dialogue with awarded suppliers on social requirements throughout the performance of the contract to facilitate learning and promote continuous improvement.
• Align minimum requirements with existing legal obligations for companies (e.g. under national or European due diligence and reporting laws) to the extent that these advance ambitious standards.
• Reduce duplication of efforts where means of verification and other evidence of compliance is relevant to multiple tenders or contracts.
• Provide key functions with access to relevant expertise.
• Coordinate new requirements with other public buyers.
• Document and share lessons learned and best practices.

Linking social requirements in tenders and contracts

If implemented, the steps above would better align and focus due diligence initiatives between resellers and public buyers. But what if the social requirements in tenders and contracts are themselves misaligned? In their second meeting, the dialogue participants considered this question and paths toward a more balanced approach.

Procurement procedures often include rigorous tender requirements that are not matched with corresponding contract performance conditions. In other cases, where the latter exist, they are not always monitored or enforced. The disconnect sends mixed signals to the market. It also creates a disincentive for suppliers to invest in developing and implementing due diligence systems as the results of these are not examined post-award.

The imbalance is problematic from an impact perspective too. The contract performance phase is much longer than the tender itself. As such, it provides scope for a deeper and broader risk assessment and time to address identified issues. By focusing on the tender phase alone, public buyers are less able to detect and address human rights abuses.

During the dialogue, resource distribution and insufficient consultation emerged as major contributors to this issue. In several of the entities represented, participants reported that personnel resources and expertise on human rights are disproportionately allocated to tender and bid teams. Some mentioned that contract and account managers are not always consulted in the preparation of tenders and bids. These factors lead to fewer people being available to monitor and enforce compliance during contract performance, and a lack of awareness among those responsible about what’s expected.

The companies and organisations that had already taken steps to address these barriers offered some solutions. Pointing to a demand-driven shift, one reseller indicated that in markets where public buyers impose and enforce strict contract performance conditions, they have been forced to balance the allocation of personnel resources and expertise. A public buyer mentioned that their organisation is restructuring the contract management process to even out the personnel available for follow-up post-award. A few participants mentioned using the sustainability leads as an extra resource to contract and account managers, and as liaison between those and the tender and bid teams.

Effective contract management

The dialogue also considered means of strengthening and building on existing practices. Given the tendency to underinvest in due diligence activities post-award, the third meeting prioritised opportunities to more effectively monitor and measure compliance with human rights requirements in contracts. Participants were provided with a sample list of Key Performance Indicators (KPIs) ahead of the third meeting to stimulate discussion. Their exchange sought to address two related sub-goals:

• facilitating equal treatment of different economic operators, and
• promoting continuous improvement.

The potential due diligence contributions of different types of economic operators, like resellers and brands, vary according to their respective capacities, resources, leverage and access to information. Despite this, public buyers’ assessment of supplier performance seldom takes these differences into account. When expectations are calibrated to what major brands can deliver, resellers may not be able to comply. At the same time, scaling back expectations to the least common denominator discourages those with a greater potential to impact change from doing so.

How, then, can supplier assessment frameworks be improved to maintain a high level of ambition without disadvantaging certain types of suppliers? The group agreed that differentiated KPIs—based on what could reasonably be expected of different types of suppliers—offer a fairer approach without compromising human rights outcomes. Several examples were discussed with regards to product traceability, a pre-requisite for monitoring human rights issues in the supply chain.

Ideally, KPIs should also be progressive, meaning that the performance expectations increase year-over-year. This provides a structure for supplier development, whatever the maturity of their practice at the outset of the contract, and prevents against stagnation to the detriment of rightsholders in the supply chain. They should also differentiate between outputs, outcomes and related processes.

In addition to their applications in contract management, there was consensus that a common set of KPIs could serve other objectives. For example, they could signal the wider collective goals of public buyers and resellers with regards to human rights due diligence and transparency and/or the minimum expectations. They could likewise be used to establish sector-wide best practice among leading contracting authorities and their ICT resellers. The latter might help to secure the buy-in from major brands and industry associations necessary to drive systemic change.

Towards maximizing leverage

As mentioned in the beginning of this article, some actors have more power in the supply chain than others. In the electronics sector, these are the major brands, the large contract manufacturers, and the producers of a few specific components, like semiconductors. Without their cooperation, it is difficult for others—including stakeholders, resellers and public buyers—to have an impact on human rights at scale.

The fourth meeting of the series considered different types of leverage (i.e., contractual, commercial, reputational, relationship-based) available to resellers and public buyers and how to use and combine them for the greatest effect. At the individual entity level, many of the conclusions expanded upon ideas and themes that emerged from the preceding meetings. For instance, with regards to commercial leverage, including a tender criterion on the capacity to manage continuous improvement or using dynamic scoring of award criteria throughout the duration of framework agreements. Other ideas, particularly those relating to reputational and relationship-based leverage, were entirely new. Sharing information with customers and end users about supplier compliance with social requirements was one such example.

When debating opportunities to exercise collective leverage, participants quickly moved to a discussion of how to sustain this group going forward and advance its recommendations. There was a clear consensus about the need to continue and expand the dialogue series to include brands, in the first instance, and the organisations managing relevant ecolabels and certifications, at a later stage. Here, sustaining the dialogue becomes a form of collective leverage in its own right.

“Having a platform that enables dialogue between resellers and public buyers allows us to gain insights from different parts of the value chain that we wouldn’t ordinarily have,” said Vincent O’Reilly, Assistant Principal Officer and Category Manger from Ireland’s Office of Government Procurement. “These exchanges help us to strengthen our centralised procurement arrangements with evidence-based, realistic and achievable human rights due diligence requirements,” he continued.

Sheryl Moore, Global Director of Sustainability at Converge Technology Solutions agreed. “The group hasn’t shied away from difficult questions and brought a wide range of perspectives and experiences to the table. This type of forum supports participants to work collaboratively to stamp out human rights abuses in the supply chain,” she said. “[It] provides a unique opportunity to share our experience and better understand our customer requirements.”

“Despite our different roles in the value chain, it’s clear that we share common challenges when promoting human rights due diligence in the ICT sector.” Ulrika Svallingson, Sustainability Coordinator, the City of Malmö.

Next steps

In the near term, the organisers will consult participants to identify a handful of brand companies from among their top suppliers to invite to future discussions. The group proposed engaging each of the selected brands individually to facilitate a more transparent and open dialogue. They also proposed narrowing the scope of the dialogue from improving human rights due diligence to driving improvements on a few human rights issues. Preliminarily, these will be working hours and wages.

Participants recommended several complementary next steps outside of the dialogue series that can be pursued in parallel. For instance, public buyers and resellers should try to influence the ongoing review of the Responsible Business Alliance (RBA) Code to strengthen human rights requirements. The RBA Code is the primary standard against which the electronics companies are audited for compliance. CFIT and Electronics Watch should continue to support the harmonisation of standards and build momentum for this work, via this forum, the Electronics Watch Code and Contract Conditions, and the forthcoming CFIT guidance on transparency, among other means.