Targeting Human Rights Reponses at the Supply Chain

The United Nations Human Rights Council approved its Guiding Principles on Business and Human Rights in 2011. Since then a steady stream of international guidelines addressing the need to respect human rights have been announced. Related moves include disclosure of human rights related intelligence in many different nations, passage of laws to confirm and report upon human rights issues within supply chains for companies to take action in this area. International initiatives have also picked up steam at the Electric Industry Citizen Coalition (EICC) and other industrial bodies. Clearly, TDK can also expect to face demands for global collaboration with other companies in its field from here on. Being viewed with particular importance these days are moves to engineer effective CSR procurement approaches through cooperation with suppliers. To further heighten transparency, more and more companies are also choosing to publicly disclose their specific suppliers. Going forward, it will grow increasingly important to maintain a firm grasp of one’s own company’s international business structure and supply chain, followed by the use of country risk and other publicly available information as references in clarifying risk, establishing priorities and otherwise advancing human rights due diligence. In the promotion of CSR procurement as well, active communication with firms acquired through M&A promises to be indispensable. If progressive precedents are available, the know-how from such cases should be constructively infused and developed within the sphere of the corporate group.

Laws and regulations for corporate compliance in adoption of supply chain based labor management are emerging with the focus on Europe and the U.S. They include bans on imports and exports of products for which forced labor is detected along supply chains, with substantial impact on business practices already being reported. The consequences of related problems will inevitably be felt on stock prices, not to mention prompting comments from the media and NGOs. In advancing procurement, therefore, it is critical to constantly put yourself in the position of the stakeholders. Moreover, while laws and guidelines are naturally important, being content to simply satisfy such demands can generate mistaken impressions of what truly needs to be done. With supplier audits, although detailed checks of documents must be performed, it is more critical to directly listen to the voices of workers. Potent methods on that front include setting up hotlines with supplier employees and other schemes to speedily identity problems. When understanding with suppliers is slow in coming, communication as an extension of “5S” activities or other initiatives already widely used in the manufacturing sector offers the potential for progress. Workplace-based human rights problems are prone to lead to quality defects in sectors characterized by human operation, with efforts to promote understanding of the linkage between such dynamics and quality control suggesting one potentially effective countermeasure.

This session provided the opportunity to inquire about global trends and specific examples, underscoring the severe risks posed by forced labor within the supply chain. Grasping the nature of such risks makes it easier to mount countermeasures in advance, enabling rapid responses to actual issues occurring at the supplier level. I also felt that appropriate human rights responses play an extremely important role in raising competitive strength as a progressive company, and otherwise transforming risk into opportunities. We must avoid becoming overly preoccupied with laws, guidelines, and other administrative rules. Instead, we need to set our sights on moving beyond that domain with initiatives capable of realizing the ideal process at a higher dimension of understanding.

While confirming the status of supply chains that reach around the world is obviously no easy task, this exchange reconfirmed that the first step in that direction is to develop a firm grasp of the overall schemes in place. After that, we need to prioritize the risks to target, formulate policies and then work through the PDCA cycle to promote effective initiatives. As we move to advance aggressive M&A, companies with different cultures and labor practices will also join the Group. This creates the need for solid human rights due diligence, proper sharing of the TDK corporate philosophy and DNA throughout the Group as a whole, thereby paving the way to genuine growth as a combination of financial and non-financial operations alike.