The Uyghur Forced Labor Prevention Act (UFLPA) requires manufacturers to look deep into their supply chains to ensure their products don’t contain any materials sourced from the Xinjiang Uyghur Autonomous Region (XUAR), which has been identified as a hotspot for forced labor. And the UFLPA is just one of the growing lists of forced labor due diligence acts being rolled out by regulators across the globe, including the German Supply Chain Due Diligence Act (SCDDA), and new forced labor requirements for Customs Trade Partnership Against Terrorism (CTPAT) members.
To stay in compliance and protect market access, manufacturers now must collect data from their supply chains, to the parts of parts level, and report with confidence that their products are free of parts produced by forced labor and child labor. This will require putting new processes in place, writing new policies, and — for many — collecting environmental, social, and governance (ESG) data for the first time. By focusing on forced labor and human rights, product and trade regulations have now entered the sphere of ESG reporting, putting manufacturers on the path to deeper ESG reporting.
As manufacturers collect data about their forced labor risks to comply with the UFLPA or CTPAT, their exposure to greenwashing risks increases. Because they will now have the ability to identify their social and governance impacts, they may find information that obligates them to take further action, like re-engineering a product or ending a relationship with a supplier. If they chose to do nothing (or obscure that data), then they can be accused of greenwashing or negligence. Furthermore, there will be added pressure to establish a human rights program for their supply chain beyond the basic requirements of the UFLPA due to additional due diligence obligations.
What is Human Rights Greenwashing?
Greenwashing is making ESG claims that are exaggerated, misleading, or untrue, either deliberately or by accident. It usually involves making statements which are not backed up by data, or making promises without taking action. Greenwashing is even recognized as a major concern by the Securities and Exchange Commission (SEC). Even responsible manufacturers may be accused of greenwashing by watchdog groups and non-government organizations (NGOs) if they aren’t transparent with their ESG data in disclosures and reports.
Greenwashing is a bit of a misnomer: Although “green” may seem to only cover environmental topics, it also addresses unsubstantiated claims for social and governance concerns. Because of this nuance, pundits in the ESG space have also begun using “purpose washing” and “woke washing.”
What does human rights greenwashing look like? It can take many forms, including:
- Making claims about your human rights performance or risk portfolio without collecting the data to back those claims up. For example, stating in an ESG disclosure that you have a low risk of forced labor in your supply chain but not using the Slavery and Trafficking Risk Template (STRT) to collect data to back that up. This can also manifest itself as having blind faith in your suppliers to “do the right thing” without collecting due diligence data.
- Collecting human rights data but not having a program with corrective or preventive actions to reduce risks in your supply chain. This form of greenwashing is often found in ESG disclosures that mention a human rights monitoring system, but there are no procedures in place to act upon that data.
- Basing your entire ESG policy on green environmental performance indicators. Due to the complexity of global supply chains, some of the biggest ESG impacts for manufacturing are related to social and governance topics. Omitting these and focusing on only environmental performance is a red flag for a shallow sustainability program.
The UFLPA and CTPAT: Policy is Not the End of Your Program
The U.S. government is cracking down on forced labor used to make goods entering the country, with new requirements for manufacturers, including the UFLPA and CTPAT membership. In both cases, manufacturers need to establish a process for identifying forced labor risks in their supply chain down to the parts of parts level or beyond, to pinpoint which global regions contribute to their human rights risks. Currently, many manufacturers do not have the deep visibility into their supply chains to demonstrate their compliance, putting their ability to access the U.S. market in jeopardy.
You can learn more about UFLPA in the Assent webinar How Will the UFLPA Affect Your Business?
What’s notable about these requirements is that they force manufacturers to go beyond the surface and take action: Manufacturers will need to not just create policies and write a code of conduct for suppliers, but also provide concrete evidence that they’re taking action based on their policies. For example, CTPAT membership has a minimum requirement that businesses provide “evidence of implementation” and proof that training has been provided to their suppliers and employees about forced labor compliance.
That’s why it’s now essential to have a solution in place that goes beyond data collection, delivering supplier education, ESG corrective actions, risk analytics, and assistance with ESG reporting. Learn more about Assent’s ESG solution.
Twice the Risk: Avoiding Greenwashing and Noncompliance
In the early days of ESG, companies were often able to evade enforcement action by simply stating they were against forced or child labor. Now, thanks in part to evolving regulations and growing consumer expectations, only having a policy in place without defensible supply chain sustainability data and an active program is considered non-compliant and greenwashing. Manufacturers who don’t gain deep visibility into their supply chain now are at twice the risk: They face noncompliance penalties from regulators — including market access issues and product seizures — in addition to greenwashing accusations from consumers and NGOs.
To avoid greenwashing and noncompliance risks, you need data and a plan on how to use that data. For manufacturers, the path isn’t always clear, and that’s why Assent created The Manufacturer’s Guide to Avoiding Greenwashing. This free handbook gives you best practices and strategies to make sure your ESG program goes deep enough to withstand scrutiny: Download your copy today.