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Supply chains will come back to bite, but present an opportunity

On Thursday last week I attended a presentation by human rights lawyers who tackle big business.

The two lawyers, Paul Hoffman and Martyn Day, described their cases against large companies such as Unocal, Shell, Trafigura and others.

They are among a small handful of lawyers who are raising the risk stakes for companies world-wide.

As Martyn Day noted last week, such litigators are few and far between, but the largely student crowd at the event may indicate growing interest in swelling their limited ranks.

Human rights lawsuits are a growing risk for companies, that much is clear if you take a look at what’s happening globally on the Business and Human Rights website.

Whilst a recent ruling related to the recently used 1789 Alien Tort Claims Act may considerable narrow it’s scope or limit its use if it stands (according to Martyn Day on Friday), its clear companies need to pay attention to what’s happening in emerging economies, where supply chains often live, or face unknown and unmanaged risks.

Here’s a couple of examples as to why. This first one is a big South African waste company.

More importantly, the issue of general waste dumping may come to bite groups of companies, rather than individual firms.

The first example is likely just one company, as in the recent Trafigura case.

But class actions against groups of companies are not inconceivable in the future. In the end the Trafigura legal settlement included some 30,000 injured stakeholders.

If you read this shocking and emotive Der Spiegel story, you realise two things.

First, governments such as Germany’s, are realising that EU Directives such as WEEE are having severe unintended consequences as waste is offshored en masse (since it’s 60% + cheaper to send it abroad to the unknown, than recycle it properly in the EU).

Secondly, companies are increasingly being held morally and legally to account over what happens to goods they made after use. That’s the point of take-back schemes.

But if the ‘recycled’ waste ends up poisoning children, companies will be rightfully open to increased moral censure and legal risk for not making sure disposal is done properly.

Supply chain ethical audits will soon be flowing downstream, as well as upstream.

The Spiegel article points out that on the information technology waste tips of Ghana, computers and their innards with “labels from the US Department of Defense, British authorities and companies like Barclays Bank and British Telecom”, are being burned and are poisoning the poor.

Three years ago, we published an investigation on this topic.

Lots of other publications and media outlets are increasingly covering this issue of supply chain waste. We can’t put it in landfill any more, and if it’s not properly recycled the chances are strong it will end up being disposed of dangerously.

If you work for a company with looming supply chain liabilities like these, can I suggest two courses of action:

1) Show your colleagues and senior executives this Spiegel article and talk to them about what’s happened to the reputation of Trafigura (a case study of malfeasance today)

2) Start thinking about how you can turn future and emerging downstream supply chain waste issues into opportunity in advance of NGO attention, lawsuits or media stories

Business is fabulous at finding solutions to difficult problems.

Closed loop recycling for electronics is a big challenge, but it can, will and must be done. Those companies who get in early, (and I don’t just mean electronics manufacturers) will surely benefit in the longer term. And so will the children of Africa.

If we can’t stop offshoring waste, why not create jobs in places such as Africa by building proper recycling facilities. After all, if commodity prices keep rising, (and they will) there’s no reason why doing this can’t be profitable.

(If you want to see how models that work for African jobs are being developed, check out the work of Advance Aid, and make a donation to them)

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