The implementation of the Supply Chain Due Diligence Act (SCDDA): Challenges and solutions

Amazon, IKEA, and Tom Tailor have been reported to the National Garment Workers Federation (NGWF) in Bangladesh for violations under the Supply Chain Due Diligence Act (SCDDA). This is the first report since the SCDDA came into effect in January 2023.

The report alleges that these companies did not provide adequate monitoring of the health and safety of their factories in Bangladesh, thereby endangering the safety of their workers.

Challenges of Implementing SCDDA

The SCDDA requires companies with 3,000 or more employees to establish, implement, and update their due diligence process. In the following year, the law’s scope will be expanded to companies with 1,000 or more employees.

It should be highlighted that the law mandates organizations to also guarantee that their supply chains (not only the organizations themselves) do not violate human or environmental rights. This implies that if an organization is not subject to the legislation but is in the subject organization’s supply chain, SCDDA will have an indirect impact on them. Companies in the supply chain under SCDDA include all related companies, including those not related contractually.

In the case of Amazon, IKEA, and Tom Tailor, the three companies are accused of failing to perform their due diligence obligations, which include human rights due diligence on factories that are actually on the blacklist due to hazardous working conditions.

Regarding the implementation of due diligence under the law, many companies have supply chains that involve several tiers of suppliers and contractors, making it difficult for them to identify and address human rights violations throughout their supply chain. This is one of the challenges that many companies face when SCDDA is implemented.

Responding to Challenges

So, how can organizations respond to these challenges?

Given the complexity of the supply chain, organizations need to conduct risk-based due diligence. This method allows organizations to determine the level of due diligence that needs to be performed based on the level of risk posed by third parties or suppliers. The higher the supplier risk, the more comprehensive the monitoring and due diligence needs to be prioritized.

To practice due diligence, companies need to invest in appropriate due diligence services and tools.

Integrity Asia, through its Know Your Vendor™ solution, has been trusted by clients from various business backgrounds to provide due diligence services equipped with a Vendor Management System.

Using the latest technology, the Vendor Management System allows clients to monitor their supply chain due diligence processes. The system enables clients to collect and manage data about their third parties, apply a risk-based approach to gathering information for high-risk third parties, continuously monitor business relationships from initiation to updates and beyond, and access reports and scores with just one click from behind their desks.

For detailed information on how Know Your Vendor™ and other compliance services that can help your company, contact us today.

Putri
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