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Responsible supply chain management is becoming an essential aspect of modern-day risk management, especially for companies that source extensively from the developing world. Amplified by the media, concern is mounting among consumers, NGOs and unions about abuses of workers in supply chains. Companies need to demonstrate that they take these issues seriously if they are to avoid the prospect of very public and damaging criticism that has the potential to damage their brands, undermine their customers' trust and tarnish their reputations - all of which can threaten shareholder value. However, there are also compelling ethical reasons for companies to address supply chain labour standards even when their brands do not face material risks related to this issue.
Attention in this area has mostly focused on 'end-of-pipe' performance, such as particular labour violations in particular factories. Substantial resources have also been committed to determining effective factory monitoring mechanisms.
Increasingly, companies and investors (but also NGOs and labour groups) need to understand the effects of processes for managing labour standards in supply chains and in particular how one approach compares to another. Such comparisons need to address both inputs, enablers and outcomes. The Gradient Index is an initial attempt to evaluate and compare companies' approaches to handling this complex issue.
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