From Risk to Resilience in the Global Supply Chain Economy after Covid-19, a Humanitarian Response

From Risk to Resilience in the Global Supply Chain Economy after Covid-19, a Humanitarian Response

Alva Bruun and Gyöngyi Kovács

COVID-19 has come to question the very fabric of our global marketplace, in an unprecedented way. Some of the emerging challenges link to the way our societies and markets are structured and the way the supply chains function. Suddenly, the very interconnectedness of our globe has started to be portrayed as part of the problem, rather than part of the solution. As businesses to a large extent source goods and services from far-reaching supply chains, production of essential goods has been disrupted severely through the unstoppable virus. COVID-19 brings to the surface how, as crises become more global in nature, the vulnerability of our global economy increases.

Global supply chains today are complex, often covering a number of countries with very different regulatory frameworks. The International Labour Organisation has estimated that nearly 500 million people work in supply chain-related jobs, and logistics costs equal between 7-12 % of different country’s GDP (for the US in 2019, the figure was 7.6% of GDP, i.e. 1.63 trillion USD). However, the risks and fragility of these supply chains have now been exposed and exacerbated by COVID-19. It is argued that, perhaps, the field of humanitarian supply chain management could guide us forward, in building rights-based and lasting solutions. It is paramount that the policies and processes created as part of the ‘recovery’ would address the vulnerability of supply chains and, in equal measure, the people most vulnerable to their disruption.

An illustrative case of Malaysian gloves
The ILO notes that the closure of production facilities, especially in South Asia, has been serious; in Bangladesh, production disruptions in the textile industry are estimated to affect the livelihoods of 2 million people. The events unfolding through Covid-19, have yet again shown that the people most affected by human rights abuses and disruptions in global supply chains are those in most vulnerable position to begin with, such as migrant workers, children, rural women. In the case of rubber glove production in Malaysia, where demand has surged significantly due to COVID-19, the rights of those involved in glove protection were fast forgotten.

Migrant rights specialist Andy Hall has noted, “it is not a question of either increased glove production to meet global needs and to ensure protection of frontline health workers or the protection of workers at high risk of forced labour – both are crucial at this time.” Strengthening supply chains seems to require rethinking risk. Protecting the rights of people and communities can protect the entire supply chain against vulnerability.

Humanitarian logistics embraces uncertainty
Humanitarian logistics has for over a decade looked at opportunities for strengthening resilience in supply chains. Humanitarian supply chain management addresses high uncertainty and complexity that characterizes disasters (Kovács and Spens, 2007) and strives to mitigate the suffering of vulnerable people to the greatest extent possible (Thomas and Kopczak, 2005). It starts to become evident that COVID-19 has shown how we need to prepare for such uncertainty and complexity and to apply the lens of humanitarian logistics to our economies more broadly.

In fact, COVID-19 only highlights numerous ways global supply chains, and policy, can learn from humanitarian logistics. These range from mitigative preparedness not only in terms of pre-positioned stock but also training, and the pre-vetting of suppliers, to policies that keep freight moving to ensure that critical supply chains don’t experience further disruptions. In fact, those countries that have embraced these supply chain principles in the medical supply chain had bought themselves some breathing time for crucial decisions to be taken as they tackled initial disruptions smoothly.

In a world where change and turbulence is the only static, the experiences from this field could certainly prove very relevant in designing the ‘New Normal’ following COVID-19 also in relation to responding to the challenges now faced by supply chain workers and the economy more broadly. Strengthened risk management solutions; mitigation and preparedness is essential in going forward, to minimize the negative impacts with the current and future crises in mind.

The importance of due diligence
Lessons from the humanitarian sphere suggests that due diligence processes could be part of the solution going forward. From a supply chain perspective, due diligence extends to many different aspects of suppliers across various tiers upstream, but in fact also of customers, such as is the question of e.g. selling crucial technologies for e.g. military purposes. Quality measures, pollution prevention principles, financial indicators of suppliers, as well as an assessment of capacity for timely delivery are central. In addition to these technical aspects, strong focus is on human rights due diligence; on assessing potential human rights risks, mitigating those risks and preventing direct or indirect abuse, and to ensure remedy for harm.

The Covid-19-crisis has put increased focus on these debates. In July, the United States started sanctioning Chinese companies because of links to alleged human rights violations in Xinjiang based on reports of the use of Uighur forced labour as part of their global supply chains, including on personal protective equipment. Now, U.S. went further to ensure products would not end up on its market. The example, while also being coloured by ‘power politics’, highlights the emerging role of states in taking action where business fail to meet their duty to respect human rights. There is a vivid debate ongoing in various European countries, such as Finland, about the need for mandatory human rights and environmental due diligence, in order to transform the way businesses operate and are held to account. Comprehensive due diligence measures, alongside other measures, are also an essential part of procurement. While there are no quick fixes to complex solutions, there are clear indications that strong human rights-based policies increase productivity and play a key role in avoiding supply chain disruptions.

A new kind of nexus for resilience
We are far from being able to assess the actual implications of COVID-19, yet there seems to be consensus about the need for transformative measures. In a letter to Governments and financial institutions addressing COVID-19, the UN Independent Expert on debt and human rights Juan Pablo Bohoslavsky stressed that emergency economic policies should not be adopted  to the detriment of public health and human rights but rather should be fully consistent with them. He alluded to the 2008-2009 financial crisis, as the world saw a rise in world hunger, unemployment and entrenched inequalities. He stressed the importance of paying attention to various politico-economic contexts, in particular to the developing countries highly dependent on supply chains to sustain their economies. It seems an opportune moment to transform supply chains and related management processes more profoundly.

The only viable solutions appear those, which consider the complexity of our economies and the vulnerabilities of the workers in the supply chains and communities depending on them. This has also been highlighted in the current Programme for Germany’s Presidency of the Council of the EU. Bold decisions that place human dignity front and centre in addressing challenges related to the links between the local and global; the social and economic spheres have never been more urgent. Could responses to the challenges presented by COVID-19 be found in a new kind of nexus; strengthened relationship between, rapprochement, of trade and international human rights law while applying lessons from the humanitarian sphere? Any investment in the resilience of the supply chains through comprehensive due diligence would be an investment in sustainable socioeconomic development – a way to ‘Build Back Better’.

References:
Kovács, G., and Spens. K.M. (2007). “Humanitarian Logistics in Disaster Relief Operations”. International Journal of Physical Distribution & Logistics Management, Vol.37 No.2, pp. 99–114.
Thomas, A. and Kopczak, L., (2005) “From logistics to supply chain management. The path forward in the humanitarian sector”. Fritz Institute.

 

Alva Bruun is Senior Adviser (human rights) at the Ministry for Foreign Affairs of Finland. Gyöngyi Kovács is Erkko Professor in Humanitarian Logistics at Hanken School of Economics, Finland.

 

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