Chicago, IL: Good article from the National Law Review. Here is the summation…
With a little hard work, you can use those findings as a basis for implementing ESG goals into your international trade compliance policy. Whether you’re an exporter or importer, it is time to go deeper and identify your company’s core values. To do so, set internal targets and understand the risks, or risk management, in your supply chain. Consider formulating contracts such as sustainable sourcing or support of renewable energy with suppliers who share similar corporate values on sustainability initiatives. With some strategic thought around how best to balance these two elements together, success should be more attainable than ever before!
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If your company is like many, your board of directors may be demanding that you put more effort into environmental, social, and governance issues, which have become known by the now-ubiquitous acronym “ESG.” Those demands don’t come from nowhere: consumers are demanding transparency and social responsibility.
For companies engaged in international trade, there are many dilemmas to confront in implementing your ESG agenda. Not least is how parts of that agenda may be in tension with your company’s growth and revenue goals. For example, how to grow export revenue while doing your part to protect the environment. Or how far to go in auditing the import supply chain to comply with expanding prohibitions on products manufactured with forced labor. Yet there is very little guidance out there on managing those dilemmas.
More recently, U.S. international trade regulations are targeting ESG goals. The biggest example is the recent surge in regulations confronting the use of forced labor in foreign supply chains. Recent examples abound. There has been a rapid increase in U.S. Customs and Border Protection (CBP) enforcement actions to prevent entry of imports made using forced labor. The Department of Labor has issued a list of foreign goods likely to be made with forced or indentured child labor. The United States-Mexico-Canada agreement (which replaced NAFTA last year) repackaged labor principles with access to a the Rapid Response Labor Panel to provide for better enforcement of worker protections abroad. Last year, the Department of Commerce issued a rulemaking proposing additional export controls on facial recognition technology and related surveillance tools used against Uighurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang region China. The Department of Commerce also added over 40 Chinese entities to the Entity List for reasons of human rights abuses against Uighur Muslims in the Xinjiang regions.
In the end, this new perspective on compliance could enable companies to not only get out ahead of potential enforcement actions and reputational threat. It can also help you identify ways to conduct sustainable and profitable business as consumers, regulators, and employees are rewarding businesses for ESG performance.
Currently there are around 50,000 people working in forced labor situations in the United States (Bales 47). Although this number is smaller than it was during the 18th century, finding and freeing these individuals is difficult because they are hidden away and exploited. Estimates of the illegal profits made from the use of forced labor in the private economy worldwide amount to $150.2 billion per year.
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Steps to Consider in Removing Forced Labor from Your Supply Chain
To extend ESG practices, make your supply chain sustainable, and root out forced labor practices, here are some steps companies may wish to consider:
- remind yourself of your company’s core values
- identify the intersection between your company’s corporate values and international trade policies
- set internal targets for all goals in the intersection between values and trade policy
- understand risks in your supply chain
- address forced labor by implementing a subprogram focused on identifying it with regular due diligence
- vet third parties who have agreed to work with you based on whether they meet or do not meet certain standards that align with what is important to you as an organization
- formalize supply chain commitments
When it comes to ESG factors and scoring, your supply chain should focus on areas that are core to your organization. For example, a chocolate company may be interested in the living conditions of cocoa farmers and the environmental impact of a product or a pharmaceutical company may pay attention to water use and its impact on human rights.
Companies will also want to consider looking at ESG risk factors as part of their due diligence process. Considering factors such as forced labor and human trafficking can help companies avoid the risk of having their brand associated with unethical practices. ESG practices such as ethical trade could benefit your business by mitigating risks (i.e., economic, operational, financial/shareholder, reputational) and maximizing opportunities (i.e., new markets, consumer trends, sustainability).
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ESG: The New Way of Doing Business in Chicago, IL
Business and organizational sustainability is a complex issue in Chicago, with many stakeholders and perspectives. It’s also an area where the stakes are high – if we don’t get it right, there will be dire consequences for our communities and the planet.
The good news is that there is a rise in investors are taking notice of ESG issues when they invest in Chicago companies and organizations. In fact, over the past decade institutional investors have been increasingly incorporating Environmental, Social and Governance factors into their investment decisions. And soon it will be impossible to win any RFP’s without it.
We want everyone (not just big institutions in Chicago) to be able to incorporate ESG-related risk into their actions because Companies that don’t adapt to these changes will not survive. This change has many companies in Chicago scrambling to figure out how they can stay competitive and be profitable while also contributing to a better future.
ESG The Report is one solution that helps businesses in Chicago find their niche in this new landscape by providing information on risks and opportunities related to environmental, social and governance factors affecting them today. Our report offers insights into what investors are looking for from companies in Chicago and around the globe.
ESG Frameworks provide investors with insight into how companies are performing in terms of corporate governance, social issues, labour standards and environmental impact. Ask about our ESG Frameworks package to help you get started on making your company, department or organization diverse, equitable and inclusive for all stakeholders.