Unilever and the Responsible Sourcing Policy

On November 20, 2014

Poor working condition, low wages, long working hours, high turnover rate and ineffective communication system between the management and workers are common problems of suppliers in developing countries. According to Oxfam’s assessment, many Vietnamese suppliers of Unilever, the 3rd largest organisation in the FMCG industry, are no exceptions to these inadequacies. However, what makes Unilever different is their willingness to directly face and solve the problem. Firstly, Unilever willingly cooperated with Oxfam, a NGO aiming to find solutions to poverty and injustices around the world. Through their partnership, Unilever realized that in order to sustainably thrive, it is vitally important that it abide by the law and respect workers’ rights. Therefore, the organisation issued the Responsible Sourcing Policy (or RSP), a framework for Unilever’s global supply chain.

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Oxfam’s report in 2011 about working conditions in Unilver Vietnam (UVN)’s supply chain showed that:

  • Supplying companies do have unions; however their roles are minor and can hardly contribute in a collective bargain.
  • Workers’ wages are above the minimum wage floor ($2 a day), but still lower than the studied living wage (5.42 million VND/ month for the household of an adult and a child), thus resulting in overtimes.
  • Labour relations can be significantly improved if the management follow the Labour Code more strictly

This report triggered a wave of global criticisms, criticizing Unilever’s labour relations system (e.g. articles from CSR-Asia, Devex and Guardian). Under intense pressure, Unilever attempted to redeem itself by thoroughly applying the UN’s Business and Human rights framework into its business model and published the framework’s guideline to its suppliers and branches, urging them to follow the code as well.

RSP is also part of the rejuvenation. These policies help Unilever in ensuring that suppliers in their supply chain respect the workers’ rights and gradually improve labour standards by issuing 12 mandatory criteria and requirements.  

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Unilever  RSP

RSP has three benchmarks, the first one being Mandatory, a set of 12 basic and compulsory policies that all of Unilever’s suppliers must follow to prolong their partnership with the organisation. On a global level, more than 200 grand suppliers of Unilever are being forced to abide the policies before March, 2015. The more advanced benchmarks are Good Practices and Best Practices, designed for partners that have executed the policies excellently and will be awarded by Unilever.

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After being applied, RSP has already had significant impacts on UVN’s supply chain. Several local suppliers that fond on tactics such as prolonged overtimes have stopped doing so in order to save their partnership. Moreover, working conditions in factories are frequently checked by Unilever’s staff, hence preventing any forms of worker exploitation from happening. All of Unilever’s strategic partners are requested to meet the requirements of “mandatory” benchmark by the end 2014, advance to “good practice” in 2016 and then “best practice” after 2017. UVN also conducts deep dive investigation about the temporary workers cases, provides necessary helps to these people whenever possible and guarantees them stable jobs. In fact, during the last 3 years, Unilever has managed to reduce the temporary workers rate of its Africa and Asia supply chains by 40%.

Despite the fact that Unilever were forced to change and save the brand’s renowned reputation, their attempt in rejuvenating the whole supply chain is indeed impressive. This is one of the few multinational organisations with complex and diverse supply chain that dare to stand up for the workers in developing countries. Unilever’s early success will be a valuable lesson in sustainable development for other organisations with supply chains of similar scale.

 

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