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Human rights issues related to supply chains have emerged as a new concern for companies. Unless the public and private sectors tackle this issue properly, it could harm the international competitiveness of Japanese firms.
U.S. President Joe Biden’s administration has issued a warning to companies and anyone else with supply chains in China’s Xinjiang Uygur Autonomous Region, saying that they run the risk of violating U.S. laws concerning imports and exports. The administration also urged such companies to review their dealings with firms operating in the region.
This move has been taken because Washington has concluded that Beijing is committing genocide against ethnic minorities in the region and subjecting them to forced labor, according to the warning.
The Xinjiang region is a leading producer of mainly cotton goods and materials for solar panels. Many Japanese companies are believed to have business connections with firms in the region, so they must respond to the situation appropriately.
The United States has banned the import of some products from Fast Retailing Co., which is behind the Uniqlo casual wear brand, after Fast Retailing failed to prove that its suppliers were not involved in the use of forced labor.
In Europe, there have reportedly been moves to establish a law requiring companies to investigate whether they have business partners that violate human rights and disclose relevant information. Respect for human rights is gaining momentum.
Investors are also becoming increasingly committed to human rights issues. Delays in taking action could have a negative effect on corporate ratings and fund procurement. It is essential for companies doing business around the world to reexamine their supply chains.
The Miki House Group, which is behind the Miki House children’s clothing brand, drew criticism from a human rights organization in 2017 over the poor working conditions at a garment factory in Myanmar that the company had business dealings with.
Miki House was at first unable to identify the plant in question due to its wide range of suppliers, but swiftly conducted on-site checks to confirm the factory and improve the situation there, the company said.
It is important to perform on-site examinations to check supply chains. However, some observers believe that pushback from China has been making it even more difficult for companies to do so in the Xinjiang region.
Although Beijing insists that the United States’ accusations of human rights violations are groundless, it has not allowed an investigation by the United Nations. There are probably limits as to how much companies can scrutinize their supply chains.
State support will be necessary, but the Japanese government is cautious about imposing economic sanctions on the grounds of human rights violations, leaving it up to companies’ voluntary efforts to deal with the matter.
The government should make it clear that it will not tolerate human rights violations and urge China to accept investigations into supply chains and provide indirect support to companies. Efforts also must be accelerated to draw up guidelines that companies can use as a reference when inspecting their supply networks.
— The original Japanese article appeared in The Yomiuri Shimbun on July 26, 2021.
