sedex briefing latin america january 2014
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8/18/2019 Sedex Briefing Latin America January 2014
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sedexglobal.com Responsible sourcing insights briefng
Latin America briengJanuary 2014
Executive summary
Drawing on data from Sedex and other leading supply
chain risks experts, this briefing identifies top line
trends, challenges and opportunities in Latin America
with a focus on risk and performance management.
In this briefing:
● The key challenges and risks affecting supply chains
in Latin America include the impact of industry and
agriculture on the environment, inadequate labour
conditions despite the emergence of democratic
political systems.
● Insights from Sedex on the most common supply
chain issues in Latin America. These include a lack
of proper health and safety management, as well as
environmental issues relating to a lack of compliance
to local and international laws and inadequate
environmental management systems.
● Contextual information to help companies working in
Latin America to understand, monitor and manage
their supply chains risks and improve standards.
This report provides a generalised introduction into
the diverse region of Latin America, which offers many
opportunities but also poses significant challenges.
Key Risks
● Supply chain risks particularly high in the major
economies of Mexico, Brazil, Colombia and Peru.
● With major countries enjoying democratic political
systems, limits on freedom of association are less of a
challenge than in the past.
● Instead, inadequate working conditions,
discrimination, and prevalence of forced and child
labour are the key risks.
● Institutions for labour rights enforcement and
monitoring have failed to keep pace with economic
growth, and are particularly weak outside capital
cities.
● Legislation in key countries is shifting towards greater
investor liability for subcontractor infringements of
labour standards. Therefore, there are political risks
for foreign companies who invest or operate in the
region.
● Highest-risk sectors are mining, agrocommodities,
manufacturing and construction.
Supply Chain Complicity 2013
Extreme risk Medium risk
>0.00 - 1.25 >5.00 - 6.25
>1.25 - 2.50 >6.25 - 7.50
High Risk Low risk>2.50 - 3.75 >7.50 - 8.75
>3.75 - 5.00 >8.75 - 10.00
Data source: Maplecroft: 2013
Environmental risks
● Impact of industry and agriculture on availability of water,
biodiversity and ecosystem services have become
central political and reputational risk issue for companies
operating in Latin America.
● Growth of civil society and greater digital inclusion means
communities are increasingly willing and able to mobilise
against projects with adverse local impacts.
● Environmental regulations increasingly sophisticated, but
enforcement is uneven and often politicised; end users
typically liable for breaches.
● For extractive industries as well as some other sectors
(e.g. aerospace), local content or offset requirements can
increase companies’ exposure to non-compliant local/
national suppliers.
● Supplier adherence to certification regimes increasing
but varies nationally and subnationally; foreign investors
have little control.
Global Risk Perspective
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Latin America
Population, total (millions) 594
Population growth (annual %) 1.1
GDP (current US$) (trillions) 5.666
GDP per capita (current US$) 7,872
GDP growth (annual %) 5
Life expectancy at birth, total (years) 74.5
Mortality rate, infant (per 1,000 live births) 18.3
Prevalence of HIV, total (% population ages 15-24) 0.5
Source: World Development Indicators, The World Bank, 2011.
Latin America opportunities:
● Latin America holds 17% of the world’s known
oil reserves and will be a critical provider of
natural resources, including minerals and
agrocommodities, for decades to come.
● Leading economies are stable democracies
committed to fostering competitive business
environments and cultivating value-added
industries to boost societal development.
● Rapidly expanding middle class – set to reach
approximately 313m people by 2030 – means
that consumer markets have favourable long-term
growth prospects, even though Latin America’s
share of the global middle class will likely fall due to
rapid Asian expansion.
● No longer just about natural resources: the region is
becoming a critical location in global manufacturing
supply chains (e.g. aerospace in Mexico).
● Growth in intra-regional trade boosting rapid growth
of Latin American brands and ‘multilatinas’ which
invest across borders.
Sedex global statistics:
● >33,000 members
● >150 countries
● >25 industry sectors based on the UNSPSC (United
Nations Standard Products and Services Code) listings
● >44,300 sites of employment
● >19,600 audits
Sedex Latin America statistics:
● Sites from Latin America represent 10% of the total sites
on the Sedex system.
● Sedex members are present in 21 of the 24 nations in
Latin America, with 4,264 sites registered.
● 48% of sites are in manufacturing.
● 18% are intermediaries or agents, and 17% are large
agriculture sites.
● Latin American members represent a total of 4,324,736
workers (including permanent, temporary, agency, sub-
contracted and homeworkers), 45% of which are female.
● By industry, the highest proportion of sites on Sedex are
associated with the Produce (20.9%), Chemicals (10.1%)
and Grocery (9.2%) industries.
Latin America overview & key
statistics
● Countries: Antigua and Barbuda, Argentina, Belize,
Bolivia, Brazil, Chile, Colombia, Costa Rica,
Cuba, Dominica, Dominican Republic, Ecuador,
El Salvador, Grenada, Guatelmala, Guyana, Haiti,
Honduras, Jamaica, Mexico, Nicaragua, Panama,
Paraguay, Peru, St. Lucia, St. Vincent and the
Grenedines, Suriname, Uruguay, and Venezuela.
● Represents approx. 8.6% of the world’s population
in 2011.
● Region covers over 21 million km2.
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It is interesting to note that although the top 3 non-
compliances (NCs) for Latin America are seemingly
small percentages, they rank significantly higher
when compared to the global incidence
Some of the issues that are associated globally
as being of significance in Latin America, such
as Freedom of Association, Forced Labour and
Corruption, do not yet show themselves in our audit
data as statistically relevant individual issues.
This may be due to the sectors that Sedex
members represent in the region, which may not be
of as high risk for these types of issues compared
with sectors such as mining and construction.
In addition, issues such as corruption and forced
labour are by their very nature subversive activities
and therefore less easy to uncover.
Top 10 supply chain issues - Latin America
Category Non-Compliance (NCs) Issue title % of all
issues
in Latin
America
Global
incidence of
the issue
ManagementSystems
A lack of proper code and systemimplementation to meet local law, ETIBase Code and customer requirements
7.8% 3.8%
Health, Safety& Hygiene
Health and Safety Management A lack of or inadequate Health and Safetyinspections
4.6% 1.3%
Health, Safety& Hygiene
Chemicals Inadequate storage facilities, labelling,training, containment or spill kits forhazardous chemicals or lapses in their use
3% 2.7%
Environment Compliance of the site with local andinternational environmental laws andregulations
2.2% 2%
WorkingHours
Level of Overtime Hours Worked Daily working hours/ overtime hoursexceeded the legal maximum
2.1% 0.9%
Health, Safety& Hygiene
Chemicals Absence of provision for safe handling/storage/ disposal of hazardous chemicals
1.7% 1%
Environment Environmental Management Systems Environment Management Systemsinappropriate to the site’s operations
1.6% 0.6%
Health, Safety& Hygiene
Hygiene Facilities Inadequate hygiene facilities - toilets,drinking water, canteen, food storage etc.
1.5% 0.4%
Health, Safety& Hygiene
Building/ Site Maintenance Failure to comply with requirements forelectrical safety inspections
1.4% 0.7%
WorkingHours
Weekly rest day(s)No rest day for each 7 days worked
1.4% 1.7%
● 5% of audits are fromLatin American sites,and those audits contain7% of NCs globally.
● Latin America
represents 7% of
overdue NCs globally.
● On average NCs fromthis region are closedoff 52% faster than theglobal average.
1 By category, Health,
Safety & Hygiene issues
collectively result as highest
occuring Non-Compliances
(NCs) at 58.7% of all issues
raised.
2 The second highest group is
Labour Standards, which
forms 23.7% of all the NCs
raised in Latin America.
3 A lack of, or improper
implementation of,
management codes or
systems are recorded as
the highest occurring NC,
at 7.8% of all single issues
recorded.
Latin America
issues in the Sedex
system - Key points:
Sample size: 19,653 audits
Sites
Audits
Workers
Rest of world
82%
18%
10%
Rest of world
90%
Rest of world
95%
5%
A NC becomes overdue if the site’s Corrective Actions are not completed and signed off by
an auditor within the Corrective Action timeframe.
*
*
Sedex system - Latin
America comparisonwith rest of world
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“It is important that international buyers who are
operating in Latin America know that we definitely
see a trend towards more and more legislation by
governments, national but also local governments,
who want to be the forefront of sustainability and
see that they have to do it through legislation.
”“
We interviewed over 3200 business executivesand consumers in 2011 from 17 countries in the
region, to ask which countries are more advanced
in terms of CSR. There is a belief that higher
standards are coming from abroad, 62% think that
multinationals are bringing higher standards to the
region. However, they also believe the national
companies are catching up very quickly.
”Fabrice Hansé, Executive Director, Forum
Empresa
Rio de Janeiro, Ryan M Bevan
“ Another key change we are seeing is the
growth and spread of “multilatinas”, firms
within Latin America or head quartered in a
Latin American country who invest across
the continent into other countries in the
region and in some cases - as with Brazilianconstruction and mining companies - actually
outside the region as well, so you can see
Brazilian investment inward into areas of
Africa becoming very important. All this
means that the region is set to become more
and more important in terms of global supply
chains.
”James Lockhart-Smith, Principal
Analyst, Latin America, Maplecroft
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Europe
Sedex Information Exchange,5th Floor,24 Southwark Bridge Road,LondonSE1 9HF | +44 (0)20 7902 2320
North America
Sedex Information Exchange,26th Floor405 Lexington Avenue, New York City,New York10174 | +1 888 487 6146
China
Sedex Information Exchange, Apollo Building1440 Yan An Road (Central),Shanghai200041 | +86 (0)21 6103 1622
Responsible sourcing insights briefng
About this brieng:
This business briefing is the latest in a series of films, publications,
resources, webinars and in-person events by Sedex Global and partners.
These focus on a range of topics including; key emerging trends for
sustainable supply chains by region and emerging CSR topics, risk
and performance management in global supply chains, highlighting
companies’ achievements of good practice and best practice, impact,
collaboration and convergence in responsible business.
See http://www.sedexglobal.com/resources/publications/
About the partner author
organisations:
Sedex Global (www.sedexglobal.com)
Our mission is to drive collaboration,
increase transparency and build the
capacity that’s needed to raise standards
across all tiers of the supply chain. We offer
the world’s largest collaborative platform for
managing and sharing ethical supply chain
data, along with leading-edge services
which multi-national companies use to
understand, monitor and manage supply
chains risks and improve standards.
Sedex works to drive engagement upand down the supply chain, encouraging
follow up corrective actions on audits and
facilitating dialogue to address challenges
‘on the ground’. We collaborate with a
range of stakeholders to share insights
and promote best practice on responsible
supply chain issues.
Sedex offers a range of services to
enable effective responsible supply chain
management. See http://www.sedexglobal.
com/member-services/
Maplecroft (maplecroft.com)
Maplecroft is a leading risk analytics,
research and strategic forecasting
company. We offer an unparalleled portfolio
of risk indices, interactive maps, expert
country risk analysis, risk calculators,
scorecards and dashboards. These
technological solutions identify emerging
trends, business opportunities and risks to
investments and supply chains worldwide.
© Sedex 2014
All texts, contents and pictures on thispublication are protected by copyright or
by the law on trademarks. The publication
is subject to the copyright of Sedex
Information Exchange Ltd. Reproduction
is authorised, except for commercial
purposes, provided that Sedex Global
is mentioned and acknowledged as the
source. Copyright of third-party material
found in this publication must be respected.
Sedex offers services, initiatives and resources that help companies
source responsibly, to fast-track transparency, and to demonstrate
the business case for supply chain sustainability. These include:
Sedex Global Platform: we provide the world’s largest
collaborative platform for sharing responsible supply chain data and
monitoring and managing risk.
SMETA (Sedex Members Ethical Trade Audit): an audit
methodology that engages supply chain monitors, buyers and
suppliers in one common audit approach, thereby reducing
duplication and increasing convergence.
Responsible Sourcing Insights: six short films featuring
interviews with leading multinationals, suppliers, trade bodies,
NGOs and other experts at the sharp end of tackling responsible
supply chain challenges.
Associate Auditors Group (AAG): a group of auditing companies,
Sedex members, NGOs and other ethical auditing experts that work
together to drive convergence in ethical trade/social auditing, based
on, and helping to shape, best practice.
Sedex Supplier Workbook: an in-depth guide offering practical
guidance, case studies and good practice to help suppliers around
the world drive ethical improvements in their businesses.
R E S O U R C E S
Disclaimer:
Data covers October 2011 to October 2013. All data correct as of 8th
December 2013.