Nikkei staff writers
TOKYO — Some of Japan’s leading companies will look into their suppliers for human rights violations, including the possible use of forced labor, as global brands confront a hidden risk in supply chains spanning the globe.
Cosmetics maker Kao plans to launch an investigation into palm plantations, while pharmaceutical company Shionogi will do the same at suppliers in India, Nikkei has learned.
Businesses have come under rising pressure from investors to conduct due diligence on their suppliers for human rights compliance. They now face serious reputational damage if they do not right those wrongs, and both corporate Japan and the government are tackling this risk with newfound sense of urgency.
Kao will start later this year to engage directly with 5,000 palm oil plantations in Southeast Asia. Palm oil is widely used in daily products, from food to cosmetics and detergents.
Kao will provide aid for technology and seek to improve working conditions. The company plans to have in place a digital human rights record by 2025, making it easier to identify and respond to problems in a palm oil supply chain that deals indirectly with millions of farms. If any human rights abuses are found, Kao plans to suspend business and demand improvements.
Shionogi will begin assessing Indian production sites for cellulose, which it uses in forming tablets, by the end of this year. It will later widen the checks to producers of aluminum and glass materials it uses in packaging its drugs.
“We need to be responsible for monitoring the supply network all the way to the end,” Ryosuke Sakai from Shionogi’s sustainability management department said.
Other major Japanese companies posed to start human rights assessments of their suppliers include Asahi Group Holdings, Suntory, Japan Tobacco, materials maker Teijin and Sekisui Chemical.
Japan’s government aims to spur such efforts by conducting its first survey on human rights due diligence. The survey will begin as early as this month and cover about 3,000 companies. It will seek to assess companies’ efforts to avoid human rights violations in their supply chains, including indirect suppliers.
The impetus for this change is coming from overseas. Last month, the European Commission published on human rights due diligence for companies. Draft legislation that would impose penalties for violators is due out later this year. The scope of the law is expected to include Japanese and other non-European Union companies as long as they meet certain business thresholds within the bloc.
The U.S., meanwhile, has expanded restrictions on goods produced in China’s Xinjiang Uygur Autonomous Region, alleging the use of forced labor.
Only 12% of 140 or so major Japanese companies in a Nikkei survey said they screen for human rights violations at businesses that supply them indirectly.
“The way things are now, Japanese companies risk being seeing has having little awareness on human rights,” said Mitsushiro Niibori, a manager at KPMG Consulting.