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Business trends

Japan to help companies check suppliers' human rights records

Tokyo asks ILO to look for labor issues in Vietnam, Bangladesh and Cambodia

A woman works at a garment factory in Vietnam. Half of all listed Japanese companies that responded to a survey have not been doing any human rights investigations. (Photo by Rie Ishii)

TOKYO -- Japan's Ministry of Economy, Trade and Industry will partner with the International Labor Organization to look into companies' foreign suppliers for human rights violations, Nikkei has learned.

With corporate activities further globalizing, more Japanese companies are coming under increasing pressure to ensure that the parts of their supply chains that run through Asia are free of child and forced labor.

In parts of Asia, social security systems are underdeveloped.

Japan lags Europe and the U.S. in doing human rights due diligence, investigations that can mitigate risks to human rights and prod suppliers to take preventive measures.

In fact, there are concerns that Japanese companies might be removed from global supply chains due to their lax monitoring of suppliers' human rights records.

Under the partnership, Japan in April will ask the ILO to send its experts to production sites in Bangladesh, Vietnam and Cambodia. Several Japanese companies' suppliers -- from textile producers to electronic component makers -- will be inspected.

Experts will visit the sites on a regular basis and monitor how these suppliers are taking the human rights of their workforces into consideration and whether workplaces follow laws and regulations. If any issues are found, with help from ILO experts, the companies will take measures to improve the situation.

At the request of governments around the globe, the ILO is implementing programs to improve the work environments at production sites in developing countries where the textile industry is concentrated. This will be the first time for the Japanese ministry to request that the ILO dispatch experts.

The ILO experts will document actual situations and log any improvements in casebooks, allowing companies to learn from human rights due diligence and make informed choices when selecting business partners.

The Japanese government intends to spur companies to share these casebooks so they can learn from one another's experiences.

According to a ministry survey, half of the listed companies that responded have not been doing any human rights due diligence. More than 30% of these companies say they don't know how to go about conducting such investigations. Only 25% of the companies surveyed look at how their business partners handle human rights.

Companies have been under pressure to carry out more investigations into whether any of their suppliers abuse human rights. The Modern Slavery Act enacted by the U.K in 2015 obliges major companies to disclose their efforts to improve human rights. The act demands that companies be aware of human rights risks along their supply chains and asks businesses to publish annual statements.

Multinational companies have begun to formulate internal rules regarding human rights that they use in selecting business partners.

Last year, the Financial Services Agency and the Tokyo Stock Exchange added a human rights provision to its corporate governance code for listed companies, as allegations of human rights abuses in China's Xinjiang region came to light and stoked concern among Western investors.

If Japanese companies come to be regarded as having little awareness of human rights, they will put themselves at risk of being excluded from investors' consideration. The guidelines encourage company directors to take voluntary action.

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