Ethical sourcing and human rights
We strive to source products in a responsible manner while working with suppliers to improve their social and environmental practices.
For Wesfarmers, it is essential that we engage fairly with suppliers, source ethically and sustainability and respect and promote human rights. We are committed to ethical sourcing and have reported transparently on human rights in our supply chain for almost a decade.
Wesfarmers is committed to respecting internationally recognised human rights as set out in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights.
Our aim is to ensure that human rights are understood throughout our operations and supply chain, and that our team members and workers in our supply chain work in safe, fair workplaces, where their rights are respected.
We recognise that modern slavery is a complex problem, exacerbated by COVID-19, and best tackled through collaborative action by like-minded organisations.
Our Approach to Human Rights details Wesfarmers most salient human rights issues. The Wesfarmers Ethical Sourcing and Modern Slavery Policy sets out minimum standards to ensure the Group sources products and services in accordance with legal obligations and community expectations, while working with suppliers to improve their social and environment practices. It seeks to prevent, mitigate and where appropriate, remedy instances of modern slavery in our operations and supply chains.
Among other matters, our minimum standards prohibit forced and bonded labour, require adherence to laws governing working ages and working hours, seek to ensure safe and healthy working conditions and transparent record keeping, and recognise the rights to freedom of association, collective bargaining and grievance mechanisms. The policy also details minimum standards for management of modern slavery risks.
Our supply chain
Across the Group, we have relationships with nearly 26,000 suppliers. Our businesses directly source products for resale from about 12,000 third-party suppliers in more than 40 countries. Our major product sourcing locations include Australia, Bangladesh, China, Europe, India and Indonesia.
Our supply chains are often complex with multiple tiers, sometimes across multiple countries, supplying diverse products to our divisions. We do not own the sites and factories where products are manufactured, but engage suppliers to manufacture own-brand goods for us and other suppliers. The Industrial and Safety division manufactures some of its own product, including apparel, signage and gases. The Chemicals Energy and Fertilisers division manufactures chemicals and fertilisers and produces gases.
Across the Group, we also manage about 14,000 service providers. These include suppliers of shipping and logistics, maintenance and repair, security, cleaning and waste removal, property and security, and training and consulting services. Some categories of service suppliers are in areas with potentially more vulnerable workers – for Wesfarmers this includes cleaning contractors and personal security contractors.
Detailed supply chain mapping, including beyond direct or tier one suppliers, helps to mitigate ethical sourcing risks and leverages our scale and partnerships to deepen awareness and respect for human rights. Our contractual arrangements are principally with our direct tier one suppliers. Each division has mapped its tier one suppliers to determine which suppliers to include in the ethical sourcing program. This process includes consideration of information about the supplier, our spend with the supplier, the type of product being sourced (including any assessed risks and whether it is ‘own-brand’), and country of origin. To expand our level of transparency, some divisional ethical sourcing teams are investigating value chains to tier two and even tier three suppliers and, in some cases, progressing the public disclosure of tier two suppliers in our supply chain.
Supplier due diligence, monitoring and reporting
Our divisions take a risk-based approach to assess and mitigate human rights risks in their operations and supply chains, each implementing their own ethical sourcing programs, in line with leading international practice.
Across the Group, all suppliers complete mandatory pre-qualification and, depending on their assessed risk level, on-going monitoring, as detailed below.
Our divisions also monitor emerging human rights issues and identify opportunities where we can influence the actions of our suppliers to mitigate risks, including through collaborations with other organisations.
This year, our divisional ethical sourcing programs monitored 2,651 sites, and 1,726 suppliers (recognising that a supplier may source through many sites), from a total of 4,355 sites and 2,744 suppliers. Accordingly, around 61 per cent of sites and 63 per cent of suppliers in the program were monitored in 2022 financial year. Monitoring seeks to ensure compliance with the Wesfarmers Ethical Sourcing and Modern Slavery Policy.
Monitoring activities include self-assessment questionnaires, supplier endorsement processes, supplier visits, independent and extensive third-party audits, and reports through grievance mechanisms. The frequency of monitoring varies from three to 24 months, depending on prior audit findings and the level of assessed risk.
Where monitoring identifies instances of non-conformance with our standards, these are classified as minor, major or reportable breaches (with reportable breaches similar to critical breaches, previously reported). This year our ethical sourcing due diligence program identified a total of 593 reportable breaches. The reportable breach classification is based on the Wesfarmers Ethical Sourcing and Modern Slavery Policy and the Sedex Members Ethical Trade Audit (SMETA) methodology. It captures any imminent threat to a worker’s safety which presents a risk to life, evidence of fraud, coercion, deception or interference, or certain repeat findings which have not been addressed over time.
This year, the main reportable breaches were:
- Health, safety and hygiene violations (39 per cent of reportable breaches)
- Excessive working hours (21 per cent of reportable breaches)
- Non-compliance with minimum wages (eight per cent of reportable breaches)
- Inadequate management systems
- Employment of children and young workers, and
- Environmental violations.
Further details on the due diligence and reporting process can be found in the Wesfarmers 2022 Modern Slavery Statement.
Actions taken to address human rights risks identified
When a non-conformance is identified, whether through monitoring or grievance mechanisms, or worker voice channels, the Group’s divisions work in partnership with their suppliers and manufacturers on ways to remediate concerns. Examples include additional targeted capacity building and training, through open discussions with a supplier, with changes to a division’s sourcing practices, or involvement in industry-based initiatives. Our response depends on the severity of harm (or potential harm). It may include immediate rectification or making good any harm experienced by an individual, and work to prevent future harm.
All sites with non-conformances, whether minor, major or reportable breaches, are subject to ongoing due diligence monitoring. The type of non-conformance also determines the follow-up. This year, 42 per cent of reportable breaches have been remediated and 56 per cent are being remediated. This year, we exited seven factory sites (two per cent) where remediation of a reportable breach could not be achieved.
It is very rare for divisions to exit a site or supplier for non-conformances including reportable breaches. Instead we engage closely to support remediation, often in collaboration with other customers to the supplier through a corrective action plan.
For additional information on remediation see the ‘Bunnings ethical sourcing program, improving conditions for factory workers’ case study.
Consistent with our policies, the United Nations Guiding Principles on Business and Human Rights (UNGPs) and International Labour Organisation (ILO) conventions, we aim to have effective grievance mechanisms available for workers in our supply chains, to confidentially raise concerns including business-related human rights risks.
This year Wesfarmers businesses supported grievance mechanisms covering approximately 750,000 workers across 1,400 sites.
For additional information on grievance mechanisms, and the additional coverage achieved this year, see the ‘Worker helpline provides additional grievance mechanism to hear directly from workers' case study.
Ethical sourcing training
Training of our team members is a key strategy to increase alignment with our minimum standards and reduce the risk of non-conformances. This year, more than 5,000 hours of training were delivered on human rights (as established by the Universal Declaration of Human Rights and other international instruments), ethical sourcing risks and mitigation strategies, and ethical buying practices. Training was also provided to selected supply chain partners throughout the year.
Improvement in our ethical sourcing reporting and performance measurement
This year, we evolved our ethical sourcing reporting, to extend beyond absolute metrics and include additional context, showing relative performance of our ethical sourcing programs, year-on-year and within our broader supply chain. We also better identify the impact of our programs including where reportable breaches have been remediated. These changes reflect recommendations from a review conducted during the year by an independent global supply chain consulting firm.
As a result of the review, this year’s reported metrics include the total number of suppliers and sites monitored, the number of reportable breaches, and also include metrics presented as percentages, so in the future we can report on the outcomes of the ethical sourcing program. Next year, we will continue to provide additional performance metrics, with the aim of reporting on metrics that will show the outcomes of the ethical sourcing program.
See our data for ethical sourcing and modern slavery metrics.
Salient human rights assessment
In 2021, Wesfarmers undertook a process with an independent human rights adviser to determine the salient human rights issues for all our divisions.
This analysis considered the concept of severity and its component parts of scale, scope and irremediability, as elaborated in the Reporting Framework of the UNGP on Business and Human Rights. Identifying our salient human rights issues helps to focus our efforts on the management of human rights risks across our operations and supply chains. The assessment identified the importance of maintaining safe and fair workplaces for our team members across our operations. The operations of our divisions are primarily conducted in low modern slavery risk countries, such as Australia and New Zealand. The Wesfarmers divisions monitor and address human rights issues in their workforces under the Wesfarmers Code of Conduct and Diversity and Inclusion Policy.
Relevant to this is our ‘NZ Safety Blackwoods integrates forced labour mitigation practices in Malaysian supply chain’ case study.
GRI 102-9, GRI 102-10, GRI 102-15, GRI 102-16, GRI 103-1, GRI 103-2, GRI 103-3, GRI 407-1, GRI 408-1, GRI 409-1, GRI 412-2, GRI 4