Myanmar: Are recent investments enough to mitigate risk?
As China becomes a sourcing destination for high-end manufacturing, low-end manufacturing, such as apparel and footwear, are looking for new sourcing opportunities. In the 2017-2019 period, Myanmar made significant strides in the ELEVATE Supply Chain Risk Score as audits show improved environmental performance and the adoption of better management systems. Myanmar stands to benefit significantly from this new interest, leveraging on lower wage levels than its direct competitors – Cambodia and Vietnam. Yet, similarly to Cambodia, there is an extreme risk of labor non-compliances exposing brands to zero-tolerance violations, including child and forced labor.
The ELEVATE Supply Chain Risk Profile series provides an overview of current and emerging risks in the supply chain and is intended to support sourcing decisions, new country evaluation and risk management strategy. Risk profiles are calculated primarily from ELEVATE on-the-ground audit and assessment analytics and publicly available insight (available in EiQ). Each profile evaluates 5 main risk dimensions: labor, environment, business ethics, management systems and health and safety.
Myanmar Supply Chain Risk Profile
Source: ELEVATE (2019). EiQ
In Myanmar, labor is an extreme area of risk: companies need to invest in supplier management systems – e.g. payroll digitization – to verify wage compliance and to cross-check worker factory ID with other documentation to better verify worker age. We recommend assessing managers’ awareness of local labor regulation, facilitating relations with local unions through dialogue / joint training and communicating regularly with labor rights NGO to ensure workers right to take collective action. This is key considering the tight relationship between businesses and military and the related risk of worker right abuse. We recommend running detailed financial due diligence to identify potential ties between the supplier and the military and cut ties in case they exist.
Health and Safety is a high area of risk: companies need to ensure that suppliers assign dedicated resources to raise awareness of standards, act to correct violations, and to ensure the establishment of the occupational safety committees in the factory and the workers’ participation.
Unauthorized subcontracting is a high area of risk exposing brands to child and forced labor in second-tier factories: companies need to run production audits to evaluate the direct supplier capacity to process the order. We recommend enhanced surveillance checks and expand the audit scope to 2nd tier sub-contracting factories. Leveraging worker voice technology during audits can also help identify these sensitive issues.
Contact ELEVATE to purchase the full report and commission supply chain risk profiles for additional countries. Coming soon – new ELEVATE EiQ risk data for 2020.
These blogs are written by ELEVATE staff members or associates and the views and opinions expressed are not necessarily those of ELEVATE.