Opinion | How to beat American-imposed bans and sanctions which hurt Asia-Pacific companies
By Augustus K. Yeung
Introduction
Firms doing business with the West face growing scrutiny of environmental and human rights practices in their supply chains.
As the world marked Human Rights Day last month (Friday, December 10), never before has this American-imposed principle been more relevant. How to help Asian Pacific companies feel less of a threat by navigating the increasingly complex issues around supply chains and achieve business growth?
Business consultant Nick Wood tells you how. ("Spotlight on Asian ESG". Friday, December 10, 2021.)
"Rising scrutiny and expectations of companies' environmental, social and corporate governance (ESG) performance must be attracting growing attention, triggering customer and government action that affects a firm's bottom line…" writes Mr. Nick Wood.
With the region at the center of the global supply chain, it is vulnerable to human rights abuses, particularly deep in the network where factory owners and their customers can be unaware of genuine abuses."
The United States CBP has Stepped Up Bans
"Companies are finding out that what worked in the past is no longer acceptable. Evidence comes from the United States, where the Customs and Border Protection (CBP) has stepped up its import bans for forced labor, mostly from Asia-Pacific."
In the first seven months of 2021, the CBP detained 1,125 cargoes worth US$413 million for alleged forced labor violations, many involving labor-intensive industries and some of the world's largest companies. This is a major step from 314 detentions worth almost US$50 million in 2020.
"The agency has targeted mainly Chinese and Malaysian imports. Imports targeted from China include those in the manufacturing, agricultural and solar industries. Three of Malaysia's largest international firms were issued withhold release orders for alleged forced labor violations, and another is being investigated. One order was lifted after 14 months, while another is still in force as the firm goes through a major independent review of labor rights in all its operations. The CBP's actions in Malaysia followed reports by non-governmental organizations."
Unfairly, the Burden of Proof is on the Importer
"All the CBP needs to detain merchandise is information that 'reasonably indicates' it contains components that are the result of forced labor. To lift the order, the burden of proof is on the importer. The bans are part of a broader trend across the world of rising expectations and activism, reflected in new laws and regulations being developed and approved by governments."
The European Green Deal is also changing the business landscape for Asia-Pacific companies, which are part of the supply chain feeding the European market. The European Commission is introducing legislation for sustainable corporate governance, which will include mandatory requirements for human rights and environmental due diligence.
"The legislation is expected to reflect existing established international and voluntary guidelines that lawmakers are convinced are no longer enough. European firms looking for partners and suppliers in the Asia-Pacific will be increasingly including human rights as well as environmental policies and practices in their selection process."
U.S. Politicization has Complicated the Business World
"New US laws on forced labor have been set for trade between the US, Mexico, Canada and China, reflecting the growing political focus on human rights and the environment. In the wake of the CBP's interest in two Malaysia palm oil companies, the House Representatives' Ways and Means Committee urged 'aggressive and effective enforcement', asking if the agency had considered a blanket ban on all palm oil imports from Malaysia and Indonesia."
Many Asia-Pacific companies are not prepared, according to a recent independent human rights survey of the top 250 firms listed on the Singapore, Kuala Lumpur, Jakarta, Manila and Bangkok stock exchanges. It showed they disclosed on average less than 22 per cent of the human rights data recommended by the US Guiding Principles on Business and Human Rights.
The Changing Business Landscape is Being Recognized
"The changing business landscape is being recognized by CEOs and business leaders. In FTI Consulting's 20231 Resilience Barometer, almost a third of 2,800 large firms polled in Group of 20 countries expect to be investigated by regulatory or government agencies over ESG in the next year."
The challenge for companies involved in complex and often opaque supply chains is immense. It requires investment and care to understand international guidelines, monitor and assess growing societal concerns, understand the political, regulatory and legislative trends, look five yeas ahead or further and develop standards and practices that future-proof the company and growth.
"But that is not enough. Credibility and trust have never been more important with legislators, balanced and fact-based understanding of the company's position, dilemmas and approach."
Proactive ESG Strategies are Essential, Four Factors
"Proactive ESG strategies linked to a firm's business strategy are essential to understand risks and build standards and effective processes into a company's approach."
Four factors are important, starting with a clear ESG strategy that guides its operations and sets clear policies and standards.
Second, companies need an effective system at the heart of their strategy that identifies ESG trends affecting supply chains, assesses and maps risks and sets management plans to avoid potential business impacts.
Third, stakeholder engagement in key markets is necessary to build transparency and trust across regulators, governments, civil society and human rights NGOs.
Finally, harnessing the latest technology can help improve supply chain traceability.
These will help Asia-Pacific companies navigate the increasingly complex issues around supply chains and achieve business growth. ("Spotlight on Asian ESG." Friday, December 10, 2021.)
Conclusion
Globalization is Americanization: It is the Americans who are setting trade rules, favorable to the hegemony of their nation in the name of "human rights" or what not.
If that is the case, businesspeople can coalesce themselves into lobby groups, forming powerful socioeconomic groups to be reckoned with.
Or they can stand firm on reasoning. For example, Japan's Uniqlo has opted to defy the American hegemonic rule, pressuring it to boycott Beijing's Winter Olympics 2022.
Or firms can boldly refuse to make decisive political donations to "lawmakers" campaigning for reelections, and let their money do the talking.
(Note: Nick Wood is a senior adviser at FTI Consulting.)
The author is a freelance writer; formerly Adjunct Lecturer, taught MBA Philosophy of Management, and International Strategy, and online columnist of 3-D Corner (HKU SPACE), University of Hong Kong.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Augustus K. Yeung:
Opinion | What more could the United States desire of China?
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