Special Feature - Ethical Supply Chain Program

Keeping up with the legislators: how global ESG regulation will impact your business

As the organisation celebrates its 20th year, Aoife McCarthy, executive, Digital Marketing & Membership at the Ethical Supply Chain Program (previously the Ethical Toy Program), tells Toy World readers what businesses ought to be doing to ensure they remain compliant with global Environmental, Social and Governmental (ESG) standards.

In a world where business practices are under increasing scrutiny, ensuring you have the correct processes in place to safeguard workers’ rights has never been more important. Across the globe, ever more governments are requiring companies to disclose the impacts of their business activities on human rights and the environment. Organisations of all sizes must evaluate their impact across a spectrum of Environmental, Social and Governmental (ESG) factors, and finding a trusted partner to help ensure your company meets these changing requirements is fast becoming a priority.

Helpfully, the term ESG is now commonplace. In its simplest terms, it’s about how businesses impact the world. While environmental concerns have long taken centre stage, the ‘S’ in ESG – referring to social responsibility – is increasingly being recognised for its importance.

ESG due diligence is no longer an expectation, but a global, legal requirement
Last year, global regulations regarding ESG advanced significantly. What was once an expectation became legally enforceable, leaving many companies unsure where to begin. Some legislative examples include: the German Supply Chain Due Diligence Act (LkSG); the US Forced Labor Prevention Act (UFLPA); and the European Commission’s Corporate Sustainability Due Diligence Directive (CSDDD). Organisations doing business in any of these regions are required to implement comprehensive due diligence programmes that demonstrate their understanding of the negative impacts their business activities might have on human rights and the environment. Companies are also expected to prove they have measures in place to prevent and remedy these impacts.

There is, however, a common misconception: that these acts will only affect the industry’s largest players, and among those, only companies originating from these territories. However, even the smallest companies can be indirectly affected. Regardless of the size of a company, failure to comply carries with it a real risk of financial and/ or reputational harm.

To paint a picture of how widespread global ESG regulation is becoming, we have put together an infographic which illustrates current regions with existing and upcoming ESG due diligence legislative requirements.

How can businesses ensure they stay compliant?
Monitoring the status of proposed or recently introduced ESG legislation on a global scale is a challenge for any business. Fortunately, finding a partner that can support you as you navigate the changing global legal landscape is a low-cost and low-risk way to ensure your business remains compliant.

One of the benefits of working with an organisation like the Ethical Supply Chain Program, formerly the ICTI Ethical Toy Program (IETP), is that it’s one-stop-shop offering. The Ethical Supply Chain Program provides solutions for all your ESG needs and houses all the key supply chain data needed for your reporting and monitoring in one convenient place, with API keys enabling you to link your existing systems and increase efficiencies.

The Ethical Supply Chain Program’s Environmental Assessment enables companies to understand the environmental impact of their global supply chain. By collecting a broad range of environmental metrics, businesses are empowered to identify meaningful trends and track their progress as they work towards achieving their commitments and targets, with the data in hand to ensure compliance with global ESG legislation.

The Ethical Supply Chain Program is the only programme to certify that the factories involved in its certification programme meet the labour standards expected of international buyers and customers, taking responsibility for any non-compliances found during audits in these certified factories. What’s more, having experienced teams on the ground, where the factories are located, means issues can be dealt with efficiently and impartially.

In addition to on the ground teams, which support buyers and suppliers alike, the Ethical Supply Chain Program has operated a trusted grievance mechanism since 2010. The Worker Helpline has long been a compulsory element of the factory certification programme, guaranteeing all workers have access to this anonymous and free grievance channel. The Worker Helpline is a confidential service and 100% of cases are resolved. The programme welcomes the due diligence requirements introduced by governments all over the world in recent years and understands these to be essential to improving transparency, encouraging remediation, and building positive relationships within the factories and communities in which they operate.

Becoming a Buyer Member provides companies with real-time helpline analytics of calls received from connected factories. This makes due diligence reporting easy, while the reasons given for calls can help identify issues early on, before they develop into more serious non-compliances. It also allows for benchmarking against the programme’s factory universe, helping businesses understand the performance of their connected suppliers.

Buyer Membership is just one of the ways businesses can join the Ethical Supply Chain Program. In addition to the helpline analytics, membership also gives businesses access to a database of suppliers all over the world who have already been socially audited and/or environmentally assessed by trusted assessors. It also goes further, providing even more assurance to businesses by taking responsibility for any non-compliance found in later audits. The programme works directly with suppliers to remedy issues found and helps suppliers make sure these changes are sustainable. For buyers, this means stronger relationships with supplier(s) and added confidence in the products they sell, so they arrive on shelf quickly.

In addition to Buyer Membership and the Supplier Certification programme, the organisation also offers a range of programmes and assessments to suit the needs of businesses of all sizes. The Social Impact Assessment is a lighter-touch approach to understanding the capability of the management systems in place, ensuring worker safety and the maintenance of proper workplace conditions. The low-cost, verified assessment is conducted remotely and can be deployed anywhere suppliers operate. To date, assessments have been conducted in over 50 countries and regions. In 2023, an additional service was developed: the Risk Assessment. This is an excellent way for businesses to gain required insight into key labour and environmental standards at a supplier who may not be suitable for an on-site audit: this could be down to low order volumes or due to being a new supplier. The Risk Assessment is quick to deploy and low-cost.

Helping you navigate through uncertainty

The Ethical Supply Chain Program helps both buyers and suppliers do good business. The past few years of disruption have presented new challenges to businesses globally, yet the Program has remained a stable counterpart for ethical businesses.

Businesses are unfortunately no stranger to shipping and supply chain disruptions. Unpredictable rates and shipping times for cargo travelling across the Suez route are some of the latest unforeseen challenges to emerge this year.

The Ethical Supply Chain Program helps businesses to find suppliers in new geographies, with a growing number of factories in Europe and the Americas. This ensures the organisation can help companies looking to nearshore, for both efficiency and/or environmental factors, responsibly and with confidence.

Celebrating its 20th year of operating in sustainability

Entering its 20th year of supporting companies on their sustainability journey, the Ethical Supply Chain Program, formerly the ICTI Ethical Toy Program (IETP), was initially created by the Toy industry to oversee the implementation of the ICTI Code of Business Practices. The programme has since developed to reach far beyond audit, providing a number of programmes and assessments to businesses in every industry, supporting them as they meet the changing needs of the global market.

The Ethical Supply Chain Program has expertise in social compliance audits, environmental and social assessments, and grievance mechanisms, and is a leader in developing and implementing Worker Well-Being programmes. The Program is able to leverage its position as a multi-stakeholder initiative and work with its stakeholders to engineer a programme which has become relevant and applicable to a wide range of industries, covering factory-based production all over the world.

The Program upholds the highest possible auditing standards and continues to develop programmes and assessments that go beyond the audit paperwork to improve the lives of supply chain workers all over the world. For more information on the program, please contact Todd Merton, head of Business Development, at: todd.merton@ ethicaltoyprogram.org.

Entering a new era of supporting businesses

At the beginning of 2024, the organisation shared an exciting announcement: its renaming to become the Ethical Supply Chain Program. The change of name, from the Ethical Toy Program to the Ethical Supply Chain Program, is indicative of the growing demand for the Program’s services beyond the toy and games sector.

This change marks a new era for the organisation. Information and updates will follow.

About the Ethical Supply Chain Program

The Ethical Supply Chain Program was founded by ICTI (International Council of Toy Industries) in 2004 as a specialist-responsible sourcing programme. Today, it champions integrity and sustainability across all sectors. We facilitate communication, certification and cooperation between manufacturers, suppliers and retailers worldwide to build a network with transparency at its core. But we’re much more than an ethical rubber stamp: our programme is a commitment to respect, fairness and inclusivity. Together, we can create a better life for workers.

We are evolving with the needs of businesses globally and so is our brand. For a short while, our website and email domains will remain the same: www.ethicaltoyprogram.org.