RESPONSIBLE SUPPLY CHAIN MANAGEMENT PRACTICES IN VIETNAM 2024

RESPONSIBLE SUPPLY CHAIN MANAGEMENT PRACTICES IN VIETNAM 2024

RESPONSIBLE SUPPLY CHAIN MANAGEMENT PRACTICES IN VIETNAM 2024

RESPONSIBLE SUPPLY CHAIN MANAGEMENT PRACTICES – EXPERIENCES FROM ENTERPRISES IN VIETNAM 2024

Tran Thanh Son

Head of Organization Department, Head of Compliance Department

Song Ngoc Garment Company Limited

I. OVERVIEW

Vietnam has actively engaged in a series of new-generation Free Trade Agreements (FTAs), most notably the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). These agreements open significant economic opportunities but also impose stringent obligations related to labor and environmental standards.

While Vietnam benefits from these agreements through increased trade and foreign investment, it must also adhere to international labor standards set by the International Labor Organization (ILO). Compliance requires Vietnam to strengthen domestic legislation concerning minimum wages, working hours, occupational safety and health, forced labor, and environmental protection. These efforts align with Vietnam’s broader strategy to ensure sustainable economic development while meeting global trade expectations.

II. PRACTICES OF SUPPLY CHAIN CONTROL

Large corporations in the US and Europe are increasingly held accountable for human rights abuses, including child and forced labor, within their supply chains. As global expectations for responsible business conduct rise, legal frameworks have evolved to mandate supply chain audits and due diligence processes. Companies must now demonstrate compliance with human rights and environmental standards at every stage of their supply chains.

Due diligence has become a central component of supply chain management. Companies must identify potential risks, take preventive actions, and develop compliance agreements with direct business partners. Furthermore, European businesses must ensure that suppliers across all tiers of their supply chains meet the prescribed requirements. This includes conducting regular audits, enforcing codes of conduct, and ensuring transparency in sourcing practices.

III. SPECIFIC EXAMPLES

Song Ngoc Garment Company Limited has secured a garment export contract with a major US brand participating in the Customs-Trade Partnership Against Terrorism (C-TPAT) program. This program emphasizes environmental protection and anti-forced labor commitments. As part of its obligations, Song Ngoc must fully comply with these standards to maintain its business relationship.

To ensure social responsibility and traceability, Song Ngoc has hired a third-party auditor based in Hong Kong. This auditor mandates comprehensive records from suppliers of raw materials, catering services, and transportation providers, ensuring they also comply with labor and environmental regulations.

A critical compliance issue involves sourcing cotton fabric from Xinjiang, China, a region linked to forced labor allegations. If Song Ngoc’s products contain such materials, the entire shipment risks being rejected by the US market, highlighting the crucial role of transparent supply chain management.

IV. ON THE ENTERPRISE SIDE

Many Vietnamese businesses with export experience to the EU and US have already made significant labor commitments and undergone social responsibility audits by brands or third-party auditors. These companies have invested heavily in implementing international labor standards and ensuring compliance.

However, a considerable number of businesses remain unfamiliar with these requirements. Even senior management often lacks sufficient understanding of supply chain audits and the steps needed for compliance. When faced with customer demands for due diligence reports, these businesses struggle to meet expectations.

Proactive investment and preparation are essential. Businesses must continuously research and update information on evolving international standards, develop comprehensive compliance plans, and implement necessary labor standards across all operations. Designating a responsible compliance team or individual ensures continuous monitoring and adherence to both Vietnamese law and international labor requirements.

V. SOME PROBLEMS

Despite progress, several challenges persist:

  • Wage and Benefit Disparities: Significant disparities in wages and benefits continue to affect workers, especially in export-oriented industries.

  • Child and Forced Labor Issues: Cases of child labor and forced labor, as defined by ILO standards, remain concerns that require persistent monitoring and enforcement.

  • Support for Female Workers: Policies supporting female workers and pregnant women with young children need further enhancement to meet international standards.

  • Freedom of Association: Workers’ rights to join organizations beyond trade unions, a critical EU labor requirement, must be recognized and protected.

  • Mechanisms for Dialogue and Negotiation: Establishing dialogue and negotiation mechanisms beyond traditional trade unions is essential to fostering a fair and transparent labor environment.

By addressing these challenges, Vietnam can strengthen its global trade partnerships while promoting sustainable and socially responsible economic growth.

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