Can a business ever source responsibly from a war zone?

When Harpreet Kaur, senior south Asia researcher at the Business & Human Rights Resource Centre, arrived in Sri Lanka four years ago, the country was just emerging from decades of brutal civil conflict.

Her brief was to discover how businesses were responsibly managing their supply chains in such a fragile and insecure environment. Instead, she found chaos.

“In a country like Sri Lanka, trying to recover from a long history of conflict but already seeing a 7.5% annual economic growth, business is essential to the reconstruction of a functioning society,” she says.

“Yet what we found in 2010 was that this really fragile post-conflict environment was instead enabling resources to be exploited illegally by businesses. Other supply chains were getting unwittingly caught up in huge human rights issues, such as illegal land grabbing for tourism development and the intimidation of activists, which were being done on the pretext of national security.”

Kaur and her team quickly found that although dozens of international supply chains were sourcing from Sri Lanka’s export industries such as clothing and tea, nobody was willing to talk about human rights.

“The one apparel company that did agree to speak to us openly admitted that it didn’t recognise trade unions in its factories,” Kaur says.

Sourcing from a conflict

Businesses’ decisions on investing in conflict-affected countries – how they take socio-political and environmental impacts into consideration, their approach towards the people they employ, their relationship with communities and their security arrangements – are factors that affect the environment they are operating in.

“If you want to manage supply chains in conflict or fragile states responsibly,” says Kaur, “it’s crucial that businesses start the process with an eye on the long term rather than short-term gains.”

With research showing that the number of violent conflicts has steadily increased since the 1950s, Philip Stack, a senior analyst at Verisk Maplecroft, a supply chain and risk management firm, says that companies trying to manage supply chains in conflict or post-conflict environments must have robust systems in place to ensure they are not contributing to insecurity.

“In a conflict zone, if you haven’t got the information about what you’re doing globally with your supply chains, who you’re selling to and where you’re doing business, you run the risk of events overtaking you,” he says.

Elise Groulx Diggs, a lawyer at Doughty Street Chambers who advises businesses operating in conflict zones around the world, agrees.

She says that in increasingly complex conflict and post-conflict environments, businesses’ must make sure they are crystal clear on their duty of care to staff and their legal responsibilities to respect local and international laws, as well as policies for when the state is not necessarily representing the rights or interests of local communities or environments affected by their supply chains.

“Investment and trade can be good for conflict-affected regions, they can help a country climb out of violence and insecurity and move towards becoming a valid and functioning state. Yet conflict environments are places where governments are often fragile, where businesses are often the only vehicles attached to the rule of law. This is a great responsibility.”

Getting a bad name

Groulx Diggs says that when it comes to the industries most likely to be sourcing or operating in conflict zones such as the extractives sector, one major challenge has been focusing on getting a social as well as a legal licence to operate.

“From a legal perspective businesses are going to have to really take it into account that consent means the option for people to say no, and for that to be listened to despite what might state players might be telling them. The risks to companies who ignore this are significant.”

Companies that eschew these principles can find themselves in a tenuous situation in fast-moving and unpredictable working environments and risk reputational damage. For example, BP faced a high-profile lawsuit against a group of Colombian farmers who alleged that the company was responsible for serious environmental damage and abuses over its Ocensa pipeline.

“Businesses working in conflict zones have to make complex judgments about who they align themselves with and what their policies are on engagement with state forces in times of civil unrest,” says Stack. “Accountability and transparency should be the cornerstones of any business strategy in such environments. While there are legal minimums required in tracing your supply chain, a sensible and responsible company will invest in making sure they know exactly where everything that goes into your product is coming from and who is involved in its production.”

According to the World Bank, 40% of former conflict zones return to a state of conflict within a decade. For businesses that want to maintain supply chains in war zones, what is increasingly needed is a rights-based approach and a focus on peace-building as well as profit.

Stack believes that companies investing and operating in conflict and post-conflict zones have a huge capacity to create positive change. As well as generating economic opportunities and wealth, businesses can assist governments in conflict prevention and post-conflict reconstruction work, and ensure that their supply chains uphold economic, social, environmental and cultural rights.

This means having strong internal policies in place, including best practices in the protection of people and assets laid out in instruments such as the Voluntary Principles on Security and Human Rights.

“Making sure your supply chains are being managed in a responsible way that promotes peace-building is not only ethically and reputationally crucial, but also good business,” says Stack. “Businesses that manage to stay the course during a conflict are often the ones that can have the biggest impact in helping rebuild a peaceful and prosperous society afterwards, but also in creating the best environment for their supply chains to flourish.”