Company purchasing practices can enable or exacerbate supply chain worker exploitation. Electronics supply chains tend to use “just-in-time” production, which can lead to excessive working hours due to short lead times, as well as a reliance on a flexible workforce. Changes or cancellations in order volumes or timelines due to demand shifts and supply chain volatility, pricing which undermines the payment of living wages, or poor advance order forecasting and planning all may lead to suppliers being unable to pay workers in time (or at all) and to plan for the workforce needed.

On the one hand, this volatility can lead to unpredictable reductions in hours; on the other, to forced overtime, inhumane pace of work, unauthorised subcontracting or a scramble to contract new or temporary workers without the necessary due diligence.* When a company decides to exit a supplier relationship in haste, this can also leave workers struggling to access remedy, as illustrated by the 2024 OECD complaint with the Japanese National Contact Point against Panasonic and Sony. The two companies are alleged to have exacerbated the situation when, in response to a supplier’s reported involvement in several indicators of forced labour, including mass non-payment of wages, they discontinued the relationship. Finally, the pricing of orders plays a crucial role in ensuring suppliers can pay workers adequate wages and provide a safe workplace.

The 2025 KnowTheChain ICT benchmark revealed purchasing practices as an area of critical weakness for ICT companies, with an average score of just 5/100 and 84% of companies scoring zero.

This suggests a systemic issue in the sector. While geopolitical volatility** is driving supply chain shifts in the sector, global companies should remain agile and manage these changes responsibly—rather than pass their costs and risks onto suppliers, and thus onto low-income manufacturing workers in supplier countries. That many of the ICT companies benchmarked enjoy double-digit profit margins*** suggests they are able to absorb the costs of human rights due diligence.

Findings

Action and disclosure on purchasing practices is a crucial part of human rights due diligence. Its absence may indicate a company’s failure to meaningfully assess how its own practices are contributing to risks and impacts, thus raising questions about the quality of due diligence undertaken.

No company disclosed committing to responsible buying practices in its contracts with suppliers.

Cisco disclosed the length of its forecast window and the frequency with which discrepancies between forecast and actual orders are reviewed (rolling 24-month window, with quarterly review). The remaining companies disclosed on-paper payment terms (with only one company disclosing the de-facto average timing of payments to suppliers) and average supplier contract length.

No company disclosed year-on-year data on their purchasing practices, which would have allowed measurement of improvement over time, or lack thereof.

Evidence from KnowTheChain’s interviews with migrant workers in Taiwan

The sector’s relentless pursuit of profit, and associated downward pricing pressure on suppliers has real-world implications for supply chain workers. Of 29 migrant workers interviewed across 16 electronics facilities, all but two (93%) reported taking on overtime, with most working overtime regularly and reporting monthly counts of up to 128 hours (a 72-hour work week). The data suggests a sector over-reliance on excessive overtime in two ways: on the one hand, the regularity of the overtime reported—with over half of workers (55%) indicating overtime that is “fixed” or “every week/month”, suggests that employers, and thus buyers, rely on a normalisation of excessive working hours in their current business models. On the other hand, high recruitment costs paid by workers and repayment of loans taken out to cover these costs are likely to drive workers to take on additional work to repay debts—with several workers remarking that “always” work overtime "as much as ... needed” or “how[ever] many hours [the employer] will give”. Where overtime is normalised in this way, workers may also feel they cannot refuse overtime for fear of losing their jobs or not being rehired at the end of their contracts. According to the ILO, excessive overtime, especially when deployed under threat, or to earn at least the minimum wage can amount to forced labour.

For more information on migrant worker testimony in Taiwan electronics facilities, see the ICT 2025 Key Findings Report.

Living wages in ICT supply chains 

Ensuring workers in the supply chain are paid a living wage, defined as a wage sufficient to meet basic needs and provide small discretionary income, lessens the likelihood an individual will be forced into exploitative working conditions, including forced labour. Yet, despite the International Labour Organisation’s 2024 agreement providing clear guidance to companies on how to estimate and operationalise living wages, evidence from KnowTheChain’s 2025 benchmark suggests that leading ICT companies fail to demonstrate how they ensure their pricing covers the full cost of production, including accounting for wages that cover the cost of living.

Recommendations for companies

• Adopt improved purchasing practices, such as:
  • Planning and forecasting that allows direct suppliers to adequately plan for the workforce needed;
  • Ring-fencing labour costs during pricing negotiations to ensure suppliers do not need to compete by lowering wages;
  • Pricing that reflects the cost of adequate wages, required overtime, social security contributions, and the cost of implementing the buyer’s human rights commitments, such as covering costs of recruitment of migrant workers.
  • Payment terms that ensure timely payments to suppliers and allow suppliers to cover labour costs.

• Track and disclose year-on-year quantitative data related to the human rights impacts of purchasing practices, such as data on the placement and cancellation of orders, costing, wages, and percentages of orders priced to reflect the costs of compliance with the company’s supplier code (including living wages for the labour required and the cost of the Employer Pays Principle, i.e., the costs of the responsible recruitment of migrant workers in line with the ILO definition  of recruitment fees and related costs.
• Shared-responsibility contracting: Contractually commit to responsible purchasing practices in contracts with suppliers, including with respect to pricing, order changes, providing reasonable financial and non-financial assistance to business partners, and assisting in providing remedy to affected rightsholders.
• Living wage: Ensure, through analysis and adequate pricing, that supply chain workers are paid a living wage to ensure a decent standard of living and to reduce risks of excessive overtime. Disclose the methodology used for assessing a living wage.

When it is time to say goodbye: responsible exit

In an era of shifting supply chains, many ICT companies are making commercial decisions to exit supplier relationships or specific factories—whether to seek ever-cheaper labour, avoid political risks, such as increased tariffs, or mitigate reputational risks when suppliers are allegedly involved in egregious human rights violations.  Where these exits are not governed by human rights due diligence, they can have serious negative impacts on the rights of workers at the facility, particularly with regards to the non-payment of past wages.

Research by the non-profit research centre SOMO, conducted in China in 2024, finds a trend of such hasty “de-risking” factory relocations or closures being carried out without prior notice to workers and without payment of wage arrears or the compensation they are entitled to by law. This phenomenon is not new, and it is likely to continue as the economic and political situation continues to evolve.

Buyers must recognise that their responsibilities are not limited to ensuring compliance with human rights standards by their suppliers; they must also consider the human rights implications of their own actions within the buyer-supplier relationship and take steps to ensure they break up responsibly.

Recommendations for companies:

• Adopt and disclose a policy on responsible exit: Several of the highest-ranking companies in the benchmark fail to disclose a policy governing its exit from a supplier relationship and setting out principles and processes to mitigate negative impacts on workers’ rights. As with any other business decision, decisions concerning sourcing practices must be executed with a sense of responsibility to avoid creating adverse human rights impacts.
• Approach the exit process with workers at the centre: This involves allocating sufficient time to conduct necessary due diligence and formulate a plan to mitigate potential impact; notifying the supplier with adequate advance of at least six months; transparent and timely communication; ongoing monitoring and evolution of approach.
• To guarantee that employees receive all wages and additional benefits owed before the conclusion of full termination of a sourcing relationship, the buyers may solicit the suppliers to maintain adequate funds in escrow to facilitate the timely and complete payment of wages, social security benefits, and termination benefits. If the suppliers are unable to fulfil all wage and other benefit obligations before the termination of a sourcing relationship, the buyers could reserve the right to use any outstanding payments owed to the suppliers specifically to compensate wages, social security benefits, and severance benefits to workers who have lost their employment as a result of the sourcing decision.
• Where the planned exit is based on the supplier’s involvement in human rights violations, follow the guidance in the UNGPs and the OECD Guidelines. Both standards emphasise the buyer’s responsibility to engage with the supplier and use its leverage to address adverse impacts; the OECD Guidelines refer to disengagement as a measure of “last resort”.

*For data about the negative impacts of procurement practices in the electronics sector on labour rights see for example the 2017 study by the ILO: ILO (2017), "The impact of procurement practices in the electronics sector on labour rights and temporary and other forms of employment."

**See for example: Reuters, "Trump says Taiwan took away US chip business and he wants it back" (13 February 2025), https://www.reuters.com/business/trump-says-taiwan-took-away-us-chip-business-he-wants-it-back-2025-02-13/. Accessed 24 February 2025.

***For instance, the average annual net profit margin for the Semiconductor sub-sector was 17.95% in Q4 2024: CSI Market, Semiconductors Industry Profitability. Accessed 3 March 2025, and for the Consumer Electronics sector for the same period 16.41%: CSI Market, Consumer Electronics Profitability. Accessed 3 March 2025.