Ignite establishes a basis for evaluating suppliers' risks associated with human rights violations and decent working conditions, also known as social risk.

To arrive at a basis, we use risk factors related to geography and industry and use an average of these factors to say something about social risk. Continue reading to understand how we establish a risk for geography and industry and how this is weighted to a social risk.

We use the ITUC's index of labor conditions as a basis for assessing the risk associated with a country. The ITUC divides countries into six categories:

In the field of geographic risk, we convert this to "Low", "Medium" and "High" as follows:

Note: To obtain geographic risk, we need a field in the table that indicates the country to which the supplier is associated.

This is either set up in advance, or if not, you choose the field that represents the country in "step 2" when setting up "Social Risk Evaluation." If we cannot interpret which country is being referred to, the "Geographic Risk" field will be blank. You can then correct the country and rerun the evaluation to get updated information.

To say something about the risk associated with an industry, we use the European Bank of Reconstruction and Development's (EBRD) index that links social risk to NACE codes. These are standardized codes in the EU to be able to compare economic activity across countries. We try to automatically enrich suppliers with these when setting up "Social Risk Evaluation" using third-party data sources (Enin).

EBRD divides risk into "Low," "Medium," and "High," and we use this directly as Industry Risk in Ignite.

Note: If we have not been able to find a NACE code for your suppliers, the "Industry Risk" field will be blank. You can then go to the supplier and add the correct NACE code, rerun the evaluation, and get updated information on industry risk.

To establish a basis for social risk, the following happens:

Step 1:

To quantify geographic and industry risks, we use the following conversions:

Step 2

We now use the score for both factors and take a weighted average to calculate social risk using the following formula:

Social Risk Score = Geographic Risk Score * 50% + Industry Risk Score * 50%

We now use this score to set either "Low," "Medium," or "High" social risk with the following score intervals:

Note: If you want a different risk score for the supplier, you can easily create your own column in Ignite to keep track of this, for example by creating a "single choice" column with "High", "Medium" and "Low", where you manually set your own risk assessment.