Unanswered questions over supply safety risks in Sigma’s supply chain

Attributable to Dr Katie Hepworth, Director of Workers’ Rights, Australasian Centre for Corporate Responsibility:

This week Sigma Healthcare faced shareholder questions at its AGM about the alleged poor handling of over-the-counter and prescription drugs at the company’s distribution centres, including from ACCR.

Disturbing allegations have been reported in the media, from current and newly redundant Sigma workers, that at at least two major Sigma distribution centres, drugs had been left out in the heat and not properly refrigerated in recent months. These allegations are now being investigated.

Obviously allegations like these can lead to reputational issues for companies, but they can also be indicative of broader operational risks.

ACCR has been raising concerns with investors about the day-to-day implications and risks associated with the replacement of a secure, permanent workforce with an insecure labour-hire workforce, including through a March 2019 report on social risk and decent work in the pharmaceutical wholesaling and distribution sector.

In our view, since Sigma moved to restructure their workforce following the loss of the company’s Chemist Warehouse contract, some of these operational risks have become more acute. ACCR is particularly concerned about the use of labour-hire workers in Sigma’s new distribution centres, as well as Sigma’s failure to transfer across well-trained and experienced workers to these new distribution centres.

Pharmaceutical supply chains involve complex processes to maintain the efficacy of medicines and their safe supply. A secure, well-trained and experienced workforce is crucial in managing complex supply chain processes. In light of these allegations, investors must ask questions about the processes that Sigma has in place to manage these risks.

Sigma CEO Mark Hooper told the media yesterday that the company management has never heard any reports from workers about such alleged mishandling, and that the whistleblower process that the company has set up has never been used.

But this does not discount the existence of issues. Whistleblower hotlines are insufficient to mitigate supply chain risks. Where workers have concerns about their ongoing employment, they are unlikely to raise issues with management.

Sigma shareholders and investors also need to ask questions about how the company’s shift from a majority permanent workforce to a majority labour hire workforce will affect their ability to ensure safe supply.