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Modern slavery, trends, actions, examples

An excerpt from our new Supply Chain Risk & Innovation publication:

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Modern slavery, trends, actions, examples

  1. 1. PAGE 21 of slavery and forced labour practices being adopted by the suppliers of many of the products and foods loved in the developed world continue to shock enlightened consumers and highlight the true depth of the problem. Who’s been caught out? The New York Times exposé of human trafficking in the Thai shrimp industry in 2014 has forced the country’s industry to re-think how and where it processes seafood. In early 2016, fast-fashion giants Next and It is the human rights abuse that everybody likes to maintain is not happening. But within corporate supply chains across the developing world – from the cocoa-growing areas of Ivory Coast, to the seafood sector of Thailand, and beyond – human trafficking and modern day slavery is still commonplace, with people being made to work and live in appalling conditions with little or no pay. According to the charity Free the Slaves, up to 36 million people are enslaved every year, generating revenues of $150bn through their labour. Most modern-day slaves (78%) are in forced, bonded or other types of obligatory labour, while around a fifth find themselves in sex slavery. More than half of slavery victims are female and around one in four (26%) are children. India has the highest number of slaves, estimated at around 14 million, with the majority working in agriculture, construction and manufacturing. The reasons why slavery still exists in the 21st century are numerous and complex; no doubt, forced migration caused by civil unrest is exacerbating the problem. And revelations MODERN SLAVERY Timetogivetraffickingtheredlight More stringent legislation and a renewed focus by NGOs means that eradicating modern slavery and trafficking should be the number one supply chain priority for business this year Essential insight • Modern slavery and forced labour risks must be dealt with as an absolute priority, from both a business ethics and supply continuity perspective. • NGOs are ramping up their efforts to expose companies not taking the issue seriously – there is no longer a hiding place for corporate neglect on the issue. • New legislation in the UK will enforce public statements. But there is still wriggle room for non-action that NGOs are likely to jump on with force. • Learn from the likes of HP and Nestlé who have developed specific programmes to reduce risk of slavery exposure. • Take action now – a new ranking of human rights performance is due later in 2016. • Collaboration, increased transparency, improved data analysis and true leadership will all help to boost performance and eradicate the issue. SUPPLY CHAINS IN FOCUSSUPPLY CHAIN RISK & INNOVATION 71% of companies believe there is a likelihood of modern slavery occurring at some point within their supply chains Most modern-day slaves (78%) are in forced, bonded or other types of obligatory labour, while around a fifth find themselves in sex slavery
  2. 2. PAGE 22 H&M admitted to identifying child labour in a number of their supplier factories in Turkey, including refugee children who had fled war-torn Syria. Last month, Nestlé and Jacobs Douwe Egberts admitted to the fact that beans coming from Brazilian plantations that use slave labour may well have made up part of their coffee – mainly because they do not know the names of all the plantations that supply them. Both firms said that, while they do not buy beans directly from “blacklisted” farms where it is known human rights abuse exists, it is impossible to completely rule out that slavery-like conditions exist within their supply chain. According to DanWatch, people trafficked to work for little or no pay, and forced to live on rubbish heaps and drink water alongside animals, may have worked on plantations that supply the two companies. The organisation, which spent seven months investigating the industry, claims that Brazilian coffee workers earn about $2 (£1.42) to fill a 60-litre sack of coffee, with less than 2% of the retail price going to the worker. With human rights abuse said to be rampant across Brazil – the world’s biggest exporter of coffee, accounting for a third of the global market – Nestlé and Jacobs Douwe Egberts are not likely to be the only companies at risk. The number of examples of NGOs exposing companies and sectors in this way is only likely to grow. Most companies (71%) believe there is a likelihood of modern slavery occurring at some point within their supply chains, according to a new study by the Ashridge Centre for Business and Sustainability. The study’s co-author Quintin Lake said that all of the companies he spoke to had publicly committed to ethical trade and are taking active steps to improve working conditions in their supply chains. However, they all agreed that the challenge of modern slavery requires distinct policies, activities and approaches. For example, many have realised that social audits are simply not revealing the hidden nature of modern slavery. The corporate world is slowly waking up to the fact there is a big problem and is starting to react. The risk to brand reputation damage is huge and, understandably, there are few issues CEOs would like their company to be associated with less. New legislation However, it is the emergence of new legislation which has really taken the issue from ethics and sustainability teams and into the boardroom. The UK Modern Slavery Act, which came into force in October 2015, obliges all companies with a turnover greater than £36m to produce an annual statement that sets out how they are dealing with eradicating modern day slavery from their supply chains. Crucially, the public statement must describe the parts of the supply chain where the risk of slavery and human trafficking exists, and the steps taken to manage those risks. Firms also have to measure how well they are preventing slavery and detail any training or development programmes being given to staff to help address the issue. The UK law follows hot on the heels of California’s Transparency in Supply Chains Act, which demands explicit information from manufacturers and retailers doing business in the US state. The proposed Business Supply Chain Transparency on Trafficking and Slavery Act of 2015 could see similar legislation applied to all US firms with revenues of over $100m. The new laws have been widely heralded as the answer to dealing with modern slavery once and for all. The Ethical Trading Initiative, which represents 88 companies with a combined turnover of more than £166bn, describes the UK law as a “game-changer”. But as with any control on social and environmental ills – from deforestation, to the SUPPLY CHAIN RISK & INNOVATION SUPPLY CHAINS IN FOCUS The UK Modern Slavery Act obliges all companies with a turnover greater than £36m to produce an annual statement that sets out how they are dealing with the issue Nestlé and Jacobs Douwe Egberts say they don’t know the the names of all the plantations that supply them BRAZILIAN COFFEEWORKERS EARN$2 to fill a 60-litre sack of coffee – less than 2% of the retail price
  3. 3. PAGE 23 procurement of so-called conflict minerals – regulation is not always a guarantee of improvement. Clothing companies are understandably cautious about making claims about their goods not containing cotton that comes from Uzbekistan, a country with a terrible track record on forced labour. The complexity of the cotton supply chain means that the raw material is often mixed, coming from different source spinning mills. Auditing and certification has its limits too, according to the University of Sheffield. In a new study into human rights abuses in corporate supply chains, senior lecturer Dr Genevieve LeBaron points to the fact that companies have “designed a system of self-regulation that allows their suppliers to cover-up abuses and easily cheat a weak inspection system”. Some progress However, some companies are making good progress, particularly in sectors most at risk. The electronics manufacturer HP has made a series of policy changes on labour practices throughout its global supply chains. Most notably, it has become the first US ICT firm to stop the common use of recruitment agencies to hire foreign migrant workers among its suppliers. The practices of recruitment agencies, which often hire poor workers in one country for employment in another, are being more heavily scrutinised over their role in facilitating forced labour and slavery, consciously or otherwise. Dan Viederman, the head of Verité, the NGO that has been working with HP to develop the new recruitment policies, says that the company’s new Foreign Migrant Standard “sets a new bar” and is likely result in “substantial financial benefit” to the foreign migrant workers along the company’s supply chain. Similarly, Nestlé – now under more pressure than most – has initiated a monitoring and remediation system to address child labour in its cocoa supply chain. By recruiting and training local agents to work in the field, it can identify children it feels might be at risk and intervene. This could be something as simple as helping a family to get a copy of their child’s birth certificate so he or she can attend school, or providing them with school equipment and uniforms. Time to take action The new UK legislation has not escaped criticism with many claiming it does not go far enough. For example, it is completely lawful under the act for a company to issue a statement saying it is taking no steps at all to identify or combat slavery. But the requirement to produce a public statement is arguably the most innovative and effective part of the new law. A ramped up demand for greater knowledge and transparency will force businesses to actively tackle slavery, with the public statement empowering the public, consumers and investors – information they can use to start scrutinising company practices further. The new world-first Corporate Human Rights Benchmark (CHRB), designed to rank the human rights performance of the world’s biggest listed companies, will add further scrutiny. The CHRB says it has developed a rigorous methodology which it will pilot with the top 100 companies from the agricultural products, apparel and extractives industries. The first results are set to be published in November 2016. It won’t be good enough to see this as a marketing exercise. Last summer, Costco was sued by a consumer in California for making false claims about the use of slave labour in its seafood products, forcing them to pull stock from supermarkets across the US at a huge cost. SUPPLY CHAIN RISK & INNOVATION SUPPLY CHAINS IN FOCUS The results of the world’s first ranking of corporate human rights will be published in November 2016 Source: Corporate Human Rights Benchmark A1 Policy commitments B1 Human rights due diligence A2 Board level accountability B2 Embedding respect for human rights in culture and management systems F Transparency 10% C Remedies and grievance mechanisms 15% D Performance: company human rights practices 20% E Performance: responses to serious allegations 20% A Governance and policies 10% 5% 5% A1 A2 B Embedding respect and human rights due diligence 25% 10% 15% B1 B2
  4. 4. PAGE 24 And it shouldn’t be seen as purely a box-ticking exercise either. It is wrong to assume that certain industries, sectors or locations have no exposure to slavery issues. While a shrimp peeling factory might report that it is paying and treating staff fairly, there could still be issues associated with the vessels in which it is buying the shrimp from. Tactics At the heart of current corporate efforts to take action is a focus on transparency and data analysis. More and more companies are making use of supply chain assessment software to better understand where the biggest risks are and to develop plans to prioritise supplier engagement efforts that will help to eradicate the problem at source – via improved training, updates to supplier code of conduct policies and ensuring minimum labour standards are a part of all contracts. Companies will need to build on existing corporate policy and risk-management systems, such as health and safety, or policies to address existing legislation such as the UK Bribery Act – to see how these might be expanded to incorporate the Modern Slavery Act. Much of the data being uncovered by auditing is identifying signs of forced labour but perhaps not recognising it as such. Non-payment of wages, withholding of passports, excessive charges around housing – all of these issues might well fall under the banner of “slavery”. There is also a call for SUPPLY CHAIN RISK & INNOVATION SUPPLY CHAINS IN FOCUS greater collaboration between companies; to put competition to one side for a moment and to share knowledge, insights and best practice. After all, many competing companies are sourcing from the same parts of the world, and often from the same suppliers. One interesting finding of the Ashridge Centre for Business and Sustainability study is that addressing modern slavery is a leadership issue. Where boards and chief executives are demonstrating active engagement on the issue, those companies are much further ahead in their efforts to tackle it than those where this leadership is not yet evident. In this respect it is a simple question of good management to get to grips with this critical business risk properly. ★ Source: Free the Slaves THE TOP 10 PER-CAPITA SLAVERY HOT SPOTS ARE: INDIA Indiahasthelargestnumber ofslaveryvictimsat 14million MAURITANIA Mauritaniahasthe highestpercentage ofitspopulationin slaveryat4% Anestimated60,000victimsof slaveryareenslavedintheUS NEPAL GABONGAMBIA IVORY COAST BENIN PAKISTANMOLDOVAHAITI 36 million are enslaved every year Slavery generates $150bn for traffickers each year 78% of slavery victims are in labour slavery 55% of slavery victims are women and girls 26% of slavery victims are children under 18