The proliferation of forced labor and slave labor across hundreds of industries has fueled efforts to enact legislation to combat those abhorrent practices. Yet despite the best efforts of some of the world’s most powerful countries, it could be a long time before we see an end to the use of these types of labor.
The EU and the U.S. have tried to fight back against the use of forced and slave labor in supply chains. In 2022, the European Commission proposed a regulation that would prohibit products made with forced labor from entering the market. That rule allows EU member states to detain, seize or order the withdrawal of products if they were found to have been made with forced labor. Prior to that, in December, 2021, the U.S. passed the Uyghur Forced Labor Prevention Act (UFLPA) to prohibit the importation of goods that were manufactured through forced labor in China, specifically originating in the Uyghur Autonomous Region in Xinjiang Province.
“The UFLPA is focused on preventing forced labor and modern slavery and banning goods that are produced in a specific region in China,” says Lauren Britts, vice president of digital transformation, partnerships and alliances for Certa, which provides third-party risk management software. “It’s very focused on one very particular part of the world.”
Twenty-two years ago, the U.S. created the Customs-Trade Partnership Against Terrorism (CTPAT) program, in response to the terrorist attacks of 9/11, to limit supply chains’ exposure to terrorism. In the summer of 2023, the U.S. passed new requirements for trade compliance partners under the voluntary program, to address the forced labor issue.
“CTPAT is more broadly focused on ensuring that entire supply chains are analyzed,” Britts says. “It ensures companies are doing a full-blown risk assessment to prevent and detect any modern slavery outside of China and more globally.”
Britts explains that all members of CTPAT voluntarily create social compliance programs made up of six elements. First, companies must perform a risk assessment of their supply chain. Second, they must update their codes of conduct to stand against the use of forced and slave labor. Third, businesses must provide evidence that they have implemented anti-slave labor policies. Fourth, they must perform due diligence and train employees to detect slave labor within their supply chains. Fifth, they need to have a documented plan in place to resolve any slave labor issues that are discovered. Lastly, companies are encouraged to share their practices publicly in order to encourage compliance across multiple industries.
“CTPAT expands this legislation to an international scale,” says Jamie Wallisch, a regulatory and sustainability expert covering environmental, social and governance (ESG) and responsible sourcing for Assent Compliance. “The same due diligence practices you would do to comply with UFLPA you would do to comply with CTPAT. They’re essentially complementary to each other.”
Unfortunately, the creation and enactment of legislation related to forced labor and slave labor doesn't mean that companies will stop using these practices.
“Every company is exposed to forced labor,” says Justin Dillon, founder and chief executive officer of FRDM, a software-as-a-service company that helps organizations track and fix risks within their supply chains. “There’s a 20% chance that the clothing I’m wearing is sourced from Xinjiang.”
Dillon explains that consumers can try their best to purchase products from socially aware companies that don't utilize these business practices. When determining which companies to buy products from, he says, there are two types of businesses: responsible organizations and compliant organizations.
“Responsibility means a company is saying, ‘We don’t have it all figured out, but we’re curious, we’re looking and we’re improving,'" he says.
Dillon says "compliant" companies have no interest in actually analyzing and fixing their supply chains. Rather, they just want to “check boxes.”
“Compliance is usually driven by general councils that want to mitigate exposure and risk down to zero. I think most people in companies are good, including general councils. They’re just doing their job,” he says. “But we have to have a mind shift. Curiosity, in this case, is going to help your bottom line.”
Dillon believes that curiosity might not help companies’ bottom lines in the next quarter, but there are long-term benefits from pursuing corporate responsibility. In fact, he says, companies’ market cap valuations perform 6.7% better over long periods of time when their investors remain committed to the long-term use of ethical sourcing practices.
He also says that ethical sourcing practices will attract new business partnerships and create relationships with high-profile suppliers that have been utilizing these practices for years.
“If you’re going to chase down ethical sourcing and removing greenhouse gas emissions, the cream is going to rise to the top,” he says. “The suppliers that are actually switched on are going to start doing business with you, and those suppliers have their acts together in a lot of ways.”
Dillon doesn’t believe that any one company is leading the charge against the use of forced labor and slave labor in supply chains. However, that’s not the case when it comes to specific industries.
“We do see that apparel and electronics have been in this for 10 years,” Dillon says. “They’ve been manually doing their due diligence using audits and questionnaires. They’re not starting at zero.”
Nevertheless, apparel and electronics companies still have a long way to go before they have adapted to the new era of due diligence, Dillon says.
“They’re having to re-skill into the digital era and the AI era of supply chain transparency,” Dillon says. “While they may have been there first, their digital transformation is taking longer than expected because they’re entrenched in the way they’re doing things.”
Still, Dillon remains hopeful about the prospect of reducing forced and slave labor in global supply chains.
“Legislation always goes forward,” he says. “These laws are only going to become more specific. There will be increased penalties and new thresholds for compliance.” That means more companies will be investigated regarding their use of slave and forced labor.
“That’s progress,” he says. “That’s how you’ll push the rats out, by having everybody going in the same direction, where there are no openings where somebody that’s doing nefarious activities can sell their products. I believe in that systemic change. I believe the regulations are well set up.”
Regardless, it would appear that Dillon, and other members of the anti-slave labor sector, still have their work cut out for them.
“I’m done when I can find all those consumers that we helped activate over 10 years and show them who to buy from,” he says. “The marketplace will respond. It’s ready.”
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