In recent years, there has been a torrent of new laws and regulations enacted globally, with the goal of eliminating slavery and forced labor from modern-day supply chains. Are they having any impact?
At the very least, the scorecard is mixed. According to the latest Global CSR Risk and Performance Index from EcoVadis, the overall performance of companies with respect to ensuring labor and human rights remained static between 2015 and 2017. And large businesses actually performed worse during that period.
It’s true that some regions saw more progress than others, says Michael Smith, senior corporate social responsibility analyst with EcoVadis. But larger companies in general haven’t made progress on the forced-labor front.
That dismal record comes at a time when private companies, under some pressure from governments, non-governmental organizations, customers and shareholders, have been struggling to clean up their act on a number of fronts. In particular, there’s been a push to curb ethical lapses such as corruption and bribery. So to state outright that the results are grim “is not painting a complete picture,” says Smith.
He sees a direct link between human rights abuses and acts of bribery, especially when it comes to the illegal movement of workers between countries. Such individuals are subject to exploitation by labor brokers, with bribes paid to customs authorities along the way. With anticorruption measures in place, one would hope to see a corresponding reduction in illegal and inhumane labor practices.
Still, there are plenty of instances around the world today where labor is being compelled through the imposition of vaguely worded contracts, illegally imposed recruitment fees (paid by the workers) and withholding of passports for the duration of an engagement.
“All of these issues are still endemic,” says Smith. Some countries have even deemed the retention of documents to be essential to maintaining the security of foreign workers onsite. (Or so goes the justification.) Yet as small and medium-sized enterprises become more aware of the practice, he says, they also come to understand that it’s unacceptable.
Smith believes SMEs are showing better results of late because large companies have already made substantial progress toward curbing the use of forced labor over the last several decades. For smaller companies, he sees a learning curve that didn’t exist four years ago, when the U.K. enacted the Modern Slavery Act of 2015. “The maturity of understanding is just now beginning to increase,” he says.
SMEs are additionally ramping up their anti-slavery programs in response to pressure from larger buyers. Many of the latter, especially well-known consumer brands, have adopted supplier codes of conduct that explicitly ban forced labor and other types of human rights violations in the workplace. In multi-tier supply chains, that stricture is supposed to apply to all manufacturers, no matter how far removed from the ultimate buyer.
Visibility of the extended supply chain is the nub of the problem. It’s essential that brands, retailers, distributors and original equipment manufacturers understand where the greatest risk of unethical practices lie. Often it’s next to impossible to gain oversight of a supplier far up the chain, such as a farm or mine.
“Everybody is clear on the fact that most of the risks in terms of modern slavery are going to be at lower tiers of the supply chain,” says Smith. That’s where supply-chain mapping comes in — the practice of identifying every single supplier, node and location that’s involved in getting product to market. Frequently that requires suppliers at each tier to address the practices of their own vendors. Only then can manufacturers proceed to assess the relative risk of each stage.
Multiple laws are in place to penalize companies that fail to take the necessary steps. Seven of the G20 countries have passed legislation or regulations addressing modern slavery. In addition to the U.K.’s action, there’s Brazil’s slave labor “Dirty List,” California’s Transparency in Supply Chains Act, and the conflict-minerals reporting requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Although court rulings have defanged that last initiative, with respect to forcing public companies to reveal the presence of conflict minerals from the Democratic Republic of the Congo in their products.)
More government actions are likely to be on the way, although Smith sees the potential for confusion wrought by too many conflicting or inconsistent measures. The Netherlands recently passed a law that applies only to child labor. Australia’s version of a Modern Slavery Bill has a different revenue threshold than the U.K. law on which it was modeled. The same potential for confusion arises from the preponderance of multiple NGOs dedicated to eliminating slavery. So which law or set of guidelines should supply chains with global scope follow?
The obvious answer lies in the establishment of joint principles, and harmonization of multi-country efforts. In the meantime, companies large and small need to get a handle on their supply chains at every tier, no matter now distant or minor. For all the progress made to date in wiping out the use of forced labor around the world, there’s plenty of work yet to be done.