Rooting Out Slave Labor in Your Supply Chain

Stephen DeAngelis

August 28, 2015

“There are slaves in your supply chain,” writes Tim Minahan. “According to the International Labour Organization (ILO) there are more than 20 million forced laborers around the world today. And it is likely that some of those slaves work for you or your suppliers.”[1] He goes on to note, “Slave labor knows no boundaries. And it occurs in the most surprising of places — even our own backyard.” Rooting out slave labor from your supply chain won’t be easy. That’s because no firm advertises that the labor they use involves slaves or forced labor or that they are involved human trafficking; but, it all boils down to the same thing. In the introduction to the 2015 Trafficking in Persons Report, Secretary of State John Kerry wrote, “Trafficking in persons is an insult to human dignity and an assault on freedom.” He continued:

“Modern slavery doesn’t exist in a vacuum. It’s connected to a host of 21st century challenges, including the persistence of extreme poverty, discrimination against women and minorities, corruption and other failures of governance, the abuse of social media, and the power and reach of transnational organized crime. That is why the United States is working with our international partners at every level to attack the root causes of trafficking, warn potential victims, put perpetrators behind bars, and empower survivors as they rebuild their lives. One thing is clear: No nation can end modern slavery alone. Eliminating this global scourge requires a global solution. It also cannot be solved by governments alone. The private sector, academic institutions, civil society, the legal community, and consumers can all help to address the factors that allow human trafficking to flourish. … This year’s Report places a special emphasis on human trafficking in the global marketplace. It highlights the hidden risks that workers may encounter when seeking employment and the steps that governments and businesses can take to prevent trafficking, including a demand for transparency in global supply chains. The bottom line is that this is no time for complacency.”

Samuel Rubenfeld (@srubenfeld) reports, “Following the release of the U.S. Department of State’s annual Trafficking in Persons report, Reps. Carolyn Maloney (D., N.Y.) and Chris Smith (R., N.J.) proposed legislation requiring public companies with global receipts of more than $100 million to disclose any measures to prevent human trafficking, slavery or child labor in their supply chains as part of their annual reports.”[2] The editorial staff at Supply Chain Standard notes, “California has already passed a similar law but that only applied to companies trading in the state. The UK is also planning a similar law.”[3] Commenting on the proposed legislation, Congressman Smith stated, “Some companies may participate knowingly in human trafficking to pad the bottom line; others are willfully ignorant of where and how their inexpensive products are made; and still others simply do not know.”[4] He continued:

“The bottom line is there is no excuse for a company’s complicity or ignorance in the suffering endured by human trafficking victims hidden away in the supply chain. It is not enough for a company to say they are unaware of human trafficking in their product line; consumers and Congress want to know that companies are actively taking steps to ensure there are no connections between human trafficking victims and their business products and services.”

Knowingly participating in human trafficking is, of course, inexcusable. Companies that do so should be prosecuted to the fullest extent of the law; however, willful ignorance is also shameful. Maloney’s and Smith’s bill aims to eliminate such willfulness. In addition to possible government requirements, companies could find themselves faced with a public affairs nightmare if activist non-governmental organizations, investors, and consumers are able to link their supply chains to suppliers (or their suppliers’ suppliers) that use slave labor. Many people think that human trafficking is only a problem in the developing world; but, that’s not the case. Minahan reports that abuses are occurring in our own backyard. “One of the world’s largest food service companies dumped one of its major tomato suppliers in Florida when it uncovered that it was holding workers without pay and against their will between harvesting seasons so that the migrant workers wouldn’t leave.” Steve Banker (@steve_scm) adds, “When many people think about human trafficking, they recall news reports about the kidnapping and sale of women and children by terrorists in the Middle East and Nigeria; the sex trafficking of girls lured from their homes in Central Europe; or wealthy families that have hired Nannies or maids, confiscated their passports, and turned these ’employees’ into slaves. But human trafficking is also a supply chain issue.”[5] Banker observes that many companies are already trying to address the issue slave labor. He explains:

“According to the Governance and Accountability Institute, 72% of the companies included in The S&P 500 Index® publish corporate social responsibility (CSR) reports. Corporate social responsibility (CSR) reports reflect the philosophy that corporations have a variety of stakeholders — investors, employees, suppliers, customers, and the broader society — and that to attempt to meet the needs of some stakeholders at the expense of others can be both irresponsible and financially short sighted. The Global Reporting Initiative (GRI) offers a widely followed reporting format that makes it possible for readers to more easily compare how different companies are doing in CSR. The latest version of the GRI report, the G4 version, looks at a companies’ economic, environmental, and societal impacts. The societal impacts include labor and human rights practices, which most definitely includes avoidance of human trafficking. Further, the report takes an extended supply chain view toward human rights. Companies should not just be fair employers, they need to be insuring that their suppliers have fair labor practices. The G4 version is the newest GRI reporting standard. Most companies are not yet reporting on fair labor practices across an extended supply chain. But leading companies are.”

So what can your company do? Deloitte University Press provides some quick background and offers a few suggestions on how businesses can proceed to root slave labor out of their supply chains in a short video. Minahan believes that companies can leverage networks they already have in place to help root out slave labor in their supply chain. He explains:

“The same networks and technology underlying them that are transforming key business processes such as buying, selling and managing cash can also be used to eradicate forced labor from the supply chain. The power of networks lies in their ability to connect people and enable the sharing of information in massively scalable ways. … Procurement organizations using such networks can, for instance, be alerted to potential future risks in their supply chain by triangulating myriad inputs — like performance ratings, payment history, etc. … They can get a view into what’s going into their products through non-profit organizations like Made in a Free World. Dedicated to ridding all supply chains of forced labor, the non-profit has created an incredibly powerful database that maps the bill of materials of countless number of products and services — from cell phones and hand-held electronics to fish and agriculture — right down to raw materials and labor inputs and cross-references this information with hotspots where there is a high propensity for the use of forced and child labor risks. And more important, they can access a framework for doing something about it.”

Besides being the right thing to do, rooting out slave labor can have a positive effect on the bottom line. Jonathan R. Copulsky, David Linich, Sean Morris, and Nes Parker report, “In May 2012, MIT published The socially conscious consumer? Field experimental tests of consumer support for fair labor standards, based on a field experiment conducted with Gap Inc. in 111 Banana Republic factory outlet stores. Labels with information about fair labor standards — including brands found at outlet stores — saw positive effects on sales among female consumers shopping for high-priced items, namely an increase in such sales by as much as 14 percent. This study also noted, however, that there was no such corresponding sales increase for lower-priced items. These results are especially interesting because many will say that ‘ethical’ purchasing isn’t a luxury many people have. Yet, this study was done with factory outlet store shoppers, who are typically more price conscious. In line with these findings, apparel manufacturers and retailers, as well as third parties, are increasingly disclosing information about clothing origins, much like fair-trade coffee and organic fruit producers.”[6] They go on to provide some positive steps that companies can take to help ensure that the slave labor problem is being addressed in their supply chains. They conclude, “The persistence of labor abuse indicates the complexity of the problem and its resistance to many of the solutions currently in place. There is no simple solution to address problems of labor abuse. Consequently, organizations should avoid the search for silver bullets and focus on taking incremental steps that consistently improve the status quo without losing sight of the longer-term goal of making workplaces safe, fair, and humane.”

 

Footnotes
[1] Tim Minahan, “Slavery: The Biggest Supply Chain Risk You Never Knew You Had,” Supply & Demand Chain Executive, 6 July 2015.
[2] Samuel Rubenfeld, “U.S. Lawmakers Propose Supply Chain Law Following Slavery Report,” The Wall Street Journal, 27 July 2015.
[3] “US Congress to vote on supply chain slavery law,” Supply Chain Standard, 28 July 2015.
[4] Mike Morosi and Jeff Sagnip, “Maloney, Smith target slavery, human trafficking and child labor with bipartisan supply chain transparency bill,” Press Release, 27 July 2015.
>[5] Steve Banker, “The Risk of Human Trafficking in the Supply Chain,” Forbes, 27 July 2015.
[6] Jonathan R. Copulsky, David Linich, Sean Morris, and Nes Parker, “Supply unchained: Fighting labor abuse in your supply chain,” Deloitte University Press, 28 July 2014.