Slavery risks on compliance agenda

Third-party risks and supply chain management have featured high up on most organisations’ risk registers for some time, though mainly over worries that these suppliers may fail to deliver the required goods or services on time. Concerns over incidences of slavery and bonded/forced labour have never really been raised—until recently.

There have been some high-profile cases of companies employing forced labour in their supply chains. In November 2015, following an audit, food giant Nestlé admitted to cases of forced labour in its fishing operation in Thailand for the supply of its Purina brand Fancy Feast cat food. The company has also acknowledged purchasing coffee from two Brazilian plantations where authorities freed workers from conditions analogous to slavery in 2015, while rival coffee maker Jacobs Douwe Egberts admitted that it is possible that coffee from plantations in Brazil with poor labour conditions ended up in its products.

This March human rights campaign group Amnesty International released a report called The ugly side of the beautiful game: Exploitation on a Qatar 2022 World Cup site which alleged that migrant workers working on construction projects ahead of the tournament lived in squalid accommodation, had their wages withheld for months, and had their passports confiscated by their employers.

The report criticised FIFA, soccer’s world governing body, for its lack of action and “shocking indifference.” Dutch trade union FNV is currently trying to take legal action against FIFA in Switzerland for its failure to protect the rights of migrants from developing countries engaged in construction projects for the tournament.

Phil Marshall, director at The Mekong Group, a not-for-profit organisation aimed at raising awareness about slavery risks in the supply chain, told attendees at Compliance Week’s European conference in Brussels, Belgium, earlier this month that “slavery in the supply chain is a major problem,” and that there are currently between 21 and 46 million victims of slavery worldwide, with one new victim being created every 4-8 seconds.

Forced labourers look like us, and work in places where we work—they just don’t have the ability to move from where they are, return home, speak up, or unionise. The first step at combating modern slavery is to see how these people are recruited, and this leads companies to a trail that they can audit.”
Neill Wilkins, Programme Manager, Migrant Workers and Work With Dignity, Institute for Human Rights and Business

“Though estimates between organisations like the International Labour Organisation (ILO) and Amnesty International may vary, there is one thing that everyone agrees on—the numbers are definitely going up year on year,” said Marshall.

Ruth Pojman, senior adviser, Office of the Special Representative and Co-ordinator for Combating Trafficking in Human Beings at the Organisation for Security and Co-operation in Europe (OSCE), also had some similarly dire figures to hand.

For example, according to The Ethical Trading Initiative (ETI), an alliance of companies, trade unions and NGOs that promotes respect for workers’ rights around the globe, 71 percent of global companies believe that there is a likelihood of modern slavery occurring in their supply chains—a possibility that becomes even greater when one considers that the International Trade Union Confederation (ITUC) believes that there is a “hidden workforce” of 116 million people in the supply chains of the world’s top 50 companies alone.

Pojman told attendees that trafficking in human beings and forced labour can happen in any country—not just in developing countries—and in any industry supply chain. “Forced labour is not limited to construction and the apparel industry,” she said. Furthermore, there is no “one-size-fits-all” solution that enables companies to combat the problem, meaning that organisations need to conduct a thorough risk assessment of their supply chains and determine which areas and operations may be more prone to slave/forced labour risks.

However, Pojman added that “generally, businesses are more than willing to comply with anti-slavery legislation and report on what they are doing to monitor such risks in their supply chains—so long as the legislation is well-designed and that all organisations are subject to the same rules in the same way.”

Many countries have taken concerted action to address labour violations. While the U.K.’s Modern Slavery Act 2015 may be one of the most recent, high-profile examples, Austria has introduced public procurement legislation this year to stamp out forced labour in the construction sector, applying the principle of “best supplier” over “cheapest supplier” in contracts valued at above €1m ($U.S.1.06m). Denmark, Norway, Sweden, and Germany have all taken positive steps to monitor procurement and improve transparency in supply chains.

Outside of the European Union, Brazil has kept a “dirty list” of companies involved in slave labour since 2003, for example, and the United States has attempted to clamp down on slavery through the California Transparency in Supply Chains Act (2010), the Trade Facilitation and Trade Enforcement Act (2015), the Federal Acquisition Regulation: Ending Trafficking in Persons (2015), and Executive Order—Strengthening Protection Against Trafficking in Persons in Federal Contracts (2012).

Other countries are trying to push through legislation. France, for example, aims to introduce sanctions and civil liability under a “duty of care” law for those companies that fail to ensure adequate corporate due diligence over their operations, based on the “protect, respect and remedy” formula that underpins the UN Guiding Principles on Business and Human Rights (UNGPs). Under the planned legislation, victims could in theory be eligible to obtain reparations, and courts could levy companies with a fine of up to €10m (U.S.$10.65M) on the grounds of a failure to enforce a supply chain due diligence plan effectively—hence the need for robust compliance functions.

Neill Wilkins, programme manager for Migrant Workers and Work With Dignity at the Institute for Human Rights and Business (IHRB), said that the problem with trying to detect modern slavery in the supply chain is that “it is often dressed up like normal work, rather than people wearing ankle chains.”

“How many of us could spot someone who was actually deemed to be a slave or was working in bonded labour? Probably none of us could. Forced labourers look like us, and work in places where we work—they just don’t have the ability to move from where they are, return home, speak up, or unionise. The first step at combating modern slavery is to see how these people are recruited, and this leads companies to a trail that they can audit,” he said.

LEADERSHIP GROUP FOR RESPONSIBLE RECRUITMENT

The Leadership Group for Responsible Recruitment strongly believes in the “Employer Pays Principle” and urges suppliers to do the same. “Adoption of this principle across all industries is fundamental to combatting exploitation, forced labour and trafficking of migrant workers in global supply chains and represents an important step in achieving the UN Sustainable Development Goal of decent work for all,” says the group, which includes Coca-Cola, HP Inc., Hewlett Packard Enterprise, IKEA, and Unilever.
The group’s aims are to:
1. Raise awareness about the positive benefits of ethical recruitment as well as the consequences of unethical recruitment practices such as debt bondage and forced labour, particularly for low- skilled migrant workers.
2. Leverage CEO and senior executive leadership of companies to call for commitment to the “Employer Pays Principle” by industry peers across all sectors.
3. Advocate for improved protection for migrant workers by supporting government efforts toward better regulation of the recruitment industry, in line with the UN Guiding Principles’ “state duty to protect”.
4. Embed responsible corporate practice by providing a roadmap of concrete actions to move beyond commitment to the “Employer Pays Principle” to implementation of policy and practice by companies and suppliers.
5. Maximise scale and impact by collaborating with and reinforcing other complementary business initiatives such as The Consumer Goods Forum on Fighting Forced Labour and the Electronics Industry Citizenship Coalition Working Group on Protecting Vulnerable Workers.
6. Drive positive change in the recruitment industry by encouraging direct hire where possible, and by supporting the development and implementation of systems to identify ethical recruitment agencies, such as the International Recruitment Integrity System (IRIS).
The group’s goals for the next 1-5 years are:
1. A practical roadmap for companies to implement the “Employer Pays Principle” with suppliers/sub-contractors.
2. Strong commitments by leading companies in all target industries to adopt the “Employer Pays Principle” and to require suppliers to prioritise direct hire or ethical recruitment agencies certified by credible assurance schemes wherever possible.
3. Inclusion of the “Employer Pays Principle” in target industry association codes of conduct, based on the Electronics Industry Citizenship Coalition Code of Conduct.
4. A year-on-year increase in the number of recruitment agencies and associations working to a business model based on the “Employer Pays Principle”.
5. Inclusion of the “Employer Pays Principle” in selected multilateral frameworks and dialogue processes relating to recruitment of migrant workers.
6. Concrete progress towards improved legislation and enforcement on the prohibition of worker fees for the recruitment industry in key home and host country governments, underpinned by greater transparency requirements.
7. Firm commitments by key investors to include the “Employer Pays Principle” in due diligence screening of companies.
Source: Institute for Human Rights and Business

Simon Henzell-Thomas, group social responsibility manager and head of stakeholder engagement at Swedish furniture retailer IKEA, agrees that unethical recruitment practices are at the heart of modern slavery.

“Any situation where an employee has to pay the employer for the right to work is clearly wrong, and this is the first red-flag that compliance officers should look for,” said Henzell-Thomas.

“Such fees can be hidden among a list of legitimate expenses—such as visa/document fees, medical checks, travel fares and so on—but compliance should look at agency records where recruiters have made large, ‘one-off’ charges for ‘placement fees,’ or for substantial regular payments that will amount to nearly all that the worker is likely to earn during the contract. This will alert you that best practice is not being followed,” he said.

“There is no business case for slavery,” said Henzell-Thomas .“It only results in negative impacts for everyone,” he added.

IKEA launched its own supplier code of conduct back in 2000. Called “The IKEA Way on Purchasing Home Furnishings Products”—but more colloquially known as “IWAY”—the code specifies the company’s minimum requirements relating to the environment, social impact, and working conditions, including no child labour, no forced or bonded labour, and freedom of association (meaning the right to organise and protest).

More recently, in May this year, IKEA joined forces with Coca-Cola, HP Inc., Hewlett Packard Enterprise, and Unilever to launch the Leadership Group for Responsible Recruitment, which is focused on promoting ethical recruitment and combating the exploitation of migrant workers in global supply chains across industries. The five founding companies have committed to the “Employer Pays Principle,” which states that no worker should pay for a job: Instead, the costs of recruitment should be borne by the employer. The group is set to develop a practical tool to help companies report under the U.K. Modern Slavery Act, California Transparency in Supply Chains Act, and the U.S. Federal Acquisition Regulation (FAR).

Compliance professionals attending the conference agreed that monitoring supply chains for incidences of forced labour has become more important following a raft of recent legislation—in particular, the U.K.’s Modern Slavery Act—as well as more vocal public opinion about how goods are sourced and how workers in developing countries are treated and paid.

“Ever since we knew this legislation was going to come into force we have spent more time reviewing our supply chains and requiring more assurance from suppliers about how they operate and who they deal with,” said one compliance officer.

But it is not an easy task, said one expert. “A lot of transactions and documentation regarding recruitment practices in places like Asia and Africa are done on paper and there are few electronic records. This makes it very difficult to carry out meaningful checks,” he said.