Rachel Stine reports on how the issues of trafficking and slavery represent increased legal and reputational risk for companies around the world

New efforts to combat human trafficking and slave labour have placed growing pressure on larger companies throughout the world to work towards eradicating trafficked and forced labour from their supply chains.

Legislation, reports, campaign efforts, and major incidents within the past year have increased awareness about the issue. Companies worldwide are being increasingly pressed to become more transparent about their efforts to eliminate all forms of forced labour.

In September 2010, California partnered with the Coalition to Abolish Slavery &Trafficking (Cast) and the Alliance to Stop Slavery and End Trafficking (Asset) to pass one of the most substantial pieces of legislation to encourage businesses to act against human slavery.

The California Supply Chain Transparency Act requires manufacturers and retailers in the state with more than $100m in annual worldwide turnover to disclose efforts to eradicate forced labour in their supply chains.

Global standards

Additionally, the UN Human Rights Council has established the first global standard for preventing and addressing the risk of human rights violations within business activities by endorsing the new set of Guiding Principles for Business and Human Rights in June 2011.

Meanwhile, the US State Department has recently released the 2011 Trafficking in Persons Report, which evaluates 184 governments on their anti-trafficking efforts.

The EU adopted a new directive in April 2011 to prevent and combat human trafficking.

And in the midst of these acts and reports, undercover police in Spain raided 80 alleged textile sweatshops and released 450 Chinese slave labourers during July 2011.

A lucrative industry

The International Labour Organisation estimates that today 12.3 million people around the world are in some type of forced labour or bondage. Annual profits from human trafficking are at least $32bn according to their research.

The highest numbers have been found in Asia with approximately 9.4 million people in forced labour, according to the ILO. More specifically, Algeria, Burma, Cuba, Iran, and Libya were among the countries named by the US’s Trafficking in Persons Report for not meeting the minimum standards set by the Trafficking Victims Protection Act of 2000 (TVPA), and not making efforts to do so.

All types of industries with elaborate supply chains for their products are at risk for forced labour, according to the ILO. In addition to industries commonly considered to be at risk, such as agriculture and garments, the ILO has also found the steel and automobile industries to be particularly vulnerable.

Businesses that fail to address these vulnerabilities risk reputation damages as well as legal ramifications, experts claim.

“Quite simply, the public do not want to associate with brands that sell goods made through forced labour,” says Joanna Ewart-James, Anti-Slavery International’s supply chain coordinator.

Stakeholder scrutiny 

Specifically with regard to California’s Transparency in Supply Chains Act, companies that fail to make the required disclosures will not only risk legal consequences but also will face scrutiny from stakeholders and advocates, says Sarah Altschuller, an associate at US law firm Foley Hoag.

With these risks in mind, companies can and should take the appropriate measures to detect and address human trafficking and forced labour in their supply chains.

Altschuller advises that companies assess the risks of human trafficking and forced labour associated with their specific supply chains. In doing so, companies can determine the effect of relevant factors including the type of product being sourced, the location of suppliers, and/or practices by suppliers.

Additionally, companies should review the adequacy of their policies to ensure they clearly establish that human trafficking and forced labour are prohibited, Altschuller says. Specifically, the policies should require direct suppliers to certify that all materials were sourced in compliance with company policies and the law.

To ensure effectiveness and implementation, companies should have their labour policies independently monitored and audited, advises Frances House, the director of strategy for the Institute for Human Rights and Business.

Practice review  

Peter McAllister, the director of Ethical Trading Initiative, recommends that companies examine their purchasing practices to ensure that they are not creating an environment where suppliers have to rely on illegal subcontracting. Companies should also work with suppliers to raise awareness and detect abuses of workers’ rights throughout the chain, suggests McAllister.

In addition to workers’ pay, hours, and conditions throughout supply chains, companies should address other factors that can contribute to human trafficking and forced labour in supply chains, House says.

Employers should be acutely aware of recruitment practices and the debts that workers carry, House advises. She encourages companies to only use licensed labour recruiters and ensure that all employers pay for workers’ recruitment and travel fees instead of the workers. In this way, employers can prevent cases of bonded labour where employees are forced to work off the debt they acquired by obtaining a job through a recruiter.

Companies should also ensure that all employees have access to grievance reports and the ability to form and maintain unions, House recommends. Furthermore, they should guarantee that workers have freedom of movement, meaning that employees have the ability to leave a position or location at any time. To ensure freedom of movement, workers should be allowed to keep their own identification documents, particularly their passports.

International laws vs local regulation 

However, challenges arise when ensuring the fair treatment of workers conflicts with a host country’s labour laws, House says. For example, in some countries, such as Malaysia, employers are required to retain the identification of all employees. And in some cases, international labour regulations conflict with domestic regulations.

As well as acknowledging potential problems with host countries, some argue that it is impossible for companies to rid their supply chains of trafficked and forced labour completely.

Ewart-James says that despite commitments not to use forced labour, many companies are not equipped to detect it in their supply chains.

When using subcontractors, many companies are unaware of the specific terms and conditions of all workers in their supply chains. Even those who monitor their supply chains may not recognise indicators of human trafficking or forced labour, she says.

“The reality of today’s complex supply chains is that [it] would be unwise for any company to offer guarantees that they are absolutely free from bonded or forced labour,” says the Ethical Trading Initiative’s McAllister. “Companies that are really committed to tackling forced and bonded labour in their supply chains need to go beyond simply complying with the letter of the law.”

Cooperate for success

As such, experts suggest that companies cooperate with each other and also work with NGOs and advocacy organisations to address challenges with the supply chain and labour issues within specific countries.

Companies can take advantage of thetools offered by organisations such as NGO Verité’s fair hiring toolkit, and look to other companies, including the Body Shop, for working examples on how to act against slave labour.

Third party organisations can also assist companies by bringing additional publicity to particular issues. NGOs and advocacy campaigns have partnered with celebrities to draw attention to human trafficking issues. Actresses Julia Ormond founded Asset, and Demi Moore made a documentary with CNN’s Freedom Project, for example.

Additionally, companies can gain positive publicity for their efforts from campaigns including Chain Store Reaction, which rates companies’ efforts against slave labour.

When confronting issues in countries, House recommends that companies band together with each other and outside advocacy groups to address the issues and positively interact with governments.

While partnerships can also help governments, such as California pairing with Cast and Asset, passing legislation and establishing regulations is only half of the battle.

McAllister says he finds California’s legislation “laudable in its intentions”, but warns that relying on top-down auditing of suppliers is inefficient and often buries problems deeper.

And the standards behind evaluations of government actions should also be considered.

For example, a country only needed to meet the minimum Trafficking Victims Protection Act standards to earn the highest rank of tier 1 in the US’s Trafficking in Persons Report.

These minimum standards require the government of a country to prohibit and punish severe forms of trafficking in persons, prescribe punishment for any act of sex trafficking, prescribe sufficiently stringent punishment for any act of trafficking, and make efforts to eliminate severe forms of trafficking in persons.

Ethical Corporation’s How to Drive Supplier Social and Environmental Performance conference takes place in New York on October 25-26 2011. For the event website click here


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