Forced Labor in the supply chain.
“ALWAYS DO WHAT IS RIGHT. It will gratify half of mankind and astound the other.”
― Mark Twain, American writer, lecturer, humorist[1]
Despite the universal condemnation of and global efforts to eradicate forced labor, the term is defined slightly differently in various jurisdictions, which is problematic for companies engaged in international business.[2] However, we suggest clients to design and implement policies that follow the definition posited by the International Labour Organization: “…forced or compulsory labour shall mean all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”
Forced labor takes the form of coercing, deceiving, or otherwise forcing people through physical or emotional threats to work, withholding wages or documents, or limiting freedom of movement. It is estimated that 50 million people globally are trapped in some form of forced labor (28 million), modern slavery and human trafficking.[3] The vast majority of those suffering are actively engaged in supply chains of global corporations that produce goods and services for consumers worldwide.[4]
Forced labor in the supply chain poses the following significant legal, financial, reputational, and operational risks to corporations:
Legal Risks: Many countries have laws that prohibit or criminalize forced labor, human trafficking, and modern slavery. For instance, the UK Modern Slavery Act[5] and the California Transparency in Supply Chains Act[6] mandate certain[7] companies to report on their efforts to eradicate forced labor from their supply chains. Failure to comply with these laws could lead to fines[8] or injunctive relief[9] as well as civil lawsuits.
Financial Risks: Forced labor may also result in financial risks such as (a) higher costs, lower productivity, poor quality, lack of innovation, delays, or disruptions; (b) lost sales, due to consumers and investors boycotting products or divesting from companies perceived to be complicit in forced labor; (c) costs of remediation and compensation to victims of forced labor or legal fees.[10]
Reputational Risks: Forced labor can severely impact the reputation and brand image of companies. Consumers are more aware and sensitive to issues of forced labor, and they expect companies to be transparent, accountable, and proactive in addressing the same. Companies that fail to meet these expectations risk losing customer loyalty, trust, and market share. In addition, social media and online activists can negatively expose and amplify cases of forced labor in the supply chain.[11]
Operational Risks: Forced labor can also affect the day-to-day operations of companies. Companies that lack proper due diligence, monitoring, and auditing mechanisms may face operational risks such as non-compliance, corruption, fraud, or supply chain disruptions that undermine their business continuity and resilience. Companies may be compelled to terminate supplier contracts (causing potentially higher costs and/or disruption) and to allocate internal resources to address allegations and/or investigations.[12]
In conclusion, companies need to design and implement due diligence programs (including use of artificial intelligence), effective policies, management systems, and communication strategies to prevent, detect, and remediate forced labor and human rights abuses in their supply chains. They also need to engage with stakeholders, including workers, civil society organizations, and governments, to promote a culture of transparency, accountability, and respect for human rights. Of equal importance, companies should work hard to eliminate forced labour because “forced labour is morally unacceptable. No child, woman or man should suffer this serious human rights violation.[13]
[1] Quotes for Leaders, https://quotesforleaders.com/wise-words-from-mark-twain-quotes-about-life/.
[2] Forced Labour Convention, 1930 (No. 29), International Labour Organization, https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C029, “Article 2, 1. For the purposes of this Convention the term forced or compulsory labour shall mean all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.” See also USA Department of Homeland Security, Blue Campaign, https://www.dhs.gov/blue-campaign/forced-labor, “Forced labor occurs when individuals are compelled against their will to provide work or service through the use of force, fraud, or coercion.” UK Modern Slavery Act, https://www.legislation.gov.uk/ukpga/2015/30/section/1/enacted, “(2) In subsection (1) the references to holding a person in slavery or servitude or requiring a person to perform forced or compulsory labour are to be construed in accordance with Article 4 of the Human Rights Convention”, which states “No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms.” (https://www.un.org/en/about-us/universal-declaration-of-human-rights#:~:text=Article%204,prohibited%20in%20all%20their%20forms). Australia Attorney-General’s Department, https://www.ag.gov.au/rights-and-protections/human-rights-and-anti-discrimination/human-rights-scrutiny/public-sector-guidance-sheets/right-freedom-slavery-and-forced-labour#:~:text=Subsection%20270.6(1)%20of%20the,to%20leave%20the%20place%20where, “Subsection 270.6(1) of the Criminal Code defines forced labour as the condition of a person who provides labour services and who, because of the use of coercion, threat or deception, would not consider himself or herself to be free: (a) free to cease providing labour or services, or (b) free to leave the place where the person provides labour or services.” China ratifies the two ILO Fundamental Conventions on forced labour, International Labour Organization, August 12, 2022, https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_853575/lang–en/index.htm. Japan reinforces its commitment to fight against forced labour, International Labour Organization, July 19, 2022 https://www.ilo.org/global/standards/subjects-covered-by-international-labour-standards/forced-labour/WCMS_851358/lang–en/index.htm.
[3] Global Estimates of Modern Slavery: Forced Labour and Forced Marriage, International Labour Organization, September 12, 2022, “The latest Global Estimates indicate that 50 million people were living in modern slavery in 2021. Of these people, 28 million were in forced labour and 22 million were trapped in forced marriage.” https://www.ilo.org/global/topics/forced-labour/publications/WCMS_854733/lang–en/index.htm
[4] Freedom United, https://www.freedomunited.org/freedom-university/products-of-slavery/#:~:text=Slavery%20has%20been%20linked%20to,been%20discovered%2C%20and%20still%20persist.
[5] UK Government, Publish an annual modern slavery statement, July 28, 2021, https://www.gov.uk/guidance/publish-an-annual-modern-slavery-statement.
[6] State of California Department of Justice, The California Transparency in Supply Chains Act, https://oag.ca.gov/SB657.
[7] In the UK, companies with annual turnover of GBP36 million or more. In California, companies with annual gross receipts in excess of USD100 million.
[8] Chartered Institute of Procurement & Supply, Fines threat for slavery law non-compliance, January 12, 2021, https://www.cips.org/supply-management/news/2021/january/firms-face-fines-for-slavery-law-non-compliance/
[9] State of California Department of Justice, Frequently Asked Questions (FAQs) – SB 657, https://oag.ca.gov/SB657/faqs.
[10] Business & Human Rights Resource Centre, FORCED LABOUR RISKS, REMEDY AND CHANGING REGULATION, 2022, https://media.business-humanrights.org/media/documents/KTC_2022_Risk_and_remedy_briefing.pdf.
[11] Business for Social Responsibility, Costly Consequences for Forced Labor, 2023, https://www.bsr.org/en/emerging-issues/costly-consequences-for-forced-labor.
[12] United Nations Global Compact, Business & Human Rights Navigator, Forced Labour, https://bhr-navigator.unglobalcompact.org/issues/forced-labour/.
[13] International Labour Organization, Global Policy Brief: Why and how businesses want to eradicate forced labour, https://flbusiness.network/global-policy-brief-why-and-how-businesses-want-to-eradicate-forced-labour/.
