Tackling modern slavery in global supply chains

In the 21st century, the persistence of modern slavery remains a stark reality, entrenched in global supply chains, factories, and industries worldwide. This article delves into what modern slavery entails, provides examples across different sectors, explores strategies to manage reputational risk, and introduces resources like the Mekong Club toolkit aimed at combating this pervasive practice.

What is modern slavery?

Modern slavery encompasses various forms of exploitation where individuals are coerced, deceived, or forced into labor under exploitative conditions. It includes practices such as debt bondage, human trafficking, poor work conditions, and child labor, often occurring in sectors where vulnerable populations are at risk, including manufacturing, agriculture, construction, and domestic work.

The International Labour Organization (ILO) estimates that over 50 million people globally are trapped in some form of modern slavery, with profits exceeding US$236 billion annually for perpetrators. The majority (82%) is in private-sector supply chains, and it persists despite international conventions and laws prohibiting such practices, highlighting the complexities and challenges in eradicating modern slavery.

Forms of modern slavery include:

1. Forced labor: Any work or services which people are forced to do against their will under the threat of some form of punishment.
2. Debt bondage or bonded labor: The world’s most widespread form of slavery, when people borrow money they cannot repay and are required to work to pay off the debt, losing control over the conditions of both their employment and the debt.
3. Human trafficking: Involves transporting, recruiting, or harboring people for the purpose of exploitation, using violence, threats, or coercion.
4. Descent-based slavery: Where people are born into slavery because their ancestors were captured and enslaved; they remain in slavery by descent.
5. Child slavery: Many people often confuse child slavery with child labor, but it is much worse. Whilst child labor is harmful for children and hinders their education and development, child slavery occurs when a child is exploited for someone else’s gain. It can include child trafficking, child soldiers, child marriage, and child domestic slavery.
6. Forced and early marriage: When someone is married against their will and cannot leave the marriage. Most child marriages can be considered slavery.

9. Agriculture: In agriculture, particularly in regions like Southeast Asia, parts of Africa, and Latin America, forced labor is prevalent. Workers may be forced to work long hours in hazardous conditions, often without adequate pay or basic human rights protections. The agriculture sector is prone to provide jobs with the "3D’s" – dangerous, demeaning, and dirty – therefore extra scrutiny of supply chains is required to ensure appropriate behavior and adherence to best practice labor laws.

To gain a better understanding of the potential presence of forced labor in your supply chain, consider using the Mekong Club’s LITE modern slavery baseline assessment tool as a starting point for your investigation.

We all need to do our part in assisting the victims. It is unacceptable that 82% of modern slavery exists in our supply chains.

Friedman’s book "Where Were You: A Profile on Modern Slavery" sheds light on the alarming reality of human trafficking in Asia. Friedman shares his first-hand experience fighting human trafficking, highlighting the prevalence of modern slavery in various industries. Through interviews with freed slaves and incarcerated traffickers, he exposes the widespread nature of the modern slave trade. Despite efforts by governments and international organizations, only a fraction of victims receive assistance. Friedman's urgent message underscores the need for significant changes to combat this growing crisis.

Managing reputational risk in supply chains and factories

To mitigate reputational risk associated with modern slavery, organizations should adopt rigorous standards and practices:

1. Due diligence and transparency: Implement robust due diligence processes to assess suppliers and subcontractors. Transparency, as mandated by laws like the United Kingdom (UK) Modern Slavery Act and the California Transparency in Supply Chains Act, requires businesses to disclose efforts to eradicate slavery and human trafficking.
2. Ethical sourcing, supplier audits, and codes of conduct: Engage in ethical sourcing by vetting suppliers for compliance with labor standards and conducting regular audits. Industry association codes of conduct promote ethical practices, ensure compliance with labor standards, and protect workers’ rights. These frameworks enhance supply chain transparency, mitigate labor violation risks, and demonstrate a commitment to ethical sourcing, sustainability, and corporate social responsibility.
3. Certification to standards: Adopt internationally recognized standards that provide guidelines on decent working conditions, workplace safety, and worker welfare. Many large brands develop their own standards to manage human rights, environmental impact, waste treatment, chemical usage, circularity, product quality and safety, occupational health and safety (OHS), transshipment, traceability, and other brand-specific measures.
4. ISO 37200 Modern Slavery: This international standard provides guidance for the prevention, identification, and response to human trafficking, forced labor, and modern slavery. It offers a structured framework for developing policies, procedures, and practices to eliminate these forms of exploitation from operations and supply chains.

Here are some examples of the key industry codes of conduct that focus on work conditions:

1. Responsible Business Alliance (RBA) Code of Conduct - responsiblebusiness.org
• Primarily electronics manufacturing but also other sectors
2. Fair Labor Association (FLA) Workplace Code of Conduct - fairlabor.org
• Apparel and footwear
3. Sedex Members Ethical Trade Audit (SMETA) - sedex.com
• Various industries – a marketplace platform to share audit reports
4. Responsible Jewellery Council (RJC) Code of Practices - responsiblejewellery.com
• Jewelry and precious metals
5. ICTI Ethical Toy Program, soon to be known as the Ethical Supply Chain Program -ethicaltoyprogram.org
• Toy manufacturing
6. Pharmaceutical Supply Chain Initiative (PSCI) - psciinitiative.org
• Pharmaceutical and healthcare
7. SA8000 (Social Accountability International) - sa-intl.org
• Multiple sectors
8. amfori Business Social Compliance Initiative (BSCI) - amfori.org
• Textiles, food, electronics
9. Workplace Conditions Assessment (WCA) - intertek.com
• Manufacturing and retail
10. Worldwide Responsible Accredited Production (WRAP) - wrapcompliance.org
• Apparel, footwear, sewn products, and other sectors
11. Global Food Safety Initiative (GFSI) Codes of Conduct - mygfsi.com
• Food and beverage manufacturing. GFSI standards, such as BRC, SQF, FSSC, IFS, and Global GAP, primarily focus on HACCP-based food safety but also include compliance with labor practices, social responsibility, and worker safety.
12. PAS 7000 Supply Chain Risk Management - bsigroup.com/Global/Headers/PAS%207000_book-marked.pdf
• Multiple sectors and a useful supplier prequalification program which takes a holistic approach to a multitude of issues including labor conditions, organizational profile, capabilities and capacity, financial practices, insurance, business governance, employee policy, health and safety, data protection, environmental management, quality management, business ethics, traceability, supply chain security, equal opportunity and freedom of association, disciplinary practices, and business continuity.

Guidance documents for establishing supplier codes of conduct

These documents can help organizations develop robust and ethical supplier codes of conduct:

1. ISO 37200: Modern slavery guidelines
2. ISO 26000: Guidance on social responsibility
3. PAS 7000: Supply chain risk management

International regulations on modern slavery and human trafficking

Recruitment companies hiring people for overseas work often implement comprehensive modern slavery and CSR programs to ensure ethical recruitment and protect workers’ rights. Here are some key components and examples of such programs:

Key components:

1. Ethical recruitment practices: No recruitment fees, transparent contracts, fair wages, and working conditions.

The following regulations reflect a growing global commitment to combating modern slavery and ensuring ethical practices in supply chains. Fines for non-compliance can be as high as 2% of company revenue. Examples of regulations include:

1. United States: California Transparency in Supply Chains Act (2012): This act mandates that large retailers and manufacturers doing business in California disclose their efforts to eradicate slavery and human trafficking from their supply chains. Companies must provide information on their websites about their verification, audits, certification, internal accountability, and training practices.
2. United States: The Trafficking Victims Protection Act (TVPA) provides the primary legislation addressing modern slavery in the US, establishing methods for prosecuting traffickers, protecting victims, and preventing human trafficking.
3. United States: The Uyghur Forced Labor Prevention Act, enacted in 2021, prohibits the importation of goods produced using forced labor in the Xinjiang Uyghur Autonomous Region of China.
4. Germany: The Supply Chain Due Diligence Act (Lieferkettengesetz), effective from January 2023, requires companies to identify and address human rights and environmental risks within their supply chains.
5. UK: The Modern Slavery Act Compliance requires companies operating in the UK to publish annual statements detailing their efforts to prevent modern slavery in their supply chains.
6. Australia: The Modern Slavery Act, similar to the UK, requires companies to report on their actions to address modern slavery, including in overseas recruitment.
7. Singapore: The Prevention of Human Trafficking Act (PHTA), enacted in 2014, criminalizes sex trafficking, labor trafficking, and other forms of exploitation such as forced labor and debt bondage.
8. Malaysia: The Anti-Trafficking in Persons and Anti-Smuggling of Migrants Act 2007 criminalizes all forms of human trafficking and prescribes penalties including imprisonment and fines. Amendments in 2010 and 2015 strengthened victim protection and prosecution.
9. Thailand: The Anti-Trafficking in Persons Act 2008 criminalizes human trafficking and includes provisions for victim protection, including shelter and rehabilitation services. Penalties include imprisonment and fines.
10. Indonesia: Law No. 21 of 2007 on the Eradication of the Criminal Act of Trafficking in Persons addresses all forms of trafficking and includes severe penalties for offenders, as well as protection and rehabilitation for victims.
11. Philippines: The Anti-Trafficking in Persons Act of 2003 (Republic Act No. 9208) criminalizes trafficking for both sexual and labor exploitation, including provisions for victim support and rehabilitation.
12. China: Various articles in the Criminal Law of the People’s Republic of China address human trafficking. China has also implemented specific measures to combat trafficking in women and children.

These programs aim to create a safer and more transparent recruitment process, ensuring that workers are treated fairly and ethically throughout their employment journey.

Real-life examples of modern slavery in supply chains

Child labor or worker abuses discovered in supply chains can have severe consequences for businesses, including legal, financial, reputational, and ethical. Below is a list of publicly available reports of such incidents. It demonstrates that even reputable companies with solid supply chain policies and programs are not immune. Constant surveillance and compliance are key.

1. Nike: Faced significant criticism in the 1990s for labor abuses in its overseas factories, including child labor and poor working conditions.
2. Apple: In 2010, Apple faced scrutiny over working conditions at its suppliers in China, including reports of child labor, excessive working hours, and unsafe conditions.
3. H&M: Faced allegations of child labor in its supply chain in 2007, particularly in Bangladesh and Cambodia.
4. Nestlé: Faced allegations of child labor in its cocoa supply chain in West Africa, particularly in Ivory Coast, dating back to the early 2000s.
5. Walmart: Faced criticism for labor rights violations in its supply chain, including reports of poor working conditions, low wages, and worker exploitation.
6. Nestlé, Mars, and Hershey: These companies have faced lawsuits for allegedly using child labor in their cocoa supply chains in West Africa. While these cases often result in settlements rather than fines, they highlight legal and reputational risks.
7. ASOS, Marks & Spencer, and Uniqlo: These clothing brands were implicated in scandals involving child labor and unsafe working conditions in their supply chains.
8. Deutsche Bank (US): Fined US$150 million by the New York State Department of Financial Services for failing to maintain an effective anti-money laundering program related to Jeffrey Epstein’s sex trafficking enterprise.
9. Xinjiang Zhongtai Chemical Co., Ltd. and Ninestar Corporation (US): These companies faced restrictions on their goods entering the US due to their involvement in forced labor practices targeting Uyghur minorities.
10. UK fashion brands: Companies like Boohoo have faced scrutiny and potential fines for poor labor practices in their supply chains. Boohoo was investigated for modern slavery in its supply chain, leading to significant reputational damage and potential financial penalties.
11. John Lewis and Next (UK): A factory owner supplying these brands was convicted for hiring illegal workers, underpaying staff, and providing sub-standard living conditions.
12. 7-Eleven (Australia): The convenience store chain was implicated in labor abuses, including underpayment and exploitation of workers.
13. Australian fishing industry: Companies involved in the fishing industry in Vietnam, China, and Thailand, which supply prawns to Australian retailers, have been linked to human trafficking and labor exploitation.
14. Singapore: Since the enactment of the Prevention of Human Trafficking Act (PHTA) in 2015, Singapore has prosecuted several cases under this act. For instance, a 25-year-old man was fined and jailed for sexually exploiting a 13-year-old girl. The maximum penalties under the PHTA include up to 10 years in jail, fines up to SG$100,000 and up to 6 strokes of the cane.
15. Malaysia: In 2018, the Malaysian government fined and blacklisted several palm oil companies for labor exploitation and human trafficking. These companies were found to have exploited migrant workers through practices such as withholding passports and underpayment.
16. Thailand: The Thai fishing industry has been under scrutiny for labor abuses, including human trafficking. Companies have faced fines and sanctions for exploiting migrant workers.
17. China: Companies like Xinjiang Zhongtai Chemical faced international sanctions and restrictions due to their involvement in forced labor practices targeting Uyghur minorities.

Outcomes and impacts of modern slavery

When organizational supply chains are exposed, it creates a rupture and focuses attention on weaknesses with the business operation. This exposure provides an opportunity to improve safeguards and continuously enhance practices by conducting audits, improving transparency, establishing codes of conduct, and refining supplier practices. It also leads to improved working conditions, stakeholder engagement, and collaboration with nongovernmental organizations (NGOs), resulting in enhanced social governance credentials and setting industry benchmarks for others to follow.

However, ongoing challenges remain in ensuring full compliance across global supply chains, as these remain fluid with supplier churn and new geographies. Therefore, there is no finish line; ongoing vigilance, compliance, and governance are key to ensuring resilience. Many companies are fortunate that their supply chains have not been exposed, but this demonstrates that hope is not a method. Learn from those that have been exposed and conduct the CEO stress test. This proactive approach may save you a lot of pain in the future.

Beyond compliance: My journey in addressing modern slavery and environmental and social governance in global supply chains

I want to share my experience with modern slavery and workplace condition assessments, including quality, environmental, and OHS issues in supply chains, as they are all interconnected. Full traceability of suppliers and compliance with modern slavery and human rights issues can solve many problems. Supplier visibility improves product quality, reduces costs, optimizes efficiency, reduces risk, and aligns with ESG values.

I remember running the first SA8000 training in Asia with CEPA in Bangkok in 1997. CEPA conducted over 100 pilot audits in Asia, all failing. The SA8000 standard, developed by an advisory board of various stakeholders, was tough for facilities to pass. This led many organizations to create their own codes of conduct and human rights audits. Many financial auditing firms initially engaged in code of conduct (COC) audits but withdrew after high-profile failures and complications. This left testing, inspection, and certification (TIC) companies like SGS, Intertek, and BV to handle factory audits, creating their own codes of conduct and supporting the emergence of programs like Worldwide Responsible Apparel Production (WRAP), the International Council of Toy Industries (ICTI), and the Fair Labor Association (FLA) for labor-intensive industries.

Retailers realized reputation risk was an issue beyond product safety and quality. People were concerned about where products were made, worker conditions, and environmental impact. Quality evolved to include process and behavioral aspects, requiring knowledge of factories, issues on the ground, and improvements needed.

As pioneers of social audits in the 1990s will know, there were many issues with child labor, poor working conditions, bonded labor, OHS issues, worker pay, and overtime. Export facilities in countries like China, Thailand, India, Pakistan, Bangladesh, Vietnam, Malaysia, and Indonesia, which underwent multiple social audits by international brands and retailers, significantly improved worker conditions and pay. These facilities became far superior to domestic factories, changing the lives of millions and reducing human rights violations. The developing world solved these problems faster than the Western world where, prior to the 1950s, America, the UK, and other mature markets were not necessarily role models compared to today’s Asian factories.

Modern slavery is a huge issue. When brands, retailers, and the private sector decide to clean up their supply chains, they make a significant impact. The brands, retailers, and TIC sector companies should be commended for investing in building the necessary capacity in these new supply chains against the headwinds of government enforcement.

Many NGOs bashing big brands and retailers were not very productive, as these issues are complex. Brands were being held accountable to enforce country regulations in developing countries, which should have been the role of their own governments. Today, many NGOs are more collaborative and see that working together with brands and retailers in building transparency and capacity makes more sense.

It’s evident that most CEOs and company boards are aware of ESG issues. However, they have little knowledge of their supply chains and what is really happening. They assume everything is fine and handled according to ESG standards, especially human rights and the environment. Consumers also assume that brands and retailers know where their products come from, have visited the factories, and that they are compliant with quality, social, and environmental parameters. These are basic consumer expectations.

The reality is that many organizations do not know their real suppliers, who made the products, and what the conditions and issues are. CEOs call this the “blessed unrest” factor. Traceability is complicated with agents, intermediaries, importers, and no-name factories. Most consider a supplier as an invoicing entity; however, to manage behavioral quality, you have to know your real factories where the machines, people, and ecosystems exist.

Due to major incidents involving child labor, prison labor, bonded labor, and other issues in supply chains, the CEO Stress Test was created to address the issue. The objective was to help CEOs connect with procurement and supply chains to ensure the right thing was being done and that ESG was fully traceable and compliant in supply chains.

The CEO Stress Test includes:

1. How many suppliers do you have?
2. How many are direct versus indirect?
3. Do you have verified living profiles of your suppliers?
4. How many have you visited and how often?
5. What are the priority issues, by country and topic?
6. What are you doing to improve the situation?
7. Does your supply chain adhere to your corporate values?
8. Do you really know what’s happening in your entire supply chain?

In other words, can you tell your supply chain story? Because if you cannot, and there is an incident in your supply chain, then someone else will tell the story for you. And we know the media will focus on sensational reporting, resulting in a knock-on effect of consequences.

Consider the program "Undercover Boss." It’s remarkable how, when executives go undercover, they often uncover numerous issues within their organizations. Studies suggest that most CEOs and boards are aware of only about 5% of what is actually happening within their companies, including employee sentiments and supply chain behaviors.

Here are what the best companies in the world are doing:

1. Align corporate values with supply chain, research and development, procurement, risk, and compliance to ensure cohesive operations.
2. Maintain a dynamic database of approved supplier profiles (direct vs. indirect).
3. Conduct comprehensive supplier risk assessments considering product type, country, private label, critical items, and economic or reputational risks.
4. Categorize suppliers by risk profiles by country, product, process, value, etc.
5. Allocate resources strategically to address areas of highest risk.
6. Perform on-site validations of critical or high-risk suppliers to ensure adherence to corporate values.
7. Continuously measure, monitor, and enhance supplier performance, supporting those aligned with corporate values.

The Mekong Club Toolkit

The Mekong Club, a non-profit organization based in Hong Kong, focuses on addressing modern slavery through innovative approaches and practical tools. Its toolkit offers comprehensive guidance for businesses:

• Risk assessment tools: The Mekong Club provides risk assessment tools, such as the interactive Modern Slavery Risk Map and Modern Slavery Scorecard, which are tailored to different industries and regions, helping businesses identify vulnerabilities within their operations and supply chains.
• Capacity building and training: They offer training programs and capacity-building initiatives, providing resources to educate businesses on recognizing signs of modern slavery, while providing in-depth consultations in human rights due diligence (HRDD), and implementing effective prevention and remediation strategies.
• Collaborative platforms: The Mekong Club facilitates cross-sector working groups for their members, where businesses, NGOs, and governments can share best practices, collaborate on solutions, and advocate for policy changes to eradicate modern slavery.
• Advocacy and awareness campaigns: Through advocacy and awareness campaigns, the Mekong Club raises public consciousness about modern slavery issues and promotes corporate responsibility in supply chain management, such as a Guide to Minimising Modern Slavery Risk in Shipping Supply Chains and The Ethics of Disengaging with Suppliers. One notable example is its recent commercial on preventing human trafficking into scam centers.

Other means of industry support

In addition to the Mekong Club, there are other organizations such as the global auditing and certification companies (BSI, SGS, Intertek, BV, LRQA, etc.) providing social compliance audits and solutions which can be tailored to support specific market needs. Other groups include:

• Global Business Coalition Against Human Trafficking (GBCAT): Provides a toolkit for corporate suppliers to identify and address modern slavery risks, particularly in recruitment and labor practices.
• International Labour Organization (ILO): Works with manpower companies to promote fair recruitment and decent work conditions through various program guidelines.
• Walk Free Organization

Conclusion

Modern slavery continues to be a pressing global issue, with profound humanitarian and ethical implications across industries and supply chains. Businesses have a responsibility to ensure that their operations do not contribute to or perpetuate exploitation and human rights abuses. By adopting stringent standards, conducting thorough due diligence, and leveraging resources like the Mekong Club toolkit and ISO 37200 Modern Slavery Guidelines, companies can mitigate reputational risks, protect vulnerable workers, and contribute to the eradication of modern slavery worldwide. Embracing ethical sourcing practices and collaborating with stakeholders are essential steps towards creating sustainable and socially responsible business practices in the fight against modern slavery.

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