In a recent investigation, Transparentem found evidence of serious labour abuses including forced labour indicators at more than a dozen material or component manufacturers in Taiwan. The findings point to an endemic problem affecting migrant workers in the country’s manufacturing sector. How should global brands respond?

Internationally-accepted standards of due diligence require global brands to take action in response to serious abuses across supply chain tiers, even if the brand has reason to believe that material from the supplier’s supplier does not enter the brand’s products.

In settings where abuse is endemic, a brand’s refusal to take action just because no direct link between the abuse and the brand’s products has (yet) been found risks weakening the collective action needed to address systemic issues. This type of head-in-the-sand behaviour allows abuses to persist industry-wide, all boats sinking together rather than rising.

Even aside from this, there are several reasons for brands to take an expansive view of corporate accountability, even when they believe they do not have direct links to harms taking place at the manufacturers that supply to its supplier.

Digging deeper into corporate responsibility

The presence of severe labour abuses beyond the first tier of supply chains - at the suppliers’ suppliers - raises serious red flags about the adequacy of the supplier’s due diligence. When a supplier uses similar materials from different sub-suppliers, it may be difficult for the brand to be sure that intermingling has not occurred. If the brand does not work with its supplier to ensure labour issues at all sub-suppliers are addressed and prevented, then the brand likely does not have a sufficient basis to trust its supplier’s due diligence and transparency on related matters.

Indeed, a 2014 OECD report highlighted this very risk of “abuse spillover” between different factories supplying a supplier, noting that “[s]ince due diligence is relevant for actual and potential adverse impacts, risk arising in different production lines [of a brand’s supplier] should lead the brand to consider the likelihood that such matters will spill over into their production line, and thereby later becoming ‘directly linked’”. The OECD report goes on to note that, in such situations, the brand should take additional action, for example “by more carefully investigating the conditions in the production line of its products or requiring additional monitoring and transparent reporting with regard to its operations with that supplier. In such circumstances, there may also be a heightened expectation of transparency and reporting.”

If stakeholders later find that the brand is wrong and its products are directly linked to the abusive sub-supplier, then there will be a powerful argument that the brand actually contributed to those abuses by its negligence.

Purchasing practices and the race to the bottom

Global brands may also contribute to abuse deep in their supply chains or at their supplier’s supplier through harmful purchasing practices – such as pushing pricing or production timelines that do not allow for dignified work or for sufficient profits by upstream companies. In such cases, a supplier may feel pressure to make savings where it can across its business – such as by purchasing forced labour-made products from another supplier.

Fungible investment and bad business

Under international norms, finance sector actors are responsible for addressing adverse impacts at their investees or clients. Consumer brands should consider their operations may be directly linked to harm through their business relationships in a similar way. A portion of every purchase by a brand may support its supplier’s business writ large. If the supplier uses forced labour from some manufacturers, the supplier may pass on the savings to any of its buyers, meaning those buyers are benefiting from the bad business practices.

The age-old question of reputational risk

Beyond these expectations from international standards, brands risk serious reputational damage if they naively assume that the absence of a direct link between their product and a harm means they can continue business as usual with a dodgy supplier that is associated with abuse in other parts of its business.

More than ever, ethically minded consumers are voting with their feet (and wallets) to demand transparency and accountability from the brands they choose to shop with.

Ethical businesses should follow suit – and in some cases they have. In response to Transparentem’s first investigation in Bangladesh, prominent US brand Timberland took action to pressure a supplier to shut down a chronically polluting tannery supplying to its manufacturer. Timberland took action despite its insistence and provision of evidence that its products were not even produced in Bangladesh.

Call to action

We call all global brands to take action to systematically identify and address severe, endemic labour abuses in the sectors and regions to which their supply chains extend. Such action – which can involve collaboration with suppliers and advocacy with governments – will pay off by reducing serious reputational risks and preventing due diligence failures.

Authors: Karen Stauss, Director of Strategic Engagement, Transparentem; Áine Clarke, Head of KnowTheChain and Investor Strategy, Business & Human Rights Resource Centre; Lennon Ying-Da Wang, Director of Policy on Migrant Workers, Serve the People Association; Joseph Wilde-Ramsing, Advocacy Director, SOMO