KnowTheChain: Ranking of 20 apparel and footwear companies on efforts to address forced labour in the supply chain

Forced labor risk: KnowTheChain apparel and footwear benchmark finds need for worker engagement

Findings report          Company ranking          Disclosure pages

KnowTheChain, which ranked the 20 of the largest global apparel & footwear companies on the steps they are taking to combat forced labor in their supply chain, finds most companies have systems in place to monitor and react to forced labor and human trafficking, but few address systemic causes.

The four highest performing companies (Adidas, Gap, H&M and Lululemon) achieve scores above 60/100. Among the lowest performing companies are Hong Kong-based Belle International Holdings (0/100), Chinese clothing manufacturer Shenzhou International Group Holdings (1/100), and the luxury Italian fashion house, Prada (9/100). Across seven measurement areas, the average company score is 46 out of a possible 100. Overall, luxury brands including Hugo Boss, Kering (holding company of Alexander McQueen, Gucci, Stella McCartney and others) and Ralph Lauren score much lower than high street apparel retailers (such as H&M, Inditex or Primark), with none achieving an above average score.

Worker voice (29/100) is one of the lowest scoring themes of the benchmark. Only four companies proactively communicate the existence of a grievance mechanism to their suppliers' workers, and only five companies engage workers outside of the context of their workplace in a manner that may give more voice to workers. Engagement with supply chain workers is an area where the industry needs to significantly improve, not least as engagement with workers can help identify, resolve, and prevent labor abuses in the supply chain that traditional monitoring systems do not catch.

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Article
22 February 2017

Are Investors Taking Action to Eradicate Forced Labor and Human Trafficking from Their Portfolios?

Author: Felicitas Weber, KnowTheChain Project Lead, Business & Human Rights Resource Centre

With investigative journalism and legislation on forced labor and human trafficking on the rise, forced labor risks can translate into concrete negative impacts for investors, both reputational and financial. [....] Are investors addressing these risks?

Here is what companies think: In 2016, the Ethical Trading Initiative (ETI) surveyed over 70 of its corporate members and found that investor interest has significantly increased [...]

Labor rights are high on the agenda of mainstream investors: In 2016, over 1,000 PRI signatory investors reported publicly on their responsible investment efforts.(6) When asked to provide examples of engagements with investee companies, labor rights [...] were the most commonly cited topic for engagement, ahead of other ESG issues including climate change. [...]

Are investors also looking at forced labor risks more specifically? Out of those PRI signatories whom voluntarily report information on engagement examples (57% of those investors that are invested in listed equity), 12.5% reported engaging on forced labor or modern slavery. This included investors from all over the world, including Australia, Europe, Latin America, and North America. Notably, over 30% of investors engaging on the topic are from the UK, the only country which has a national disclosure legislation specific to modern slavery. [...]

Investors should strengthen and disclose their efforts to safeguard their investments and ensure forced labor related concerns are heard by companies: [...] Given over 60% of companies in the MSCI ACWI Index (an index which covers approximately 85% of the global investable equity universe) will be subject to the UK Modern Slavery Act, the California Transparency in Supply Chains Act, or the proposed US Business Supply Chain Transparency on Trafficking and Slavery Act,(8) forced labor should be high on the investor agenda.

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Article
19 December 2016

Hong Kong lags behind in the battle against modern-day slavery

Author: Lowell Chow, Business & Human Rights Resource Centre (on South China Morning Post)

"Hong Kong lags behind in the battle against modern-day slavery", 16 Dec 2016

Walk Free Foundation’s data for 2016 shows 45 million people are victims of modern slavery, which closely relates to almost every aspect of our daily lives…Yet, a new benchmark by KnowTheChain found that, in the global garments industry, action to tackle the scourge is lacking…

Some of the incentives for companies to act is coming from government legislation. In the US, California enacted the Transparency in Supply Chains Act in 2010…UK last year passed its Modern Slavery Act…These laws have played an important role in pushing businesses to at least start looking into the issue…

For its part, the Hong Kong government should consider broadening its current narrow approach to tackling forced labour – focused on trafficking for prostitution – to also encourage companies to prevent exploitation through their supply chains. A strong response from business involves assessing risks to the lowest level of the supply chain, starting with commodities. Cotton and leather are both among the goods produced by forced labour in China, the world’s largest cotton producer and exporter, for example. Moving up the chain, forced labour is also prevalent in the manufacturing stages…

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Article
12 December 2016

Investor calls on peers to hold portfolio companies in the food sector accountable for forced labour

Author: Huffington Post (Boston Common Asset Management)

"Investors Must Hold Food Companies Accountable for Forced Labor in their Supply Chains", 17 November 2016

Lauren Compere, Director of Shareholder Engagement, Boston Common Asset Management explains forced labor risks in the food industry for investors, action taken by investors to date, and calls on peers to ramp up action:

"Last fall I had the unique opportunity to visit with the Fair Food Program to learn and see first-hand what conditions have been like for some trafficked tomato pickers and the incredible improvement in their lives catalyzed by the Fair Food Program [...] 

KnowTheChain’s food & beverage benchmark show that more action is needed particularly in areas such as responsible recruitment and purchasing practices [...]

What are investors doing? Since child labor was discovered in the cocoa fields of Africa in the late 1990s and in cotton fields of Uzbekistan starting in 2007, investors have engaged companies on supply chain traceability and transparency related to these human rights risks. [...] Through a public investor statement, a global coalition of over 80 investors with close to $5 trillion in assets under management is supporting a framework for corporate disclosure on human rights based on the UN Guiding Principles for Business and Human Rights (UNGPs). 

There has also been concerted effort to specifically engage on forced labor in the agricultural sector. From 2013-2015 the Principles for Responsible Investment (PRI) have coordinated a collaborative investor-company engagement on labor conditions in the agricultural supply chain. This resulted in improved practices at 23 out of the 34 companies engaged over that period, including a number of large US food & beverage companies. Under the leadership of an advisory committee of global investors (Bâtirente, Boston Common, Hermes, PGGM, and Robeco) the second phase of this project will focus on improving traceability in sourcing and enhancing supplier relationships, and is supported by an investor statement which outlines expectations on company policy, practices. The Interfaith Center on Corporate Responsibility (ICCR) has also achieved success through their “No Fees” Campaign engaging 12 companies sourcing palm oil or seafood to create robust management systems which will ensure that workers in their immediate and extended supply chains are not forced to pay for employment. Their plan is to expand this engagement to over 50 companies.

As we celebrate the five-year anniversary of the UN Guiding Principles for Business and Human Rights (UNGPs), which define a global standard for preventing and addressing the risk of negative human rights impacts by business activity, we need to move beyond principles to practice. To ensure this happens, benchmarks such as KnowTheChain can help put a spotlight on forced labor, make a clear comparison to peer companies, and help identify gaps as well as recognize and put a light on leading practices."

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Article
14 November 2016

Migrant workers in agricultural supply chains: Companies must act on recruitment, worker voice and traceability

Author: Annabel Short, Deputy Director, Business & Human Rights Resource Centre

foodbeverageoverallcompanyranking

...Within the U.S., for example, over 70 percent of farm workers are immigrants.  In this context, and amid rising anti-immigration-rhetoric, food companies need to acknowledge the large numbers of migrant workers in their supply chains – both on farms and in food-processing – and the specific vulnerabilities they face.  This includes racism and discrimination, but also hazardous working conditions, and at the worst extreme, situations of modern-day slavery.  The Coalition of Immokalee Workers has estimated that in the U.S. alone, around five percent at any given time are subject to forced labor: numbers in other countries can be much higher still.

A new benchmark by KnowTheChain of the world’s 20 largest food companies has found that while they are aware of the risks of forced labor through their supply chains, only a handful are taking action to address it.  Three areas in which food companies need to step up their game are recruitment, tracing their supply chains to the level of commodities, and worker voice...

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Item
28 October 2016

Investors welcome benchmark study of forced labor risks in food and beverage sector

Author: Interfaith Center for Corporate Responsibility

17 October 2016

Members of the Interfaith Center on Corporate Responsibility and investors who are actively engaging food and beverage companies on human rights concerns, welcomed today’s release of a benchmark report on corporate efforts to eradicate forced labor risks by Know The Chain.

The study ranks the top 20 global food and beverage companies on their efforts to address potential forced labor risks in their supply chains. Given that the agricultural sector is known to be one of the most at-risk for human rights and forced labor abuses, primarily due to its reliance on migrant labor, a ranking of performance on these measures for the most influential corporations in the sector is a critical first step to ensure progress is made on the issue...

Said Valentina Gurney, ICCR Associate Program Director, “ICCR members are currently engaging over 50 companies on forced labor risks via unethical recruitment including 12 of the 20 benchmarked in this report. With the U.S. being the largest corridor of migration in the world, American companies are definitely not immune to these risks, yet very few companies have forward-facing policies and internal protocols to address them...

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Article
17 October 2016

KnowTheChain: Ranking of 20 food & beverage companies on efforts to address forced labour in the supply chain

 

Forced labor risk: KnowTheChain benchmark finds major food and beverage brands’ response inadequate

Findings report          Company ranking          Press release

KnowTheChain, which ranked the 20 largest global food and beverage companies on the steps they are taking to combat forced labor in their supply chain, finds major food and beverage companies are not taking sufficient action despite acute risks

Across seven measurement areas, the average company score is 30 out of a possible 100, with a significant disparity between a few leading brands and the rest. Unilever (scoring 65/100), Coca-Cola (58) and Nestlé (57) score highest. All other companies score under 50 points, and four companies (Fomento Economico Mexicano, Kraft Heinz, Monster Beverage, and Tyson Foods) score under 15 points.

Some findings are encouraging. Seventeen of the 20 companies have processes in place to trace some aspects of their supply chains, however no company has achieved full traceability. Also promising is that 15 of the companies integrate labor standards (including a prohibition on forced labor) into their supplier contracts; however few complement this with purchasing practices that support suppliers that have strong labor practices such as offering long-term contracts.

Report
19 September 2016

KnowTheChain ICT Company Action Guide

Author: KnowTheChain

Following the release of KnowTheChain's Information and Communications Technology (ICT) benchmark, KnowTheChains has published an ICT Company Action Guide on Addressing Supply Chain Forced Labor.

The company action guide is broken out into the seven themes by which companies where benchmarked: commitment and governance; traceability and risk assessment; purchasing practices; recruitment; worker voice; monitoring; and remedy. It gives a summary of practices that can be implemented and provides resources for companies to engage deeper into each specific theme.

The intended goal of this company action guide is to meaningfully advance the efforts of not only the companies benchmarked in our report, but of the ICT sector as a whole. The company action guide is best reviewed alongside KnowTheChain’s ICT benchmark report.

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Item
29 August 2016

We’ve asked, many responded: How engaged are technology, food, and apparel companies on forced labor?

Blog published originally on KnowTheChain on 29 August 2016 by Felicitas Weber, KnowTheChain Project Lead.

To drive awareness and continued corporate action on the issue of forced labor in supply chains, this year KnowTheChain is benchmarking a total of 60 global companies from the information and communications technology (ICT), food & beverage, and apparel & footwear sectors on their efforts to address forced labor in their supply chains.

Ahead of analyzing the companies’  disclosed policies and practices, we reached out to all 60 companies and invited them to update their websites, or to respond publicly to a set of engagement questions related to the benchmark indicators. (Company responses to these questions are published on www.business-humanrights.org).

KnowTheChain selected these sectors based on their high-risk of exposure to forced labor. Each of these sectors has been identified by the U.S. Department of Labor for sourcing goods using forced labor and Verité’s Forced Labor Commodity Atlas identified forced labor in commodities in the supply chains of all three sectors.

So, are companies in these three sectors aware of their exposure to this issue and are they actively addressing it?

The level of responsiveness gives a good indication of the extent to which the sectors are engaged on the issue and recognize the need for transparency.

LEVEL OF ENGAGEMENT* APPAREL & FOOTWEAR ICT FOOD & BEVERAGE
High engagement 80% 55% 45%
Low engagement 10% 10% 30%
Awareness 10% 5% 15%
No engagement 0% 30% 10%

 *High engagement = company sent response to questions.  Low engagement = company sent link to disclosure.  Awareness = interaction between KnowTheChain and the company. No engagement = company did not acknowledge KnowTheChain’s outreach.

The apparel & footwear sector was the most responsive, followed by the ICT sector, with the food & beverage sector showing lower levels of engagement.

Most notably, because the Business & Human Rights Research Centre’s regional researchers were able to follow up with companies in their local language, we managed to have at least an email exchange or phone conversation with all 20 apparel and footwear companies – and 80% of those disclosed additional information through our engagement questions.  On the other hand, even though we managed to get in contact with most food & beverage companies, only 45% of them provided a response to our questions.

These results are not surprising. They are reflective of the level of media attention and civil society pressure companies in each of the sectors have received, as well as of the role and leadership – and lack thereof – we have seen from industry associations and individual companies over the past decades.

Revelations about sweatshop conditions and child labor have put the spotlight on labor issues in apparel supply chains since the 1990s, and pressure has continued with recent incidents such as the Rana Plaza factory collapsein Bangladesh. A number of organizations are since working with companies to address working conditions in their supply chains: From initiatives founded in the late 1990s following sweatshop scandals, such as the Ethical Trading Initiative and the Fair Labor Association, to more recent initiatives working exclusively with apparel companies, such as the ILO’s Better Work Programme and the Sustainable Apparel Coalition. While the garment industry is far along in terms of industry initiatives, this does not mean it is close to ensuring a forced labor-free supply chain: further work is needed for example at the level of spinning and weaving mills, and in purchasing practices by brands that can trigger “undeclared” subcontracting to factories where oversight is non-existent and forced labor risks are therefore much higher.

Attention to labor abuses in the ICT supply chain started much later. Most notably highlighted in the press were thesuicides of Foxconn workers linked to working conditions in 2010. Following a more recent report from Verité into forced labor in the manufacturing of electronic goods in Malaysia, in 2015 the Electronic Citizenship Industry Coalition (EICC) updated the code of conduct for more than 100 member companies. The code now includes a ban of recruitment fees for workers, including supply chain workers, and a requirement to pay back any such fees.

The food and beverage industry, on the other hand, had traditionally not received as much pressure from civil society or the media on labor issues in its supply chain until Oxfam launched the “Behind the Brands” Campaign in 2013. This was followed soon after by media coverage of forced labor in the Thai fishing industry. Subsequently, in December 2015, Australian retailers signed a pledge to address forced labor in their supply chain, and in January 2016 the Consumer Goods Forum published a resolution to develop an action plan to eradicate forced labor through collaboration between retailers and manufacturers.

In June 2016, leading companies across several sectors came together to form the Leadership Group for Responsible Recruitment, with a committing to ensure that recruitment fees are paid by the employer, not the worker.  This initiative has representatives from both the ICT and the food sector – and while the apparel industry has done well in improving management of labor issues in the supply chain more broadly, including working on enabling factors such as living wages through collaborations with trade unions such as ACT (Action, Collaboration, Transformation), leadership to address forced labor specifically is somewhat absent.

Where does this leave us?

A look across three sectors with high-risk of forced labor shows that company action is too often a reaction to the media uncovering poor labor conditions, rather than a proactive analysis and mitigation of risks. Companies in all sectors need to be alert to risks and respond to them, particularly at the lowest levels of the supply chain in the production of commodities and extraction of raw materials where forced labor can be more widespread. That said, it is encouraging that all three sectors are moving in the right direction. The number of companies that did not engage with KnowTheChain was low across geographies, with North American companies being the most unresponsive companies (16%), followed by Asian companies (15%).

Benchmarks such as KnowTheChain’s can help accelerate this movement, by recognizing the leadership of companies pressing ahead, and identifying gaps and opportunities for improvement for those lagging behind. As such, benchmarks can be a tool for companies themselves, their industry associations and third party stakeholders such as investors and civil society to drive faster progress in eradicating forced labor from global supply chains.

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Article
27 July 2016

Blog: Decision-making in a Context of Uncertainty – Why Investors Should Look at Forced Labor in Their Portfolios

Author: Felicitas Weber, KnowTheChain Project Lead, Business & Human Rights Resource Centre

Blog published originally in Cornerstone Capital Group's Journal for Sustainable Finance & Banking on 27 July 2016 by Felicitas Weber, KnowTheChain Project Lead, Business & Human Rights Resource Centre.

Forced labor is a risk that can affect shareholders drastically, in light of increasing regulation, litigation, media and consumer attention.  Take the case of Signal International, a US marine-services company, which went bankrupt following compensation payments to victims of forced labor –leading to a US$70 million loss for two Alabama public pension funds that held shares in the company.[1]

Reputational risks of forced labor are particularly high in the supply chains of consumer-facing companies.  In Malaysia, for example, nearly a quarter of workers employed in the production of electronic goods are working under conditions of forced labor[2].  Non consumer-facing companies may still come under scrutiny as business partners of consumer-facing companies.  In May this year, US Customs and Border Protection seized imports from PureCircle, a Malaysia-based supplier of sweeteners to companies such as Coca Cola, under a new law banning imports of products produced with forced labor.  News of the seizure reduced PureCircle’s market value by almost US$100 million, and forced Coca Cola to respond to the issue.[3]

The US Customs legislation is just the latest in a growing number of regulations on this issue.  As many as 62% of companies in the MSCI ACWI Index will be subject to the UK Modern Slavery Act, the California Transparency in Supply Chains Act, or the proposed Business Supply Chain Transparency on Trafficking and Slavery Act in the US.[4]...

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Article
27 June 2016

Bennett Freeman: Investors should pay attention to how ICT firms manage forced labour in supply chains

Author: Bennett Freeman is Former Senior VP, Sustainability Research and Policy at Calvert Investments and former U.S. Deputy Assistant Secretary of State for Democracy, Human Rights and Labor, in Responsible Investor

Technology has brought great advances to humanity, and drawn the world closer together. Not least it allows you to read this article on a laptop at work, on a mobile phone on the road, or on a tablet at home. Yet many of the same products that enable you to access just about any information within seconds have—unknown to many users, companies and especially investors—been produced by forced labour. For example, a 2014 Verité study found that nearly a third of workers employed in the production of electronic goods in Malaysia can be considered to be working as forced labour.

The first sector-specific KnowTheChain benchmark provides an unprecedented view of how companies in the ICT sector are addressing the scourge of forced labour. It assesses the publically disclosed efforts of 20 global ICT companies to address those risks in their supply chains. The findings send an important and urgent message: with an average score of 39 out of 100, these companies must do more to address forced labour.

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