This opinion piece was originally published by Thomson Reuters Foundation

As governments and investors dial up heat on modern slavery, companies must catch up

In the first weeks of 2021, governments and investors have shown just what is possible when there is a will.

After making waves last year by issuing import bans on a range of companies across sectors including two of the largest palm oil producers in the world, US Customs and Border Protection has now also banned imports from an entire region – even though that region produces a quarter of the world’s ketchup and a fifth of the world’s cotton. 

On the investor side, Blackrock, the world’s largest asset manager – which is managing US$7 trillion in assets under management, more than the GDP of any country except the US and China – voted against the directors of rubber glove maker Top Glove at its annual general meeting earlier this month, because of a lack of respect for workers’ rights.

Are companies ready? Hardly.

Looking at high risk sectors such as the food and beverage sector, KnowTheChain found that the largest global companies in the sector source on average six (and up to 16!) commodities which may be sourced using forced labour. Yet of 30 of the largest companies in the sector that report using palm oil and soy, only 10 disclose labour risks related to palm oil and only five in relation to soy.

A similar picture emerges in KnowTheChain’s forthcoming apparel and footwear benchmark: Despite the high risks in the sector, only eight of the 37 largest global companies disclose forced labour risks across supply chain tiers, including risks related to Uyghur forced labour. Our research finds that information on risks identified is particularly absent in the luxury sector – even though sector giants such as Hermès, LVMH and Prada source cashmere: a material for which China is the largest producer, with a third of production deriving from Xinjiang. Salvatore Ferragamo, an Italian luxury brand which sources high-risk materials such as cotton and cashmere, goes as far as stating that “the risk of modern slavery … is generally low in its production supply chain.” While Kering, one of the top three largest global luxury brands and owner of Alexander McQueen and Gucci, is the only company among its peers that discloses forced labour risks, it also discusses a project on organic cotton farming in Xinjiang in its reporting – yet fails to mention associated risks for farm workers.

Understanding supply chains is a crucial prerequisite for understanding risks – and a lack thereof is a major factor in why abuses go unchallenged. As such it is a key ingredient to build trust and accountability with both workers and investors. Yet the majority of companies are unable to demonstrate where they source from – with transparency decreasing in every tier of the supply chain. Only 11 of the 37 largest apparel companies disclose a list of their first-tier suppliers, only four disclose a second-tier supplier list (or at least a full list of sourcing countries), and none (!) disclose the sourcing countries of at least three raw materials at risk of being produced with forced labour (such as bamboo, cashmere, cotton, natural rubber, silk, viscose, or wool).

Albeit often limited to specific sourcing contexts, examples from companies on how to address forced labour are out there:

First of all, companies need to provide meaningful information for workers: Companies such as Nike have demonstrated for years that it is feasible to provide a supplier list that is easily accessible (i.e., downloadable and searchable) in the public domain. Others demonstrate a strong understanding of who the workers in their supply chains are. Adidas discloses the number of migrant workers at most of facilities and the number of workers at its second-tier wet process facilities, and H&M discloses which of its factories have “worker-endorsed unions” and worker representatives chosen by workers in place.

Secondly, companies need to adopt a due diligence approach that is based on workers’ needs and demands and addresses underlying conditions such as purchasing practices and a lack of worker organizing. Marks & Spencer for example engaged with a coalition of civil society organizations and trade unions, the Coalition to End Forced Labor in the Uyghur Region, and formally supports the coalition’s asks. Costco and Nestle report creating demand for responsible recruitment agencies in some of their supply chains. HP discusses the positive impact on workers of changing its purchasing practices, noting that increased lead times at a final assembly supplier led to a decrease from 12-hour to eight-hour shifts for workers.

Addressing power imbalances between workers and companies is equally vital. Unilever reports cases where it worked with suppliers to ensure workers are able to join a union and organize, and Tesco discloses participating with peers companies, unions, and others in the Malawi 2020 coalition, a collaboration which led to collective bargaining agreements and wage increases for workers. Entering into enforceable labour rights agreements such as the Fair Food Program where Walmart is a participating buyer, is essential to ensure to ensure positive outcomes for workers.

Finally, ensuring remedy across supply chain tiers and to the satisfaction of workers remains crucial. Companies such as Intel have demonstrated that ensuring remediation in lower tiers is possible.

Investors and governments have shown just what is possible where there is a will, and companies need to catch up. Doing so is a moral obligation, but also makes business sense if companies want to avoid a knock on their door from their largest investors, questioning how they treat their workers, or having their products seized by government.