Steps for Brands and Consumers for Diminishing Modern Slavery

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Steps for Consumers

Consumers need to be aware of how their personal choices can affect people across the supply chain of the products they buy. Bales suggests that consumers maintain an interest and awareness on the topic, join others that are working on it, and really begin to hold their political representatives and businesses accountable for their commitments (Bales 2005). Additionally, consumers may be investors themselves and they can begin to raise questions on how their pension funds are being allocated or how their own personal portfolios measure up to ESG standards.

Additionally, it is important for consumers in the Global North to begin to overcome the idea that MS is a problem that afflicts only places that are in the Global South, “developing nations” or overall “far away”. There are instances of MS much closer to the UK, US, or European countries than what many consumers believe. For example, a November 2019 police investigation in Italy uncovered cases of MS in Naples where migrants were allegedly producing luxury goods or migrant smuggling in the UK was brought to the public attention after 39 Vietnamese workers died in the back of a truck (Reuters 2019; Thomson Reuters Foundation 2019). Additionally, we must seek to generate awareness that MS is not something that affects only specific commodities such as cotton. Rather, global supply chains that include raw materials such as cobalt or gold, as is the case for electronics, can also include instances of forced labor. Other materials and processes that are hidden components of everyday products can also include MS and are not as high-profile as other instances (International Labor Organization 2018).

Steps for Brands

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As we have seen, private actors are now expected to respond to MS risks. There is no magical catch all solution that will be a “quick fix” to the problem of this magnitude. Instead, incremental and intentional steps must be taken. The following section summarizes some relevant recommendations on this subject.

Governance and reporting

Brands have responded to investor pressures and a changing regulatory environment by increasing their reporting efforts. Although uniform and consolidated reporting metrics have not yet taken hold, these efforts need to continue to grow. From the business perspective, this is relevant because it is part of the overall risk mitigation strategy. After all, ESG issues are risks: climate change, water scarcity, or human rights abuses affect business performance and long-term value. These risks include supply chain disruptions, reputational, regulatory, litigation, transition, or human capital/talent retention.

The CEO of the World Wildlife Fund has suggested that one element that will catalyze this is a change in board level governance that will allow firms to hold management accountable. This can be done by creating sustainability committees within the board or naming key sustainability experts as board members (Roberts 2019). Other analysts from Ceres have developed pointed recommendations for boards: 1) include ESG risks and time frames as part of board conversations, 2) evaluate processes to identify ESG risks, 3) identify what peers are doing to address ESG risks, 4) increase awareness on assumptions or blind spots in the ESG identification process, and 5) integrate ESG risks into the Enterprise Risk Management Process. Additionally, the board needs to participate in prioritizing risks identified through a materiality lens and make strategic decisions to mitigate or adapt to them. Finally, boards need to disclose their role in assessing ESG factors in their financial findings (Ramani, Saltman, and on 2019).

Furthermore, executive compensation can be tied to achieving sustainability targets (Koors 2019). As of 2017, only 2% of S&P 500 companies linked compensation to environmental metrics (Burchman and Sullivan 2017). From an employee standpoint, sustainability professionals need to start having a place at the executive level to exercise influence in the decision making process. Organizationally, companies need to clarify where the sustainability leadership role sits and who it reports too. Currently, there are no consistent structures (Kreeger and Yorzyk 2019).

Exercising leverage

Leverage is a key concept for understanding the role that private businesses play in addressing MS and human rights risks more generally speaking. In fact, it is included in UNGP 19 and is defined as “where the company has the ability to effect change in the wrongful practice of the entity that causes harm” (Shift 2013b; United Nations Office of the High Commissioner 2011). As identified by Shift, companies can exercise leverage over upstream suppliers, horizontal business partners, and downstream users and customers. This can be done via contracts, bidding criteria, and legal incentives; promoting industry or international standards for common requirements for suppliers; or engaging with civil society organizations or governments (Shift 2013b). Another way in which leverage can be exercised is by rewarding suppliers that consistently meet or exceed brand expectations. For example, PVH has established a tier system in which suppliers that meet certain conditions have a re-evaluation assessment cycle of 36 months instead of the more frequent audit visits that are in place for other suppliers (PVH 2019).

That being said, other authors highlight the importance of framing the supplier/buyer relationship as a partnership in which best practices are openly shared, transparency is promoted, and a communications calendar is established to ensure expectations are being met (Taylor 2017). It is important to note that behind many private brands there is a group of investors which can also exercise leverage on the brand which can trickle down to suppliers and workers.

Risk assessment

As organizations develop more robust policies and practices to minimize and address modern slavery, it is important to begin by assessing risks involved. Note that the risk assessment needs to be done from the perspective of all stakeholders. Therefore, organizations need to take into account risks that go beyond affecting solely their business proposition or value (Shift 2012). The following steps have been identified for a comprehensive risk evaluation: first evaluate the risk in the country of operations itself (conflict affected regions, low state capacity for enforcement), then evaluate the worker type that will be engaged (migrant, refugee, low-skilled, women, seasonal), finally evaluate the partners you will be working with (previous allegations of abuse, management systems, transparency level, subcontracting (Ethical Trading Initiative and Ergon 2018).

Additionally, brands can take preventive steps when choosing suppliers to identify potential issues that may arise. For example, the Thomson Reuters Foundation encourages brands to verify the legal standing of the supplier, search for adverse media coverage, review regulatory, litigation, and bankruptcy databases; conduct a reputational review with relevant stakeholders, and screen against international sanctions and watchlists before signing contracts with any given supplier (Thomson Reuters 2016).

Supply chain mapping

Mapping a supply chain requires participation and buy-in across different organizational teams. Taking into account the level of data collection required, it is important to prioritize mapping of high risk products or sectors (Shift 2012). Given their crucial role in managing relationships with suppliers, it is essential that buyers are aware of the risks of modern slavery in their scope of work and are actively engaged with suppliers in implementing relevant policies. Once mapping of the first tier of the supply chain has been completed, the company can proceed to cascade down the information requests into their second tier of suppliers (Ethical Trading Initiative and Ergon 2018). A 2019 study by Deloitte found that 65% of Chief Procurement Officers (CPO) admit to having limited or no visibility beyond their first tier (Deloitte 2019).

Training and internal alignment

It is important that actors from procurement departments and across the supply chain are aware of the indicators of high risk for modern slavery. According to SupplyShift’s white paper on MS, some of the common indicators are (SupplyShift 2019):

1. Restriction of freedom of movement (personal document retention, intimidation, inability to leave facility)
2. Suspicious terms of payment: recruitment fees paid by the worker, payments to accounts that don’t belong to the worker, lack of contracts, contracts in different language
3. Unusual production statistics: anomalies in record keeping/bookkeeping, unusually high production rates for low levels of working hours
4. Anomalous behavior during worker interviews: nervous behavior, avoidance of eye contact, malnourishment

It is through training and recurring awareness workshops that the organization can achieve high levels of alignment through which entire teams know their roles and responsibilities for addressing human rights violations (Shift 2012). For example, frequent last minute changes to orders without adjusting delivery times or costs are part of the adverse purchasing practices that can contribute to human rights violations.

Risk mitigation

Private brands are well suited to exercise leverage among their suppliers to mitigate the risk of modern slavery. They can do so in different key moments of the relationship, including the contractual negotiation, via conditional funds disbursement, board representation, and capacity-building efforts (Ethical Trading Initiative and Ergon 2018). Thankfully, there is now robust research on best practices for managing the relationship between buyers and suppliers around modern slavery mitigation. To begin with, mitigation requirements must be specific instead of abstract; investors can also place contractual controls on specific due diligence requirements and mandatory reporting. Additionally, grievance mechanisms are paramount and can be set as requirements for investment or credit. From an internal standpoint, buyers need to understand the impact that short-term changes to orders have on the production lines and on the workers themselves. In other words, buying teams need to play their part in ensuring that they do not set up risky conditions for modern slavery to flourish with short term significant order changes. Furthermore, the establishment of long-term relationships allows suppliers to trust that they will continue to have a buyer as they invest in the capacity building efforts that mitigation plans often entail. This may require inter-brand coordination as often suppliers serve multiple clients.

Grievance mechanisms

Common forms of grievance mechanisms include whistleblowing hotlines, complaints processes, trade union procedures, among others. The challenge of relying on grievance mechanisms is that they may not be accessed by the most vulnerable population groups among the workers.

Remediation

The key goal of remediation is to provide remedy for harm (Ethical Trading Initiative and Ergon 2018). Contemporary remediation places the victim at its center and is focused on addressing the root causes of the harm and prevention of recurrence. The UNGP describes three main remediation routes: state-supported judicial mechanisms, non-judicial state mechanisms, and non-state mechanisms (including trade unions, NGOs, and businesses) (United Nations Office of the High Commissioner 2011). When a case of MS takes place, it is the responsibility of investors and companies to provide protection to workers and give effective remediation. Under some interpretations, the involvement of the investor or company in the case of modern slavery determines the depth of their role in remediation: a direct contribution requires direct engagement in the remediation effort vs. a mere linkage to a case may require only monitoring the remediation by the investor or company (Ethical Trading Initiative and Ergon 2018).

Remediation must include the identification of the party responsible and a response that is clearly pre-defined in internal processes and is provided within an adequate time frame. The response needs to ensure victims are protected and provide restitution, compensation, or rehabilitation as appropriate. Remediation can include, but is not limited to, corrective internal actions, referrals to local authorities, or referrals to external organizations (Ethical Trading Initiative and Ergon 2018). The third option is especially recommended when local judicial action is neither enforced nor timely.

Transforming corporate accountability

Although compliance with current legal standards should be the minimum that private actors do, this is not always the case. For example, regarding the UK’s Modern Slavery Act, an optimistic count from Transparency in the Supply Chain found that by November of 2019, 78% of the companies required to disclose their statements are currently doing so (Thomson Reuters Foundation and Guilbert 2019).

Some overall best practices when considering how to implement corporate accountability mechanisms are:

• Binding commitments with suppliers that are enforceable; brands can start by publicly stating their due diligence policy (Clean Clothes Campaign 2019; International Labor Rights Forum 2019a)
• Worker representation in the design and implementation of human rights policies has been recognized to be an important step forward in the sustainability landscape (C&A Foundation, Future Impacts, and 4CF 2019)
• Transparency in supplier relationships: in order to build trusting relationships with suppliers, it is important that brands streamline data collection and avoid duplicate or repetitive survey requests or audit visits (SupplyShift n.d.) .
• Addressing purchasing practices and collaborating with other key players facilitates driving best practices forward and collaboration (C&A Foundation, Future Impacts, and 4CF 2019). This also means that suppliers should be included as part of MS working groups (Taylor 2017).
• Sharing information to leverage the network of brands of suppliers and their ways of addressing common challenges (SupplyShift 2019). An example of this line of work is that of the Mekong Club.

For example, since at least 2013, Shift has been advocating for transforming social audits and the broader compliance realm in the following ways: 1) moving from pass/fail compliance to continuous improvement programs, 2) replacing audits with assessments and root cause analysis, 3) promoting active use of grievance mechanisms, 4) integrating capacity building efforts with suppliers, 5) establishing partnerships between brands and civil society, 6) providing incentives for improvement in social performance, 7) aligning purchasing practices with social commitments (Shift 2013a).

Under this new vision, root cause analysis should include if/how the pricing or purchasing practices contributed to violations. From a practical standpoint, off-site worker interviews should be conducted and all audit reports should be published in local languages and made available to workers and unions, including the corrective action plans (Clean Clothes Campaign 2019; Miedema 2019). Specifically for social compliance initiatives and auditing firms, a 2019 analysis recommends that 1) all audit reports and corrective action plans be shared with national labor inspection agencies and labor unions and 2) high level training and expertise is developed among the auditing team (Clean Clothes Campaign 2019). A more ambitious recommendation is including factory workers are third-party beneficiaries that can claim damages if necessary (Clean Clothes Campaign 2019). This is part of the broader move towards expanding liability to auditing firms that was discussed earlier.

References:

Bales, Kevin. 2005. “CODA: Three Steps to Stopping Slavery (And Four Things You Can Do Right Away).” In Understanding Global Slavery, A Reader, University of California Press, 172–74. https://www.jstor.org/stable/10.1525/j.ctt1pnpdg.13 (June 20, 2019).

Burchman, Seymour, and Barry Sullivan. 2017. “It’s Time to Tie Executive Compensation to Sustainability.” Harvard Business Review. https://hbr.org/2017/08/its-time-to-tie-executive-compensation-to-sustainability (November 25, 2019).

Clean Clothes Campaign. 2019. “Fig Leaf for Fashion. How Social Auditing Protects Brands and Fails Workers.” Clean Clothes Campaign. https://cleanclothes.org/file-repository/figleaf-for-fashion.pdf/view (September 23, 2019).

Deloitte. 2019. “2019 Global CPO Survey.” Deloitte United States. https://www2.deloitte.com/us/en/insights/topics/operations/chief-procurement-officer-cpo-survey.html (November 13, 2019).

Ethical Trading Initiative, and Ergon. 2018. Managing Risks Associated with Modern Slavery A Good Practice Note for the Private Sector. https://www.ifc.org/wps/wcm/connect/485fd322-d01a-474a-b447-3ed9c40c4f88/Global+Practice+Note_Managing+Risks+Associated+With+Modern+Slavery_Draft+For+Consultation_14.08.2018.pdf?MOD=AJPERES (June 20, 2019).

International Labor Organization. 2018. Ending Forced Labour by 2030: A Review of Policies and Programmes. Geneva. https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---ipec/documents/publication/wcms_653986.pdf (November 3, 2019).

Koors, Janice. 2019. “Executive Compensation and ESG.” Harvard Law School Forum on Corporate Governance and Financial Regulation. https://corpgov.law.harvard.edu/2019/09/10/executive-compensation-and-esg/ (November 25, 2019).

Kreeger, Daniel, and Jeff Yorzyk. 2019. “Why Climate and Sustainability Professionals Need to Take the next Step in Our Evolution.” GreenBiz. https://www.greenbiz.com/article/why-climate-and-sustainability-professionals-need-take-next-step-our-evolution (November 25, 2019).

Miedema, Christie. 2019. “Failing Workers by Design: The Fatal Assurances of the Social Auditing Industry.” Business & Human Rights Resource Centre. https://www.business-humanrights.org/en/failing-workers-by-design-the-fatal-assurances-of-the-social-auditing-industry?mc_cid=462f5deb35&mc_eid=602b1a6b2f (November 20, 2019).

PVH. 2019. “Corporate Responsibility Supply Chain Guidelines.” https://responsibility.pvh.com/wp-content/uploads/2019/07/pvh-cr-supplier-guidelines.pdf (November 27, 2019).

Ramani, Veena, Hannah Saltman, and on. 2019. “Running the Risks: How Corporate Boards Can Oversee Environmental, Social And Governance Issues.” https://corpgov.law.harvard.edu/2019/11/25/running-the-risks-how-corporate-boards-can-oversee-environmental-social-and-governance-issues/ (November 25, 2019).

Reuters. 2019. “UK Police Charge Man with Human Trafficking Offenses in Vietnamese Truck Deaths Inquiry.” Reuters. https://www.reuters.com/article/us-britain-bodies-charges-idUSKBN1XY09C (November 25, 2019).

Roberts, Carter. 2019. “Next-Generation Corporate Sustainability Leadership: New Lines of Accountability.” GreenBiz. https://www.greenbiz.com/article/next-generation-corporate-sustainability-leadership-new-lines-accountability (November 25, 2019).

Shift. 2012. “Respecting Human Rights Through Global Supply Chains.” https://www.shiftproject.org/resources/publications/respecting-human-rights-global-supply-chains/ (September 30, 2019).

— — — . 2013a. “From Audit to Innovation: Advancing Human Rights in Global Supply Chains.” https://www.shiftproject.org/resources/publications/audit-to-innovation-advancing-human-rights-global-supply-chains/ (November 13, 2019).

— — — . 2013b. “Using Leverage in Business Relationships to Reduce Human Rights Risks.” https://www.shiftproject.org/resources/publications/leverage-business-relationships-reduce-human-rights-risk/ (September 30, 2019).

SupplyShift. 2019. “Modern Slavery in Supply Chains White Paper.” https://get.supplyshift.net/modern-slavery-in-supply-chains (June 20, 2019).

Taylor, David. 2017. 11 Tactics for Engaging Suppliers with Your Tackling Modern Slavery Strategy. London: S4RB. http://www.s4rb.com/wp-content/uploads/2017/09/Whitepaper-11-tactics-for-engaging-suppliers-with-your-Tackling-Modern-Slavery-strategy.pdf (June 20, 2019).

Thomson Reuters. 2016. How Can You Eliminate Modern Slavery in Complex Supply Chains? https://www.thomsonreuters.com/content/dam/ewp-m/documents/thomsonreuters/en/pdf/reports/modern-slavery-report.pdf (June 20, 2019).

Thomson Reuters Foundation. 2019. “Italian Police Uncover Naples Sweatshop Linked to Luxury Groups.” news.trust.org. http://news.trust.org/item/20191119091035-cbk9a/ (November 25, 2019).

United Nations Office of the High Commissioner. 2011. “Guiding Principles on Business and Human Rights.” https://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf (October 2, 2019).