ESG & Supply Chain Modern Slavery – Time to Act

According to UN estimates, 25 million people worldwide live in conditions of Modern Slavery. Of these, 16 million work in some of the worst forms of forced labour, including agriculture, domestic servitude, construction, and sex work. One in four slaves is a child, according to global estimations.

While shocking, the issue has only recently gained global notoriety and importance, as revelations about the plight of the Uyghurs in the Xinjiang Autonomous Region have been headlined. On this, the Coalition to End Forced Labor in the Uyghur Regionreported that “virtually the entire apparel and footwear industry” is complicit in forced Uyghur labor.

This was echoed by a report published by the Australian Strategic Policy Institute (ASPI), stating that there are strong indications that some 80,000 Uyghurs have been forced to work in factories that form part of the supply chains of numerous global brands.

However, it is not just endemic in the apparel industry, nor is it only happening in China.

At ethiXbase, we believe that, within the consumer sector, the industries with the highest levels of exposure to Modern Slavery are food producers, retailers, apparel, tobacco, and consumer electronics firms. Other high-risk goods include rice, spices tea, coffee and cotton – under which the apparel industry falls. In these industries, a key driver to vulnerability is outsourcing, which involves multi-tiered and usually opaque supply chains. These are the conditions particularly susceptible to exploitation.

Examples of supply chain fragility have been found in several high-profile cases in the Thai fishing industry. Here, slave labor was used on fishing boats producing fishmeal, which was then used to catch shrimp. In this case, slavery was discovered far down the value chain, yet still caused disruption to US retailers who procured the shrimp.

A similar incident occurred in 2015; newspaper reports in the UK detailed human trafficking within the Thai shrimp industry, this time focused on shrimp peelers whose produce ultimately ended up on the market in the US, Europe, and Asia.

While these two incidents initially occurred in Thai waters, it’s clear the affect of modern day slavery has far-reaching impact much closer to home.

As recently as 2020, Manchester-based fast-fashion retailer BooHoo was found to have workers within its UK supply chain paid well below minimum wage, and in COVID unsafe environments. BooHoo claimed that an indirect supplier was responsible and launched a costly internal review to eradicate supply chain malpractice, but not before a social media led backlash wiped US$1.89bn of market value over two days.

Co-Founder of ethiXbase, Mike Short, provided clarity on these incidents, stating that: “the issue of modern slavery is of global concern and is not focused on any single country. Companies in the West are certainly not immune from such risks.

“Highly complex ‘just in time’ supply chains coupled with the quest for ever more cost-effective sourcing, sometimes mask forced labor and the human misery this entails.  Brands associated (however tenuously) with forced labor will face acute reputational damage and a resultant loss in value.  This is leading to the adoption of enhanced ESG compliance measures within their supply chains.

“In effect, this means that companies need to fully understand who is producing their goods, communicate their expectations for a free and fair work-place and ultimately engage with their suppliers to elevate standards of ESG across the entire supply chain.”

Forced Labour and Modern Slavery are now huge issues in ESG compliance as many governments legislate to prevent this abhorrent practice, leading to modern slavery legislation on a global scale.

The UK was a leading and somewhat early adopter of such legislation, enacting The Modern Slavery Act in 2015 and, more recently, launching their very own Modern Slavery Statement Registry. The act stipulates that companies providing goods and services with a turnover of £36m or more are obliged to publish an annual Slavery and Human Trafficking Statement detailing the measures taken to ensure slavery and human trafficking does not persist within internally or within their supply chain.

The US and Canada are also developing legislative frameworks to combat forced labor. Although, the US currently lacks national legislation, the 2010 California Transparency in Supply Chains Act, requires companies of a certain size operating in California to detail efforts to eradicate slavery and human trafficking from their direct product supply chains.

Canada is working towards legislation, having proposed a Modern Slavery Act which is currently before the senate. Under this act, any Canadian business with (among other stipulations) C$40m in revenue is required to annually report on anti-modern slavery policies, procedures, training, and risk management.

Such proactive legislation is encouraging; alongside business engagement with the issue, and both are crucial to fighting Modern Slavery. Never has it been more important for business to demonstrate ethical supply chain practice, faced with the threat of regulatory penalization and reputational ruin there will soon be no place for laggards to hide.

Discover ethiXbase GreenLITE – our new ESG risk management solution that lets you audit 100% of your supply chain, instantly. ethiXbase GreenLITE is a supply chain risk management platform that allows businesses to enable sustainability, ensure resilience and deliver impact within their network of partners, suppliers and third parties, who are vital to their operations.

Contact ethiXbase at marketing@ethixbase.com for further information regarding our ESG and Sustainability solutions, specifically designed to assist our clients eradicate modern slavery and forced labor in their supply chains.  We would be delighted to hear from you.

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