The Negative Externalities of Modern Slavery

Author: Calvin London, Founder & Principal Consultant | The Compliance Concierge | Australia


In the last five years it is estimated that the global private economy has consumed the lives of almost 90 million people into some form of forced labour or human trafficking. So much so that it sits behind drugs and arms as the third biggest crime business; over $150 billion dollars a year. In countries all over the world, unscrupulous employers and recruiters are increasingly exploiting gaps in international labour and migration law and enforcement.

A Global Epidemic: Modern slavery is defined by the ILO as work or service which is extracted from any person under the menace of any penalty and for which said person has not offered him/herself voluntarily. It estimates that 10.7 million people are victims of labour exploitation in private enterprise alone. In agriculture, manufacturing, construction, mining and utilities sectors, slavery generates $43.4 billion in illegal profits per year.

Modern slavery is a problem that has emerged into a global epidemic across some 167 countries.  If you tell someone that the smartphone they are using is more than likely assembled by children as young as seven carrying out back-breaking work for twelve hours a day, or that the shrimp they are eating has been harvested by slave labour, most would find it hard to believe.  Indeed, the fishing industry in Southeast Asia has been notorious for severe labor abuses. With eleven of the world’s largest fisheries in Asia, labour is in heavy demand. These mega-fisheries often employ migrants from Bangladesh, Cambodia, Indonesia, Laos, Myanmar, the Philippines, and Vietnam for minimal wages and poor working conditions and run with pseudo-mafia rule.

Its persistence is due to the complexity of the supply chains that has developed in modern economy. A complex web of producers, manufacturers, distributors and retailers, all participate in the production, delivery and sale of a product. Tracking a component of an end product such as a cotton T-shirt back to a particular producer or cotton farm is difficult to say the least.  If a brand gives its supplier a large order with a short turnaround time beyond the suppliers’ capacity, the risk of using slave labour to meet the demand is magnified, especially when that supplier subcontracts work to factories that are not regulated by the same standards as the supplier.

A Grim Future: One of the features of modern slavery is that it is highest in impoverished countries and countries with a vulnerable minority. It is big business affecting everything from domestic cleaning, to fishing, picking fruit and vegetables, and digging for mineral to be used in phones, make-up and electric cars. Mining, farming and production for domestic consumption or export to more prosperous nations and all under our very noses.

We hear about the occasional incident, for example, the celebrity chefs in Australia who came under attack for underpaying their workers or when a large brand name is identified as using slave labour, but by and large it is silent injustice. Kevin Bales once said in a TED Talk, “This is an economic crime.  People do not enslave people to be mean to them; they do it to make a profit.”

Slavery thrives in the absence of a properly functioning law enforcement system. It is often abetted by police and other authorities. Without adequate enforcement of existing laws and the strengthening of legal frameworks, human traffickers operate with impunity.

Impoverished workers in China and India are being forced into labour camps to work unrealistic hours to manufacture products using raw materials collected from even more impoverished people in Cambodia, Myanmar and Sri Lanka. This is driven by opportunistic middle-men keen to ravish the demand from larger companies to meet the demands of the Western world.

There will be radical shifts in global supply chains. Companies seeking to maintain or restore production levels will quickly identify alternative suppliers to meet demand. Others may pressure existing suppliers to increase their capacity. Given the high levels of unemployment exasperated by the COVID pandemic, risks of worker exploitation and modern slavery will rise.

There Is A Solution: The story of modern slavery is remarkably similar to the battle against corruption and bribery. We can start to reduce its impact by adopting many of the principles that have been in place for several years in the fight against bribery.

Companies seeking to enhance their human rights approach can leverage existing anti-corruption frameworks designed to assist company compliance with the U.S. Foreign Corruption Practices Act, the UK Bribery Act and other laws. As has been pointed out, this approach is appropriate given the traditional correlation between corruption and negative human rights consequences. Bribery has been cited as a key contributor to modern slavery and labour abuses, factory and building collapses, plane and train crashes, health risks from illegal toxic waste, impunity for security sector abuses, and a host of other negative impacts.

Principally six areas overlap: (1) governance and oversight; (2) policies and procedures; (3) diligence, risk assessments and program testing; (4) training, communication and advice; (5) hotline reporting and grievances; and (6) reporting.

It is time for companies to start to embrace the concept of holistic compliance. With so many aspects of control common to both, why would you have two systems?

Not only is it inefficient, but in many cases it would be ineffective and create its own roadblocks such as the competition for resource not to develop a common process. The expectation of assigning day-to-day program management to the same senior company personnel also exists both for anti-corruption and human rights programs.  It is a key factor in successful management of any compliance program.

Some words of caution. Beyond governance structures for both programs, visible support from senior and mid-level management is critical to success.  Such “tone from the top” or “message from the middle” underscores the company’s commitment to conduct unwavering ethical and compliant business. Fraudulent and corrupt activities (which includes slave labour), should be sought out by shareholders and local communities alike, and those responsible held accountable.

The tone includes both words and actions. In the current environment no company can confidently say that they do not have modern slavery or other serious human rights abuses in their domestic or global supply chains. Legislation is coming but like the initial attempts at legislation with bribery and corruption, it is soft in its effect at the moment. The words are there in Acts such as the California Transparency in Supply Chains Act, and the UK and Australian Modern Slavery Acts including mandatory due diligence laws, creating a company “duty to know” about and report on human rights risks throughout its operations and its value chains. The reality is that companies shun the use of technologies and surveillance mechanism that have become an integral part of corruption and bribery programs covering their eyes to the real story that goes unseen.

Just as with compliance for anti-corruption, until we start to hold companies and individuals accountable for such actions that not only put their company reputation at risk but compromise the foundations of modern society, little will change.

Slavery is also an emotionally charged problem; one that can cause big and painful brand and reputational damage for companies. The role of every person is to take action when they identify or become informed about companies that permit these practices and vote with their feet, moving support to those organisations that are prepared to seek out and eradicate such injustices.

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