Why your firm's social audits are not enough to reduce Modern Slavery risk

On the 1st of March 2019 the British Academy hosted “Tackling Modern Slavery, Creating Value, Promoting Responsibility”, an excellent Symposium of summary updates by academics on their latest research on modern slavery. An overall take-away seemed to be that unfortunately the risk of modern slavery in a firm’s global supply chains is not going away any time soon. Insights were shared of little traction to realise freedoms for young women locked inside south India fabric spinning mills, of poor auditing and poor human rights due diligence in Thailand food production and fisheries supply chains, and no monitoring at all of atrocious and sometimes forced labour conditions for workers in factories processing and for fishermen catching tuna in Indonesia, the world’s largest tuna sourcing market. This was without the conference even featuring directly new risks in Japan for the increasing numbers of foreign migrant workers planned, or in China supply chains from the imprisonment in “re-education camps” of around one million Uighur peoples, many of whom (including innocent qualified professionals) are now reported to be being forced to work in "training" factories making shoes, garments and other consumer goods, already discovered to have ended up in one USA brand (without a good practice human rights due diligence programme) supply chain.

The UK Modern Slavery Act came into effect in 2015, requiring companies making over ￡36 million in revenues annually and with a UK operation to publicly report inline with the Act’s Section 54 “Transparency in Supply Chains, etc” clause on how they monitor toward ensuring no modern slavery in their global operations and supply chains. I’ve worked in firms, non-profit and consultancy on supply chain labour and environmental standards for over 15 years, and it has been fantastic to see the Act cause many more firms than ever to start assessing their supply chain labour standards. Nevertheless, as updated at the British Academy, we have a long way to go to in tackling modern slavery to realise both risk reduction for firms, and decent conditions for people producing our food and making our things. Many firms have introduced new policies, and started risk assessing, and for many this has meant starting some “social audits” of all first tier or key supplier labour standards. Some may even attempt to reduce duplication through gaining social audit reports through sharing databases. Despite these good steps forward, the latest research funded by the Royal Academy highlighted the need for more firms to join in taking the "beyond audit" steps, which many of us who have worked on these issues learned were needed and have worked in and guided leading firms to move forward with:

1.     Deeper investigation and monitoring than quick, poor, commercial social audits: Lisa Rende Taylor of Issarra Institute in Bangkok and Myanmar briefed on how workers report 16 hour days, delayed wages, and bonded labour conditions which brands are not finding in their commercial social audits or mobile tech surveys of the same factories. Another researcher reported on sexual harassment suffered by many women workers in India garment factories where the type of poor (mainstream commercial) social auditing Human Rights Watch (HRW) reported on in January 2019* was also the norm. HRW found reports of “unbearable abuses at work from [supervisor]….. her supervisor stalked and repeatedly (asked) for sexual favors, (and) when she complained to the factory’s administration, they.... told her such harassment was “normal”” and yet that “These are not isolated cases. Recent studies by nongovernmental organizations and news reports show that sexual harassment is rampant in garment factories in India”. The HRW report found similar in Pakistan, Cambodia and Bangladesh export factories and that social audits “are not equipped to capture and address sexual harassment or other forms of gender-based violence at work for numerous reasons”, with some experienced auditors from different countries saying that "…it was difficult to conduct good interviews with workers on-site (but) that…most brands or factories paid too limited fees for the conducting of interviews off-site". As an indicator of poor audit standards HRW analyzed 50 reports of recent third party audits of factories by six large auditing firms, but none mentioned the gender composition of the group or individual interviews or whether there were even any all-women group discussions.

2.      Multi-Stakeholder Collaboration: For better practice worker-representative run monitoring (and auditing where relevant), and as a solution to the limits of commercial audits, initiatives such as the legally binding USA based FairFood programme were presented that retailers participate in with the Coalition of Immokalee Workers (CIW). This and the multi-stakeholder (with worker rights organisation Board leadership) nature of the Bangladesh Accord on Fire and Building Safety were mentioned by many speakers as the emerging model for how business should participate in worker (rights holder) driven human rights due diligence collaborations in supply chains around the world to respect rights and realise faster improvements for workers. The message was that workers should be involved in the conducting and/or owning of the auditing and monitoring reports and process.

3.      A Rights holder based approach: Dr Priya Deshingkar of the University of Sussex who has been researching the risks some Ghanian people take for work opportunities abroad, talked about the need to foremost listen to and consider the worker (person) in slavery in assessing and remediating so-called modern slavery. Foreign migrant workers may end up in bonded labour, but her research found many often return to countries where they had worked in the past despite such debt bondage as earnings opportunities were greater than home. So in committing to “no fees” policies or recommending other remediation, companies need to ensure these are realised in ways which are realistic for keeping these livelihood opportunities alive for the very people we seek to help, or at the very least, place hearing their most immediate their needs (which may be an end to sexual harassment or abuse) as priority, as worker driven multi-stakeholder initiatives are more likely to do than merely rapid commercial “social audits”.

4.      Systems: Former Amnesty International Head Aidan McQuade, in chairing a panel noted that we are dealing with “Systemic issues that deserve systemic responses”. Much of what we are dealing with in labour exploitation and modern slavery in supply chains, such as workers paying agent fees and ending up in “bonded labour modern slavery”, is a result of broken systems and insufficient effective policies at a macro level, so random occasional and poorly setup audits will not be enough to remediate the issue, or sustainably reduce risk for business, nor to deliver proper business human rights due diligence.

5.      Government engagement and Law: Was therefore a frequent topic raised. The former child worker Nazma Akter of Awaj Foundation Bangladesh courageously pointed out that efforts to improve supply chain labour standards also need to be aligned to effort to cause countries to ratify and respect ILO Conventions which allow workers Freedom of Association and the right to Collective Bargaining so that workforces can, as Dr Deshingkar indicated, prioritise themselves with management their greatest needs first for decent livelihoods. Dr Katherine Jones of Coventry University, in exploring labour conditions in the seafood industry in Indonesia, briefed on how fishermen were not really included in labour laws (the system) and hence had no formality and were often not being paid even the legal minimum wage despite the massive profits in the tuna industry. As an example of the success improved laws can have Dr Alex Tautrims of University of Nottingham responded to questions on his research on the impact of Brazil’s laws against modern slavery (under which companies can be blacklisted from public sector contracts if a supplier was found to have modern slavery), that overall law improvement and enforcement seemed to have positive consequences, despite occasional unintended consequences which can be overcome. He also referenced the success of the EU Timber Directive in helping reduced deforestation and in showing how better law and enforcement focussed business attention to the issue, and across a more level playing field for all businesses in the sector. Human Rights Watch call for companies to publicly support the drive towards a binding ILO convention to tackle violence and harassment at work.

6.      Transparency: Was frequently mentioned, with CIW pointing out that under the FairFood programme brand buyers such as McDonalds would be unable to buy from farms where sexual abuse of workers occurred as the worker-run CIW monitors conditions and under the FairFood legal contract all parties know of farms banned for such exploitation. I mentioned the ILO Better Work transparency database which has also driven faster improvement in labour conditions in countries like Cambodia since it’s monitoring reports were published on the internet regularly, in a similar fashion to the Bangladesh Accord’s transparency database. Human Rights Watch and other organisations call for businesses to "Publish the company’s global factory lists in accordance with the Transparency Pledge" as companies such as Puma, Levis, Nike and Adidas have done for over 10 years. The emerging transparency theme was further mentioned by Clare Richards of ShareAction regarding their “Workforce Disclosure Initiative” (WDI) which, backed by 120 institutional investors, kicked off in 2017 and requests corporate disclosure on how companies manage risks and opportunities related to their workforces and supply chain. The WDI found firms had much more data for direct employees than supply chain and limited information on how firms protect contingent workers rights to decent work, despite reporting large contingent workforces and a trend for more of such outsourcing. Claire noted that (under increasing expectations) firm's responsibilities (for human rights due diligence) cannot be outsourced.

7.      Price and Purchasing Practices: Repeatedly researchers spoke of a root cause of the exploitative conditions they discovered in supply chains for tuna, other seafood, garments, cocoa, beef and more being not only poor laws and monitoring of their enforcement, but also far too low prices paid by international buyers, despite significant profits seen further up the value chains. Some researchers indicated they may further research which players up value chains are profiting before undertaking human rights due diligence to ensure workers in these value chains were first paid legally and treated fairly first. A lack of commitment to long-term contracting with suppliers was also pointed out as creating challenges to realise compliance, with a lack of learning from the success of the Bangladesh Accord on fire and building safety which had required it's 200 participating buyer companies to commit to retain the same approximate value of garment sourcing from the country for the five years of the Accord legal agreement.

In summary, whilst the full research reports by the British Academy funded researchers are not yet out, the full day conference clearly indicated that business will be called to go beyond auditing, and to participate in worker stakeholder driven initiatives monitoring buyer and supplier efforts, and transparently reporting on progress publicly. Inline with emerging legal expectations that business respect human rights defenders related to their business impact (as now monitored by the Corporate Human Rights Benchmark), business is increasingly expected to partner with multi-stakeholders to support or respect worker driven monitoring, and use leverage to influence for the compliance and conditions improvements needed. Rapid, light commercial audits which don’t find issues, and lack of attention to internal purchasing practises pushing down prices un-sustainably in supply chains are becoming unacceptable, and (as indicated by the KIK and Nevsun legal cases) potentially a legal risk. There is work to be done by all parties to end modern slavery, and businesses will be increasingly expected by laws and stakeholders, and monitored by media, social media and ESG (Environmental, Social, Governance) investment data tools, to go deeper and apply the better participation in worker representative led multi-stakeholder initiatives partnership and internal purchasing practises improvement revolution, that leading firms have tested, to deliver their supply chain human rights due diligence and social impact. Transparency was the name of the 2015 UK, and 2018 Australia laws on reporting on Modern Slavery in supply chains, and the spotlight is coming, even if not soon enough for the people who make our things in global supply chains, and who deserve the Sustainable Development Goals (SDGs) promise of decent work now.

To learn more about modern slavery risks in supply chains, especially Asia, and How To Manage them to meet the increasing human rights due diligence and transparency expectations, connect, or read about a New Online Course guiding the step by step process here: https://asiaresponsiblesourcing.thinkific.com/

Thanks for your comments below, and for more Articles on these issues, including on the internment of around one million Uighur people in China, risk from this to supply chains and business, and business human rights due diligence responsibilities to take action (what companies can and should do to be on the right side of history for these people), please register for the email newsletter at https://supplyeschange.com/.

Reference: *https://www.hrw.org/news/2019/02/12/combating-sexual-harassment-garment-industry