November 27, 2017
Addressing The Risks of Supply Chain Forced Labor
In 2014, a Verite investigation, commissioned by the U.S Department of Labor, found that 32% of foreign workers in the Malaysian electronics industry were employed under forced labor conditions. Further, 90% of foreign workers were at risk of being subjected to forced labor due to the prevalence of withholding migrant workers’ passports, preventing freedom of movement, and requiring the repayment of, often excessive, recruitment fees resulting in debt bondage. Since then, there has been a real and increasing awareness of the issue with a focus on countries where migrant workers are prevalent in the manufacturing sector. Examples include Thailand, Taiwan, Malaysia, Singapore, Jordan and Turkey.
Recent years have seen comparable legislation in the United States, United Kingdom and France requiring companies to publicly disclose the steps they are taking to combat slavery in their supply chains. Members of the private sector have also taken leadership positions. Patagonia has been exceptionally transparent over the forced labor challenges it has encountered across its supply chains while Apple has worked to have almost $30M in recruitment fees returned to its migrant workers.
Despite these developments, there still is no ethical migrant worker recruitment system available to brands and retailers which can operate at scale. Therefore, companies find it very difficult, if not impossible, to be certain that their products have not been manufactured under conditions involving forced labor.
The point at which migrants are most vulnerable to forced labor are the terms suppliers use to recruit them. Manufacturers usually outsource their recruitment of migrant workers to a complex web of labor brokers, and other actors, in both the sending and receiving countries, which operate with limited transparency. Because they are responsible for the complete recruitment and relocation process, labor brokers cover charges for transportation, accommodation, medical screening, visa applications and administration costs among others. Sometimes more egregious costs are included such as business class flights and equivalent hotels for the labor broker management as they travel around the regions. Costs often reach $6,000 per worker for recruitment into Taiwan, for example, and Patagonia has reported $7,000, per worker, for its mills there. From poor regions of the Philippines, Thailand, Bangladesh, Indonesia or Vietnam, for example, migrants are unable to front this cost and, instead, it is deducted from their salary over the term of their employment. Indicating the severity of this arrangement, deductions can easily account for one third of all net income over a 3 year employment contract.
Brands and retailers are increasingly adopting the 3 pillars approach: requiring an ‘employer pays / no fees’ policy, no withholding of passports and contractual requirements clearly communicating, in a language the worker can understand, the conditions of their employment. While this is an admirable, bold stance, it is not the solution in itself. The employer pays principle, for example, has led to a scenario where brokers seek compensation for workers for whom they cannot charge recruitment fees by layering on additional charges to those migrant workers unprotected by a ‘no fees’ policy. In addition, using this $6,000 per worker example, 200 migrant workers recruited into Taiwan, would lead to charges of approximately $1.2M for the supplier. Some brands have implemented cost sharing models between themselves and their manufacturers, but this solution is not practical for all commercial relationships.
What is clear is that no one company can tackle this challenge alone. Collaboration is crucial. There are now a number of platforms working towards a solution such as The Responsible Labor Initiative by the Responsible Business Alliance (formerly the EICC) here in the United States or Stronger Together in the United Kingdom.
While recruitment practices remain the key challenge in tackling forced labor in supply chains, brands and retailers should continue to review their surveillance systems. Detection is not easy within the framework of a traditional responsible sourcing audit where usual interviews and document reviews are not designed for work forces comprised of migrants from multiple countries with different languages. Specific audits, focusing upon migrant worker conditions, with greater translation resources are a good option. There is a growing number of interesting worker voice initiatives, utilizing mobile technology, available to brands and retailers but, similarly, these are also diagnostic tools rather than cures. Given how ingrained into the recruitment process labor brokers are, it would also be helpful for brands and retailers to invest in training and education for their suppliers also on ethical recruitment of migrant workers.
In my view, the greatest progress will be made in a world where suppliers are required to hire their migrant labor force through a network of certified labor brokers committed to ethical recruitment. The industry is a long way from this position, but the Clearview certification program is making steps towards it. Detection will remain an important component of an effective migrant worker protection program. However, the greatest impacts will be made at recruitment where migrant workers and labor brokers intersect. The very nature of detection determines that once the problem has been detected it is already too late.