March 2, 2016
How Exposed Is My Supply Chain to Forced Labor?
Forced labor is a broad term encompassing multiple scenarios with differing levels of severity. Prison labor, trafficked labor, indentured labor (where workers are prevented from voluntarily resigning), bonded labor and withholding of worker passports and deposits are all variations. In Omega’s experience, trafficked, bonded and indentured labor are relatively uncommon in supply chains operated by western consumer brands and retailers. Instead, these issues are more prevalent in less regulated industries such as mining, food production and fishing. Omega has though witnessed cases of bonded labor in Indian textile supply chains where children have been used by families as loan guarantees. This tragic practice is more likely to occur in Tier II factories or undisclosed subcontractors.
In Asia, the most common form of forced labor, Omega encounters, is retention of foreign worker passports and similar identification. This issue is particularly common in Malaysia, where a significant proportion of Indonesians, and increasingly Nepali, Bangladeshi and Burmese, comprise the labor force, and Thailand, where migrant Cambodian, Laotian and Burmese workers play an important role in the manufacturing sector. Restricting free movement of labor, this is an egregious violation of the ILO Principles.
Another more common example of forced labor is bonded labor where migrant workers are required to repay recruitment fees charged by brokers operating overseas. These fees can be as much as US$7,000 and, automatically deducted from worker salaries, can take up to 2 years to repay. There is a growing awareness of this issue. A number of industry leading companies are taking the lead by prohibiting labor brokers or requiring factories to pay the fee in full. One large apparel brand has even disengaged from Malaysia as a sourcing hub.
While this approach is possible for companies with leverage over suppliers, large electronics brands, for example, it is not always commercially practical. Unlike Health and Safety, there are no industry-wide best practices for managing these more nuanced forms of forced labor. The reality is complex. In Malaysia, for example, factories are legally responsible for the whereabouts of migrant workers and will be fined if a worker becomes unaccounted for. The result is a financial incentive for the factories to restrict worker movement by holding their passports. Added to this, Malaysian labor law is unclear on the legality of this practice.
Withholding worker identification documents is completely unacceptable, even if the workers have, purportedly, consented to the practice. So what can be done? Assuming that buyers lack the purchasing power to require factories to cease what is a common practice, a more practical approach is required.
With immediate effect, factories must terminate the practice and formally implement a revised management system where all passports are returned with the process recorded. Should factories require access to original passports, for example, they must be stored in a repository which workers can also access. A clear, documented procedure must be established, translated into the migrant workers’ language(s), agreed to and fully understood. An unannounced Follow-up Audit is also required to verify that the revised procedures are effective.
It is important that brands and retailers have a clear understanding of how their supply chains are exposed to forced labor and have procedures to identify and remediate issues. While the issue is more common in Thailand, Malaysia, Taiwan and The Philippines, Omega predicts it will become an increasing issue in China where rising labor costs will create a demand for cheaper migrant labor from neighboring countries such as Myanmar and Laos.
Identifying and remediating forced labor is a complex issue. Omega has vast experience in dealing with the challenge. For more information, please contact us.