Lawmakers Can Make a Difference in the Fight Against Forced Labor in Supply Chains

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Editor’s Note: Dr. Alexis Bateman is Director, MIT Sustainable Supply Chains.

Media reports detailing abuses suffered by the Uighur people in the Xinjiang region of northwestern China spotlight society’s long-running failure to eradicate the use of forced labor from supply chains. 

Companies’ efforts to tackle the problem through improved supply chain visibility and the introduction of audit programs are laudable and have deterred some bad actors. However, this scourge will not be rooted out until its perpetrators face stiff penalties that are enforced – and that requires a legislative framework that is much more punitive than the one currently in force.

A problem not to underestimated

The International Labour Organization defines forced labor as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily.” Transgressions can include violence, manipulated debt, the keeping of identity papers, or threats of illegal immigration reports. At its worst, forced labor involves modern slavery and human trafficking where victims are taken from their home countries and restrained from leaving foreign worksites. Such crimes create “living and working conditions contrary to human dignity” (ILO 2012).

Forced labor is found in multiple industries globally, including apparel, palm oil, and seafood. But the scope of the violations in Xinjiang and the extent of the corporate ties to these operations – primarily in the fashion apparel business – should put the controversy on every company’s radar.

It is tempting to write off the outrage caused by these crimes as isolated, short-lived, and low on corporate agendas. However, this view is short-sighted.

Increasingly, companies – global fashion brands in the case of the Uighur people abuses – are being held responsible for their role in these violations in media reporting and NGO campaigns. 

In the first MIT CTL – CSCMP State of Supply Chain Sustainability report,  practitioners were surveyed on their companies’ commitments to socially responsible supply chains. Addressing labor issues, including the use of forced or child labor, was cited as the highest priority goal for companies. The likely reason is that these are often regarded as “zero tolerance issues” for companies.

But giving worker rights a high ranking is one thing – investing in measures to eradicate violations is another. Respondents in the above survey reported that while social issues were top of mind, the level of investment devoted to addressing these issues was ranked significantly lower. This telling gap could be one reason why such violations persist in supply chains.

Achilles Heel of existing laws

Another reason is that legislation designed to combat labor abuses in supply chains is inadequate.

For example, a bill introduced recently in the US House of Representatives in response to the Uighur people controversy would prevent imports from the Xinjiang region. While this legislation might encourage companies to rethink their sourcing strategies, it would do little to solve the forced labor problem. If Xinjiang – or any other region – is placed off-limits by government, companies will switch to another region for the production capacity they need. The root causes of the problem are not tackled. Moreover, abuses may be evident in the alternative sources of supply. Another drawback of this legislative approach is that political maneuverings can blunt its effectiveness. The Xinjiang bill referenced above illustrates this drawback, in that the legislation may be colored by America’s ongoing trade war with China.

Meanwhile, Some shipments have even been prevented from entering the United States on the suspicion that product came from the Uighur region. But this is not the first time that the Trump Administration has cited suspected labor violations for blocking imports from China.

New legislative approaches offer hope

Still, legislation can be an effective weapon in the fight against forced labor if designed to promote real change. Some recent examples point the way. For instance, the California Supply Chain Transparency Act (2010) and the UK Modern Slavery Act (2015) require companies to exercise due diligence when evaluating suppliers and report their findings.

Although these laws represent a step in the right direction, they lack teeth because there is no provision for punishing non-compliance through penalties. Legislation in the pipeline could take this important step.

In July 2020, the US Congress introduced the Slave-Free Business Certification Act that will require large companies to audit and report on instances of forced labor in their supply chains. If this Act is passed, it will make non-compliant companies liable for civil damages of up to $100 million and punitive damages up to $500 million.

This legislative effort in the US piggybacks on more recent regulations in this area. The French Corporate Duty of Vigilance Law (2017), which applies only to French companies, allows victims and other concerned parties to bring forced labor violations and failures to report before a judge, and can result in fines of up to 30 million Euros. The Netherlands Child Labor Due Diligence Law (2019) also imposes fines for non-reporting.

Research sheds light on legislation

To help companies and lawmakers understand and build on these positive developments, the MIT Sustainable Supply Chains initiative at the Center for Transportation & Logistics and the Luxembourg Center for Logistics and Supply Chain Management, part of the MIT Global SCALE Network, are examining the various types of regulation in place and how companies are preparing to manage compliance for these regulations. Stay tuned for forthcoming research.

Forced labor has been a part of global supply chains since the inception of international trade. But as the complexity of supply chains has increased in line with the growth in trade volumes, such abuses have become more onerous. It’s time for governments worldwide to step up to the plate with meaningful and effective laws.

For more information on the research described above and participating in the project, please contact Alexis Bateman at .(JavaScript must be enabled to view this email address).

 

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2020-11-18 13:15:00

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