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VERISK PERSPECTIVES | AN ISO EMERGING ISSUES REPORT

Why human rights in supply chains are a growing concern

By: Victoria Gama

The impact that the COVID-19 outbreak has had on poor and developing countries has placed the issue of human rights in supply chains in sharp relief.

Several countries in the Americas, Asia, and Africa already rank as extreme and high-risk in Verisk Maplecroft's Informal Workforce Index. With local businesses around the world poised to make cost cuts in response to the pandemic, the pool of informal workers may now grow and be more vulnerable to labor rights violations, potentially implicating different companies that source from these countries.

What is the Informal Workforce Index?

The Informal Workforce Index estimates the percentage of workers employed informally in each country. Workers employed informally are often the most at risk from a wide range of labor rights violations as they generally lack the legal protections and state oversight typically associated with formal employment.

According to the International Labour Organization (ILO), "informal economy workers often work in the most hazardous jobs, conditions, and circumstances across all economic sectors–agriculture, industry, and services. Typically, informal sector units are small-scale, engaging mainly non-waged and unorganized workers in precarious work processes and labor arrangements, largely unregulated and unregistered, falling outside state regulations and control, including those related to [health and safety] and social protection. The necessary awareness, technical means, and resources to implement [health and safety] measures are also lacking."

The ILO's latest report on informal work estimates that more than 61 percent of the world's employed population, i.e., some two billion people," earn their livelihoods in the informal sector. "In fact, of the two billion workers in the informal economy worldwide, 800 million are said to be women from predominately low-income countries who" are more often found to be the most vulnerable."

Even before COVID-19, developed countries recognized these violations as a major international problem and began enacting regulations to deter corporations from participating in supply chains that involve human rights violations. And according to a 2020 study by the European Commission and various other independent studies conducted by local NGOs, even when mandatory reporting human rights legislation is in place, some businesses fail to provide detailed reports over potential human rights impacts of their operations and actions taken to remediate them.1

To help mitigate this issue, governments, primarily in western Europe, Canada, and the United States, are looking to heighten business human rights obligations by making supply chain human rights due diligence mandatory—with stricter obligations, heightened sanctions, and enforcement bodies with robust mandates along the lines of the French Duty of Vigilance Law2 and the Dutch Child Labour Due Diligence Law.3

Perhaps recognizing that the societal and economic trends inflicted by COVID-19 may threaten years of progress on this front, the private sector also has undertaken efforts to address human rights issues. For example, in April 2020, a group of 101 international investors representing over $4.2 trillion in assets issued a joint call for greater regulatory measures requiring companies to carry out human rights due diligence.4

Could a combination of regulations and an increased emphasis on responsible sourcing help blunt the potential adverse impacts caused by COVID-19? It will likely be a difficult road, given human rights violations often transpire in supply chains that yield products that are not only in high demand but also socially beneficial. Two examples help underscore this point: 1) the sourcing of a vital component to manufacture hand sanitizer and 2) the mining of elements and other materials that make zero-emission electric vehicles (EVs) possible. If more laws are enacted to impose liability on corporations that participate in a supply chain with human rights violations, there could be repercussions relating to the production of both of these goods.

An upsurge in hand hygiene may pose high human rights risks

Alongside masks, hand sanitizer has become a viable weapon in the battle against COVID-19. But the supply chain behind alcohol-based hand sanitizer (and its main ingredient, ethanol) runs through countries with a notorious human rights track record that includes forced labor and child labor.

The harvesting of sugarcane, from which ethanol is derived, is typically done by hand and is extremely physically demanding, involving a large number of repetitive movements. Take Brazil, a major producer of sugarcane. According to a 2006 study, a Brazilian worker cutting 12 tons a day will walk an average of 8.8 kilometres/5.5 miles per day and perform over 130,000 cutting motions.5 Evidence of low salaries–barely higher than the minimum wage–and the use of the 'champion system' in which workers are paid based on the amount of sugarcane they collect, compel workers to dedicate extra hours in intense heat, according to the study. Some workers labor for 10 to 12 hours a day.6

Added to that, occupational health and safety issues due to the lack of personal protective equipment can make workers prone to machete-related injuries and respiratory problems resulting from burning cane;7 this dynamic could explain the extreme or high-risk scores seen in our Forced Labour Index.

In Brazil's case, the use of forced labor resulting from an increase in sugarcane demand to distill alcohol for hand sanitizers is hardly unprecedented.

Public Prosecutor's Office (Brazil) investigations resulted in more than 10,000 people being reportedly freed from forced labor on sugarcane plantations between 2003-2011, while 2013 statistics show that from 2003-2013, sugarcane accounted for the second-highest number of forced labor reports.8

Despite these enforcement actions, in 2018, the United States Department of Labor highlighted sugarcane sourced from Brazil as having a high risk of being produced with forced labor due to the frequent practice of debt bondage.9 Although the Brazilian government attempted to address the issue, its release of the 2019-H1 lista suja or 'dirty list,' which names and shames companies for the use of forced labor, included numerous sugarcane farms.10

It's worth considering that there are significant differences between southern Brazilian states, such as São Paulo, where mechanization prevails, and the northeastern states, where the harvest is still done manually. In the map, you can see our subnational forced labor index that highlights the disparities between the risks of forced labor in the Northeast and Southeast regions, a critical example being Maranhão, where manual intensive sugarcane harvesting still prevails.

ChildLabourSugarCane_Resize.jpg

While mechanization of the sugar industry is credited with reducing the number of forced labor incidences in those areas, labor standards vary significantly by region.11

Even with more stringent human rights regulations being passed in wealthier countries, we don't anticipate a reduction of instances of forced labor, as the labor inspectorate's funding reportedly has been reduced under Brazilian President Jair Bolsonaro's administration. According to the Federal Budget Secretary, in 2019, the allocated budget for labor inspections decreased by 60 percent year on year to BRL3.3 million (USD 785,732).12 Furthermore, Brazil only has 2,997 inspectors – 29 percent of the number it requires under the ILO benchmark – leaving the promotion of decent working conditions is largely down to businesses and trade unions.13

According to new data from Verisk Maplecroft's Commodity Risk Service, the production of sugarcane already poses a high or extreme risk of child labor, modern slavery, and deforestation in countries such as Brazil, India, Mexico, and Thailand. And the situation is likely to worsen as the COVID-19 economic fallout makes its way through these countries, and demand for sanitizer remains high.

Hand sanitiser table_Resize.jpg

Electric vehicles: a greener approach can come with a high human price tag

The economic disruptions caused by COVID-19 has highlighted the risks posed by the United States and Europe's extreme reliance on Asian-based supply chains to cater to their domestic market and decarbonize their economies. This recognition has appeared to encourage governments on both sides of the Atlantic to rethink their dependence on global supply chains for EV production as they seek to revitalize their battered economies.

Although bringing production of EVs home might reduce labor rights violations in the production and assembly of those vehicles, both Europe and the United States could still heavily rely on battery raw materials sourced from the Democratic Republic of Congo (DRC), Chile, and Argentina in the years to come. All three regions have problematic records concerning human rights and mineral extraction.

Our subnational Child Labour Index and Security Forces Human Rights Index point to higher risks for cobalt extracted in the Haut Katanga and Lualaba provinces of the DRC, demonstrating the hazardous conditions in which children work in illegal mines to extract minerals.

Child labor is widespread throughout the DRC's cobalt supply chain, but occurs mainly in artisanal mining, a traditional mining form where miners are not officially employed by a mining company but normally sell minerals to them.14 An estimated 30 percent of DRC's total cobalt production is carried out by artisanal miners, which leaks into industrial mining supply chains.15 In December 2019, Apple, Google, Microsoft, Dell, and Tesla were accused before a U.S. court of allegedly aiding and abetting in the death and serious injury of children working in cobalt mines associated with their supply chains.16

The high and extreme risks score for Chile and Argentina in our Indigenous Peoples' Rights Index illustrate the underlying tensions between the expansion of production of minerals required in EVs and the demand for compliance with the United Nation's free, prior, and informed consent (FPIC) processes from indigenous communities.

FPIC is a specific right that indigenous peoples have, which allows them to give or withhold consent to a project that may affect them or their territories.17 According to this right, states have to consult and cooperate in good faith with the indigenous peoples concerned through their representative institutions in order to obtain their free, prior, and informed consent to any resource extraction project on their territory.18

The so-called "Lithium Triangle" in Chile, Bolivia, and Argentina, where an estimated 75 percent of the world's lithium is located,19 has been an arena for litigation. One such example is in Chile, where a local court upheld a water usage complaint from the Camar and Peine indigenous communities who were not consulted over the expansion of SQM’s mine in a water-scarce area.20

In 2010, 33 indigenous communities from the Great Salt Mines and the Guayatayoc lake located in the northern provinces of Salta and Jujuy, Argentina, took their FPIC case to the Inter-American Commission on Human Rights, which is reportedly known for its extensive pro-FPIC jurisprudence.21 Though litigation can be time-consuming, we expect these lawsuits to shape reform conversation and produce a lasting impact.22

Accountability may be coming for businesses of all sizes

These two examples are just a glimpse of current human rights scenarios in supply chains and how a post-COVID-19 world can exacerbate already fragile human rights environments. With regulatory bodies paying increasing attention to these issues, coupled with growing expectations of Corporate Social Responsibility (CSR) and sustainability for corporations, human rights due diligence is becoming imperative for companies to avoid related reputational, operational, and litigation costs.

Corporate human rights due diligence is slowly becoming a norm of expected conduct for all types of business no matter the size or sectors, and business are joining governments by asking for a clear and more transparent playing field.23 Given this dynamic, more businesses in the European Union are endorsing the EU’s proposal for a single, all-encompassing law24 that would eliminate the need to navigate a patchwork of potentially juxtaposing legislation.

These regulations could cast a wider net over the entire corporate structure, as well as their business relationships. For now, the expectation is that due diligence will reach Tier 1 of the supply chain – the companies that deliver product devices that are almost close to the finished product – but obligations will likely progressively be cascaded down value chains through business-to-business pressure. No matter what form the ultimate regulations take, the trend seems clear: the era of voluntary compliance with human rights supply chain initiatives is ending. In its place, we can expect a more forceful regime of sanctions, monitoring, grievance mechanisms, civil liability, and extraterritorial litigation.

Author
Victoria Gama is a senior human rights analyst at Verisk Maplecroft. Victoria can be reached at Victoria.Gama@maplecroft.com.


1. “Study on the due diligence requirements through the supply chain,” European Union, February 20, 2020, < https://op.europa.eu/en/publication-detail/-/publication/8ba0a8fd-4c83-11ea-b8b7-01aa75ed71a1/language-en >, accessed on November 24, 2020.

2. “France: Natl. Assembly adopts law imposing due diligence on multinationals to prevent serious human rights abuses in supply chains”, Business and Human Rights Resource Centre, 2020, < https://www.business-humanrights.org/en/france-natl-assembly-adopts-law-imposing-due-diligence-on-multinationals-to-prevent-serious-human-rights-abuses-in-their-supply-chains >, accessed on November 24, 2020.

3. Juliane Kippenberg, “Netherlands Takes Big Step Toward Tackling Child Labor,” Human Rights Watch, June 4, 2019, < https://www.hrw.org/news/2019/06/04/netherlands-takes-big-step-toward-tackling-child-labor >, accessed on November 24, 2020.

4. “Investors with over US $5 trillion call on govts. To introduce mandatory human rights due diligence for companies,” Business and Human Rights Center, April 21, 2020, < https://www.business-humanrights.org/en/latest-news/investors-with-over-us42-trillion-call-on-govts-to-introduce-mandatory-human-rights-due-diligence-for-companies/ >, accessed on November 24, 2020.

5. Carolina Giraldo et al., “TRABALHADOR CANAVIEIRO NO BRASIL: estudo da legislação sobre contratação e condições de trabalho available,” Revista de Politicas Publica, 2017, < http://www.periodicoseletronicos.ufma.br/index.php/rppublica/article/view/8249 >, accessed on November 24, 2020.

6. Thyna Cunha, “Pesquisa da UFSCar traca perfil dos cortadores de cana-de-acucar,” Sao Carlose E Araraquara, October 10,2016, < http://g1.globo.com/sp/sao-carlos-regiao/noticia/2016/10/pesquisa-da-ufscar-traca-perfil-dos-cortadores-de-cana-de-acucar.html >, accessed on November 24, 2020.

7. Dirce de Abreu et al., “Brazilian sugar cane production and rural worker’s health,” Revista Brasileira de Medicina do Trabalho, 2011, < http://www.rbmt.org.br/details/87/pt-BR/a-producao-da-cana-de-acucar-no-brasil-e-a-saude-do-trabalhador-rural; http://www.scielo.br/scielo.php?pid=S0034-89102008005000009&script=sci_arttext&tlng=en >, accessed on November 24, 2020.

8. Daniela Penha, “Exaustos, trabalhadores cortavam 22 toneladas de cana por dia para Raizen,” A Reporter Brasil, October 24, 2020, < https://reporterbrasil.org.br/2018/10/exaustos-trabalhadores-cortavam-22-toneladas-de-cana-por-dia-para-raizen/ >, accessed on November 24, 2020.

9. “U.S. Department of Labor’s 2018 Findings on the Worst Forms of Child Labor,” U.S. Department of Labor, 2018, < https://www.dol.gov/sites/dolgov/files/ILAB/child_labor_reports/tda2018/ChildLaborReportBook.pdf >, accessed on November 24, 2020.

10. “Nova lista suja do trabalho escravo tem 187 empregadores,” Terra, April 3, 2019, < https://www.terra.com.br/economia/nova-lista-suja-do-trabalho-escravo-tem-187-empregadores,e725ef2097e76c5c6789c625887db5a58swl9j67.html >, accessed on November 24, 2020.

11. “TRABALHADOR CANAVIEIRO NO BRASIL: estudo da legislação sobre contratação e condições de trabalho available.”

12. Gabriela Caesar, Nº de fiscalizações de trabalho infantil é o 2º menor registrado nos últimos 10 anos,” GI, January 9, 2019, < https://g1.globo.com/economia/noticia/2019/09/01/no-de-fiscalizacoes-de-trabalho-infantil-e-o-2o-menor-registrado-nos-ultimos-10-anos.ghtml >, accessed on November 24, 2020.

13. “Brazil,” International Labour Organization, 2020, < https://www.ilo.org/labadmin/info/WCMS_114935/lang--en/index.htm >, accessed on November 24, 2020.

14. Annie Kelly, Apple and Google named in US lawsuit over Congolese child cobalt mining deaths,” The Guardian, December 16,2019, < https://www.theguardian.com/global-development/2019/dec/16/apple-and-google-named-in-us-lawsuit-over-congolese-child-cobalt-mining-deaths >, accessed on November 24, 2020.

15. “Congo, Child Labor and Your Electric Car,” Financial Times, < https://www.ft.com/content/c6909812-9ce4-11e9-9c06-a4640c9feebb >, accessed on November 24, 2020.

16. “Apple and Google named in US lawsuit over Congolese child cobalt mining deaths.”

17. “Free, Prior and Informed Consent,” Food and Agriculture Organization of the United Nations, < http://www.fao.org/indigenous-peoples/our-pillars/fpic/en/ >, accessed on November 24, 2020.

18. “Free, Prior and Informed Consent of Indigenous Peoples,” United Nations Human Rights Office of the High Commission, September 2013, < https://www.ohchr.org/Documents/Issues/ipeoples/freepriorandinformedconsent.pdf >, accessed on November 24, 2020.

19. Samar Ahmad, “The Lithium Triangle: Where Chile, Argentina, and Bolivia Meet,” HIR, January 15, 2020, < https://hir.harvard.edu/lithium-triangle/ >, accessed on November 24, 2020.

20. “Productora chilena de litio SQM sufre revés por decisión de tribunal Ambiental,” America Economia, December 27, 2019, < https://www.americaeconomia.com/negocios-industrias/multilatinas/productora-chilena-de-litio-sqm-sufre-reves-por-decision-de >, accessed on November 24, 2020.

21. Dario Arand, “Litio argentino: Comunidades denuncian a Livent en la CIDH,” Mining Press, March 25, 2020, < http://miningpress.com/nota/328455/litio-argentino-comunidades-denuncian-a-livent-en-la-cidh >, accessed on November 24, 2020.

22. “Apple and Google named in US lawsuit over Congolese child cobalt mining deaths.”

23. “Support for EU framework on mandatory human rights and environmental due diligence,” Human Rights Watch, September 2, 2020, < https://media.business-humanrights.org/media/documents/EU_Business_Statement_Mandatory_Due_Diligence_02092020.pdf >, accessed on November 23, 2020.

24. Gavin Hinks, “Support builds for mandatory human rights due diligence,” Board Agenda, September 8, 2020, < https://boardagenda.com/2020/09/08/corporate-support-builds-for-mandatory-human-rights-due-diligence/ >, accessed on November 24, 2020.