The potential impact of slavery and human trafficking on brand reputation might seem remote to many companies. But the tens of millions of workers trapped in webs of debt, threats, illegality, and physical coercion are inherently part of the global economy. Slavery and human trafficking can lurk in commodity production and low-value manufacturing, to name a few; in the subcontracted workforce of the emerging markets; and in economic subsectors of Europe and North America.
For businesses trying to balance the need to comply with modern slavery laws against the potential damage that full disclosure on forced labor might have with their consumers and shareholders, ensuring that these hidden risks remain hidden can seem like an appealing option. But the dilemma such an approach raises isn’t that straightforward.
If companies fail to provide adequate details on the steps they’re taking to eradicate modern slavery from their supply chains, they may be accused of not being committed to tackling labor exploitation or face compliance issues with applicable laws. Alternatively, disclosing the risks they know about may actually increase, rather than decrease, their legal and reputational risks.
Herein lies the problem: Companies that actively identify modern slavery in their supply chain must do so with the understanding that the more they know, the more they’re required to reveal.
Legislation such as 2015’s U.K. Modern Slavery Act and the pending U.S. federal bill titled U.S. Business Supply Chain Transparency on Trafficking and Slavery Act of 2015 generally requires companies to publicly disclose what actions they’re taking to identify and eradicate modern slavery from their business and supply chains. Such requirements can make their supply chain practices more open to public scrutiny. Consumers are becoming an increasingly powerful force, typically demanding that businesses prevent the exploitation of workers in both their direct operations and global supply chains.
Verisk Maplecroft’s new Modern Slavery Index sheds light on the risks facing companies navigating these new supply chain disclosure laws. Our research reveals that companies are facing a “high” or “extreme” risk of association with the practice in 115 countries, with manufacturers and commodity producers in Asian and African countries posing the greatest challenge to companies.
According to this index, the Asian heavyweight exporters of China and India feature in the “extreme risk” category, alongside important natural resource hubs, including the Democratic Republic of Congo (DR Congo), Iran, and Côte d’Ivoire. The association of slavery with hard and soft commodity production and low-skilled manufacturing deep in business supply chains means that the retail, garment, agriculture, ICT (information and communications technology), and automotive sectors face the highest risks.
Verisk Maplecroft’s methodology for the index was developed over the last 12 months and uses multiple data sources to benchmark the risk across 198 countries. We’ve aligned our research with the definitions outlined by the International Labour Organization (ILO) and the U.K. Modern Slavery Act by analyzing the breadth of national legislation; quality of law enforcement; and reported evidence of trafficking, forced labor, servitude, and slavery.
With only four major Western economies—the United Kingdom, Germany, Denmark, and Finland—rated “low risk,” the study also highlights that no country or region is immune to slavery. As recent reports of slavery in the U.K.’s offshore oil and gas industry demonstrate, even the most regulated industries in developed countries are vulnerable.
The fact that even countries with more comprehensive legal frameworks to address slavery can struggle to eradicate the problem reveals the extent of the challenges that governments in less developed regions face. Many of the highest-risk countries do have legal frameworks in place, but widespread corruption and a lack of resources often contribute to the haphazard enforcement of such laws.
While most multinational companies have robust systems to ensure that slavery does not occur among their first-tier suppliers, key numbers emerging from our research expose the extent of the challenges lower down the supply chain (at the commodity level and from subcontractors).
Companies are, understandably, questioning how much they should reasonably know about the existence of modern slavery in their operations and supply chains. Public scrutiny of child slavery entering the cocoa supply chain in West Africa and of bonded labor in Southeast Asia’s fishing industry has served to entrench the assumption that brands can be held responsible for all workers that help to manufacture their end product, no matter how far down the supply chain. Brand reputation is therefore tied to a broadening perception of a business’s responsibility, which potentially exposes such entities to increased risks—especially if, like many, they have not yet managed to map supply chains or assess modern slavery risks beyond their first-tier suppliers.
Given the complexity of most production processes, it can be difficult for companies just to identify suppliers in the lower tiers of supply chains, let alone ensure that no human rights violations are taking place. Yet it’s clear that claiming ignorance of such violations in supply chains is not a defense.