Public Sector Supply Chains and Government Compliance

Public Sector Supply Chains and Government Compliance
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The Independent Review of the Modern Slavery Act published the final report at the end of May 2019. The final report proposed a consultation to run that focused on issues surrounding transparency in supply chains and modern slavery reporting. On the 9th July 2019 this consultation was launched, forming part of a governmental commitment to improving section 54 of the Modern Slavery Act 2015, which addresses modern slavery reporting requirements and transparency in supply chains. The consultation took responses from NGOs, charities, businesses, public sector bodies, and various other organisations and interested parties, addressing three key areas:

 

  1. The content of modern slavery statements: This section addressed inconsistencies in reporting approaches taken by different companies and the possibility of making certain criteria mandatory. This section also sought to address the fact that global movements in modern slavery legislation may make it desirable to ‘harmonise our approach’. The questions posed focused on reporting practices and the implications of making certain areas mandatory.

 

  1. Transparency, Compliance, and enforcement: The second section of the consultation sought to propose the introduction of a central government registry, one designed to improve transparency. It also addressed reporting deadlines, proposing a single annual reporting deadline so as to reduce the confusion of multiple separate deadlines throughout the year. It finally sought to gain views into how section 54 of the Modern Slavery Act might be enforced. Questions were posed on each of these areas.

 

  1. Public sector supply chains: The final area addressed in the consultation examined public sector supply chains. In essence, the consultation proposed that reporting requirements would be extended to public sector organisations with a turnover of more than £36 million per year.  Reporting requirements would be for each individual government body to maintain responsibility, whether given individually or as part of a group statement. The questions posed by this section of the consultation focused on the apparent benefits and challenges of imposing modern slavery reporting requirements on large public sector bodies.

 

The consultation period ended on the 17th September 2019 and the following day the UK Government announced a series of measures that would be introduced to ensure that governmental supply chains were free from Modern Slavery. The UK government spends approximately £52 billion in the procurement of goods and services, with wider public sector annual spending nearing £203 billion. The statement further announced a new partnership with the Chartered Institute of Procurement and Supply to provide training and awareness to government workers and departments. The announcements addressed several of the issues raised in the consultation surrounding public sector supply chains, with proposals that from 2021 individual ministerial departments will produce their own modern slavery statements. However, the final response to the period of consultation has yet to be released.

The Rise of Technological Responses to Human Trafficking and Modern Slavery

Technology and Human Trafficking

Technology, and in particular mobile applications, is being increasingly identified as an important method of tackling modern slavery and human trafficking. Mobile applications have recently been responsible for the identification of nearly 1000 cases of modern slavery in car washes around the country. With the release of the Modern Slavery Helpline annual report for 2018, which recorded approximately 1 in 7 reports were made by webform submissions or through the Unseen App, it is clear that there is a rising awareness of modern slavery and human trafficking in the UK and a significant proportion of reports are made through technological methods.

However, mobile applications are not the only technologies being identified and implemented to help tackle modern slavery and human trafficking. So far in 2019 there have been several reports of new implementations of technology to combat modern slavery and human trafficking. For example, satellite imaging being recently used in a study by Nottingham University to accurately map the number of brick kilns in India. Brick kilns in India, which are associated with the exploitation of labourers through forced labour and debt bondage, exhibit unique features that can be mapped by satellite imaging and it is hoped that other industries associated with modern slavery may be vulnerable to satellite imaging too; scaling this use of technology into a major method of tackling modern slavery in remote areas. By contrast, algorithms that measure activity against a set of variables have been piloted by banks in the Netherlands to identify unusual behaviour that may be indicative of human trafficking or modern slavery.

However, whilst the use of technology to combat human trafficking and modern slavery is advancing in new directions and receiving high profile acclaim concerns have been raised that technology merely constitutes a tool and its use alone may not be enough. TechUK, an organisation responsible for representing approximately 900 companies that develop technology, has raised concerns that for technological tools to be truly effective corporations need to ensure they have a strong anti-slavery culture with a willingness to act. Whilst strong corporate and social anti-slavery cultures are vital, the development of technological tools and processes to target human trafficking and modern slavery demonstrate positive commitments by a wide range of actors to tackling these issues. Many of these technological developments are recognised as new and as these tools are refined it is quite possible that technology will take play a greater role in combating human trafficking and modern slavery.

Child Rights and Corporate Social Responsibility (CSR)

Child Rights and Corporate Social Responsibility
Child Rights and Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been understood and conceptually used since the 1990s, yet only recently gained weight in legal terms. It was designed to hold businesses accountable for the environmental wellbeing and human rights within their production and supply chains that they financially benefit from, and in turn to uphold the rights of the most vulnerable sector of society – children.

The importance of child rights

The interaction between businesses and children is inevitable, as people under 18 years old make up a third of the worlds population. The importance of this interaction, whether as consumers, relations to employees or young workers themselves is critical because childhood is the most fundamental stage of development, where young people are more sensitive both to psychological and physical harm. Furthermore, they are most vulnerable to violence and abuse, deeming defenceless when forced into certain situations either out of desperation or before their own autonomy has developed to protest. If they are exposed to hazardous operations whether directly or indirectly, they are at high risk of mental and physical damage. In extreme yet unfortunately widespread cases of child labour exploitation within supply chains, for domestic work or other forms of illicit labour, the consequences to a child’s wellbeing can be irreversible.

Furthermore, the wellbeing of children is important to the long-term economic growth within communities. 215 million children are engaged in child labour worldwide, and 101 million children are not attending primary school. By being exploited from a young age, the stunt in education that children undergo will ultimately feedback negatively on the future overall productivity rates of businesses within certain economies.

The development of CSR

In the development CSR, rights observers have understood that corporate interests generally outweigh the voluntary demand for an ethical and socially responsible supply chain. There are various examples of CSR that have developed, which compels corporations to comply with legal standards. For example the UK Modern Slavery Act 2015 that that dictates national legal standards, which requires corporations to publish the steps they are taking to ensure their supply chains and free of modern slavery, child labour, human trafficking. This regulation applies both domestically and for international sourcing, in which certain export standards of mandatory social compliance are placed onto developing countries with cheap labour. The California Transparency in Supply Chain Act (CTSCA) 2010 operates similar obligations but working at state level. The Indian Companies Act (2013) compels Indian corporations to spend 2% of their pre-tax profit on CSR.

How Child Rights fit into CSR

Although such legislation is aimed more broadly at achieving supply chain transparency, upholding child rights is a key element of this. Specifically, there is a set of 10 Child Rights and Business Principles as outlined by Save the Children, the UN Global Compact and UNICEF, which give a comprehensive yet non-exhaustive list of CSR requirements in relation to child rights. Corporations must:

  1. Meet their responsibility to respect children’s rights and commit to supporting the human rights of children
  2. Contribute to the elimination of child labour, including in all business activities and business relationships
  3. Provide decent work for young workers, parents and caregivers
  4. Ensure the protection and safety of children in all business activities and facilities
  5. Ensure that products and services are safe, and seek to support children’s rights through them
  6. Use marketing and advertising that respect and support children’s rights
  7. Respect and support children’s rights in relation to the environment and to land acquisition and use
  8. Respect and support children’s rights in security arrangements
  9. Help protect children affected by emergencies
  10. Reinforce community and government efforts to protect and fulfil children’s rights

As this literature points out, the rights of children are no ‘new legal obligation’, instead are innate human rights, which in turn drives CSR. This can be broken down into the Corporate Responsibility to Respect, which applies to the business’s own activities and to its business relationships, linked to its operations, products or services” as well as the Corporate Commitment to Support, which demands voluntary actions that seek to advance human rights, including children’s rights, through core business activities, strategic social investments and philanthropy, advocacy and public policy engagement, and working in partnership and other collective action.”

The focus of CSR towards children aims to eliminate child labour from supply chains, but also must take the nuanced approach which includes protecting the rights of children in their core business strategy, covering all operations, employee rights, marketing, and delivery of products and services.

The aim is for states to be responsible by implementing such CSR legislation to level out the injustices and inequalities of the world’s wealthiest corporations taking advantage of the worlds most poor and vulnerable. Although this works ideologically, the problem comes with implementation. Limitations with CSR studies show that even passive state regulation does not necessarily lead to thorough commitment to supply chains free of human rights abuses and environmental degradation by corporations. Trends show most corporations only apply resource to CSR when receiving pressure from external organisations. Hence, it takes active pressure by rights groups, NGOs and governments to achieve this, indicating the critical role of UNICEF and organisations to lobby against corporate interests. For CSR to be achieved, strict legal requirements and binding commitments must be met with appropriate sanctions as means of compulsion to achieve child rights.

Labour Abuses in the Jewellery Industry

Over 1 million children between the ages of 5 -17 are working in artisanal mining operations on less than $2 per day or receiving food as payment
Over 1 million children between the ages of 5 -17 are working in artisanal mining operations on less than $2 per day or receiving food as payment

In the wake of the development of modern slavery compliance legislation, there is a movement towards transferring the onus of responsibility onto large corporations to ensure their own supply chain is clean. Some of the worlds largest companies are in the jewellery business, with a notorious reputation for human rights abuses, yet some of the world’s highest revenue. According to Human Rights Watch (HRW), specifically gold and diamonds generate over $300 Billion revenue annually, from 90 million carats of diamonds and 1,600 tones of gold. 

There has been an upraise in media on ethical supply chains in agricultural industries such as fishing, cocoa & coffee production, yet there are significant issues to be addressed in supply chain compliance and ethical sourcing compliance for the jewellery business – here addressing labour exploitation, child labour and human trafficking.

Examples of Human Rights abuses

 Specifically in relation to child labour, estimates suggest over 1 million children work in artisanal or small-scale mining operations, despite being illegal at both the domestic level and by international law. Statistics from the African Centre For Economic Transformation suggest these children between 5 -17 are working on less than $2 per day, or receiving food as payment. Child labour has been reported in Ghana, Mali, Nigeria, the Philippines, Tanzania, and Zimbabwe, Burkina Faso, Uganda, the Democratic Republic of Congo, and Indonesia. However, regulation is lacking and children are continuously working in extremely dangerous and inhumane conditions, including exposure to toxic and explosive chemicals potentially causing brain damage, respiratory diseases from the dust, heavy strenuous lifting and exposure to dangerous machinery.

Concerning forced labour, it has been reported in Peru, Democratic Republic of Congo, Eritrea and in Zimbabwe where the military physically forced workers into diamond mining between 2008-2014. In the harsh conditions of the mining industry, workers are prevented from leaving either by blackmail or violence. In other cases, workers are trafficked to mines, by deception or force, in order to be exploited for mining work.

Wider rights abuses are continually taking place in the extraction industry, including land rights violations whereby indigenous populations have been displaced, armed conflict violations including money laundering to fund civil wars and violence by arming militias. Sexual violence, including abuse and torture by occupying mine workers, security guards and soldiers controlling mines has been reported, such as in Porgera mine, Papua New Guinea. Furthermore, environmental rights have been violated by disrupting 1000s of people and defecating habitats with toxic mine runoff, as in Nigeria 400 were children killed by artisanal mine toxic lead poisoning.

What are the current standards?  

Alongside prominent Modern Slavery legislation, as seen developed in the UK, USA and developing in Australia, that holds businesses accountable for their own supply chain regulation, there are several international standards for human rights compliance yet none that are prominent enough to control this issue.

The United Nations Guiding Principles on Business and Human Rights declares that companies are by law required to undertake “human rights due diligence” within their entire supply chain. Furthermore, they must have systems in place to identify and remediate human rights abuses immediately. However, when it comes to implementation this only document offers only ‘guidance’.

The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas provides an industry-targeted outline for mine operators. The major issue with this, however, is that it is voluntary and therefore not officially regulated.

Furthermore the Kimberley Process Certification Scheme (KPCS) is a significant international standard relating specifically to diamond extraction, to eradicate “blood diamonds” or “conflict diamonds”. However, again this proves too narrow, as it does not cover human rights abuses outside of active conflict zones.

The Responsible Jewellery Council (RJC) provides a certification system for all stakeholders in the jewellery supply chain. However, as this is an industry led program, it fails to have the legal and regulatory weight to ensure due diligence is done. Instead, according to findings by HRW it has flawed governance systems in which most companies assign their whole credibility for human rights compliance.

Are jewellery companies adhering to Modern Slavery compliance regulation?

HRW released a report in February this year focusing on the policies and practices of 13 major jewellery brands that generate over $30 Billion per year. Many reporters and researchers fail to receive any comment from major bands as to their slavery and trafficking risks associated with gold mining.  HRW concluded that clear majority of jewellery companies are not meeting human rights standards within their supply chains. There are little hands on investigations, and too much reliance is put on verbal ‘assurances’ from their suppliers that the gems, minerals, products are ethically and sustainably sourced.

Two mining companies have monopoly over the global diamond industry, and account for over half of all diamond sales. De Beers, working from South Africa, Botswana, Canada, Namibia, and Russian company ALROSA. However, according to HRW, both of these fail to be transparent with the mines in which their diamonds are sourced.

Issue in difficulty for companies to trace their supply chains

With parallels to technology companies who source small parts from many locations, the jewellery industry has very complex supply chains, as oppose to fishing or agriculture where the total product (e.g. a fish) has one source of origin. For example diamond jewellery is handled by many actors, making it difficult for companies to trace their full supply chain. From the mines, diamonds are firstly sent to be cut and polished, whereby 70% of the global diamond supply is done in India and 20% in China, reflecting their low labour costs. The next stage in a generic supply chain is to jewellery manufacturers where the products are pooled and constructed. Finally they reach the end retailers, where the US has the largest market of 40% of global sales.

A crux of the issue is in the sale after the raw extraction process because as soon as the minerals go through the first process of trade or export, batches from many sites are often mixed up. This makes the sustainably and ethically sourced gems or metals untraceable from those that are product of exploitative labour. This is ultimately caused by negligence of the mine operators in dealing with and processing their products in a way in which they can be accounted for.

Some companies have CSR programs used to give back to the community and in exchange for their land use, build major infrastructure like schools, roads, and hospitals. (Harvard) However, there is speculation around using these methods as a way to be presented as human rights compliant, as these initiatives are undercut by their lack of transparency in their daily business operations and supply chain mechanisms. Analysis of the global extraction business points to the conclusions that this industry is fuelled by profit and capital gain, whereby there is a large disconnect between those that are receiving the benefits of the jewellery business and those that are suffering. This issue is on-going because perpetrators will not have interests in alleviating the abuses from their supply chains, unless legally forced to, or compelled by their customers through suspended of business.

Resolutions

Although the majority of companies are lacking in their supply chain compliance, HRW points out that some positive initiatives are blooming. For example a number of jewellers are exclusively working with artisanal mines that comply with the Fairtrade or Fairmined gold standard coming from Latin America, driven by consumers demanding ethical sourcing. In order to be most effective, successful domestic legislation such as the UK Modern Slavery Act should be used as a blueprint to regulate national supply chains. For countries that are less likely to adopt such policies, the international literature should become involuntary, binding and regulated, to cut out any internal corruption facilitating the mining industry. Furthermore, a percentage of the capital that is gained from mines should be redirected to the local communities through education and infrastructure to deal with the long term problem of child labour in the extraction sector.

Statistics drawn from Human Rights Watch Report February 2018: The Hidden Cost of Jewelry: Human Rights in Supply Chains and the Responsibility of Jewelry Companies

 

Child Labour is Prominent in Tobacco Production Supply Chains

A farmworker rests while harvesting tobacco at Dormervale farm, east of Harare, Zimbabwe, on November 28, 2017. (Reuters / Siphiwe Sibeko)
Photo Credit: A farmworker rests while harvesting tobacco at Dormervale farm, east of Harare, Zimbabwe, on November 28, 2017. (Reuters / Siphiwe Sibeko)

Claiming to be ‘ethically sourced’, tobacco fields are one of the biggest cash crops in the developing world yet have one of the most corrupt supply chains. Tobacco farms are worked on by children labouring excessive hours for minimal or no pay, while tobacco companies reap the multi-billion dollar benefits of the industry.

Human Rights Watch conducted research in Zimbabwe in 2017, which revealed children aged 12 – 17 are employed for tobacco harvesting and processing. They reported negative health affects including nicotine poisoning, pesticide exposure, carcinogen exposure and associated immune defects, yet the workers and farmers themselves were ignorant as to the cause of their regular sickness. Despite the ongoing social consequences of child labour including exemption from education, tobacco farm labour is not regulated as ‘dangerous work for children’ in Zimbabwe.

On our analysis, this is problematic not only because of the short-term consequences on the health and social rights of the workers, but also as it fuels the longer-term demand for the toxic, pollutant and addictive recourse. This demand is rising in the vulnerable areas of Asia, Africa while decreasing in the West due to education, taxation and policy restrictions. Abolition of child agricultural labour is a high policy agenda for the new Zimbabwean government, and a fundamental step in promotion of a stable democracy throughout other developing states that are also the production sources of tobacco.

For the full report on A Bitter Harvest: Child Labor and Human Rights Abuses on Tobacco Farms in Zimbabwe, read here.