Skip to content

Forced Labour, Human Trafficking & The FTSE 100: A review of company disclosure and recommendations for investor engagement – Anne Marie Barry, Rachel Palmer

December 5, 2015

FLChild labour, very long hours, even women being chained to their machine desks in sweatshops – these stories are commonplace and people of good will often feel powerless to stop it. ‘Clean clothes campaigns only go so far because you can point the finger at Primark but many other high street stores involve slave labour but don’t tell you about it.

It isn’t just abroad. There are factories in the East Midlands paying £4 per hour.

The report estimates that, today, 21 million people are trapped by forced labour — which generates profits of £98.25-billion per year ­14.2-million of whom are at work within the private economy.

The report recommends practical guidelines for companies with a turnover in excess of £36,000, such as appointing a human-rights ex­pert; addressing human rights in the code of conduct; and investigating the possibility of human trafficking in the supply chain, directly or by affiliation.

Good practice is highlighted at Unilever, The Arcadia Group, Project Issara, Anglo-American, Tiffany & Co., The TUI Group and the Calson Rezidor Hotel Group.

“Everyone is talking about the crime of human trafficking.The UK’s Modern Slavery Act requires businesses to wake up to the fact that trafficking is everywhere and it’s not all about the sex trade. Think hard before investing. Check out what risks companies really have in this area and what they are reporting on. That’s why

Forced Labour, Human Trafficking & The FTSE 100 is such a valuable tool – an extraordinary resource for everyone who cares about good business, ethics and human rights.” – Steve Chalke

Trafficking abuses people for financial gain. It surfaces in legitimate economies in the supply chain that brings to the end consumer low priced food and commodities. This report challenges us to reject complicity in modern day slavery and speak loudly for a world where all can work in safety and with dignity.” Ms Janette O’Neill CEO/General Secretary of Us (United Society)

Modern slavery is a scourge that grossly undermines the inherent and God-given dignity of the human, and we must work urgently to eradicate it from our world. This report highlights that in our globalised economy, any business can be exposed to slavery through its supply chain. Companies that have conducted audits have been shocked to discover that they have been unwitting beneficiaries of slave labour. The transparency in supply chains measure in the Modern Slavery Act is a call to action that I urge British business to seize.” Justin Welby

Quotations:

FTSE 100 companies can play a significant role in confronting this crime, both in the UK and globally.

With a combined value of £1,700 billion, FTSE 100 companies represent approximately 80% of the market cap of all listed UK companies.

Further, unit trusts, insurance companies, financial institutions and pension funds collectively hold close to 30% (£500 billion) of the FTSE 100 companies.

It is clear that they too have a vital role to play.

Forced labour and human trafficking can occur in business operations in a variety of ways:

Directly – by employing a trafficked or exploited person within the business or through a subcontractor or recruitment agency;

Indirectly – through illegal subcontracting occurring within supply chain or through use of products or materials which have been produced by people under conditions of forced labour;

By association – where trafficking occurs within the local area as the result of a company’s operations, or as a secondary consequence of a company’s actions.

In light of new legislation which focuses on ‘modern slavery’, companies are now at risk not only from reduced consumer confidence but also legal challenges, both of which could have significant financial implications;

Investors can encourage companies to be aware of the growing issue of human trafficking, how it is likely to affect companies and how to put in place adequate measures which go beyond a ‘tick-box’ exercise that will mitigate risk;

Investors probing specific mitigation processes that companies have (or do not have) in place can be a very effective way of determining commitment to anti-human trafficking activities and bringing positive changes within company operations

In 2014 The Guardian newspaper published a series of articles focussed on the situation of endemic slave labour in the production of seafood in Thailand. The coverage highlighted the existence of supply chain links to UK supermarkets and confirmed that the supermarket industry as a whole is well aware of this issue and has been for some time. One large American corporation has recently had a lawsuit filed against it for ‘making false claims about illegal conduct in [its] supply chain’ by purchasing farmed prawns from Thailand under the knowledge that they are produced by people under conditions of slave labour.

Food Retailers – Collaboration: Retailers in high-risk areas should collaborate as much as possible with organisations which have a focus on researching the pertinent issues, investigating how the issue of forced labour in the fishery sector can be tackled, and with those offering support regarding supply chain management, such as the Ethical Trading Initiative (ETI) and Seafish (Risk Assessment for Sourcing Seafood (RASS))

Disclosure: Food retailers should acknowledge the high risk of forced labour and trafficking which is prevalent within the fisheries sector, specifically within high-risk countries. Whilst the majority of supermarkets within the FTSE 100 are taking part in Project Issara, this goes unmentioned in their disclosure documents. It is important for investors to know what progress is being made by supermarkets with regards to this project. In cases where regulation of the industry is problematic, increased disclosure could include company reporting on the extent to which human rights are being protected by their suppliers, and disclosing any steps they have taken to prevent human rights abuses from occurring.

RECOMMENDATIONS

Slave Fisherman in the Thai Seafood industry In June 2014 The Guardian reported the story of Myint Thein, a 29 year old Burmese fisherman who was deceived into paying a middleman to smuggle him across the border into Thailand, only to discover he had been sold and enslaved to a boat captain. Myint Thein has been forced to work 20 hour days for the past two years as a slave and has endured beatings from his Thai captain. He explains ‘when I realised what had happened, I told them I wanted to go back […] But they wouldn’t let me go. When I tried to escape, they beat me and smashed all my teeth.’ The fishing boat that Myint Thein is crewing on catches inedible and infant species of fish known as “trash fish” that are ground into fishmeal for Thailand’s farmed prawn industry. The supply chain connects the slave labour to the fishmeal that is used to feed prawns that are sold to UK and US retailers, making it likely that Myint Thein’s exploitation results in a product that is purchased by shoppers in the UK. Many of the slaves like Myint Thein told the Guardian they were being fed only one plate of rice a day, and that those too ill to work were sometimes thrown overboard. Many of these fishing ships stay out at sea for years at a time and trade slaves from one boat to another. The supply chain links these slaves to many international supermarket chains

tens of thousands of children are found in the small scale gold mines of Africa, Asia and South America, with may be as many as 65,000 children involved in mining in Peru, Bolivia and Ecuador alone, and equally large numbers in countries of western and central Africa. The extraction phase of the mining process is where the worst forms of exploitation can take place and the risk of trafficking is highest. Children

are at risk of explosions, rock falls, tunnel collapse, dust and toxic gas, and many children in small-scale or informal mining often do not have the necessary equipment or preparation to ensure a minimum level of safety. Gold miners face the added

risk of mercury poisoning as the toxic chemical is used in the extraction phase to separate the gold from the ore. Mining work employing children is generally seen as one of the worst forms of child labour due to its posing a great risk to the health

and wellbeing of the child – it falls into the category of that stated in the ILO Convention No.182 as ‘work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children.’

there is a significant increase in trafficking for sexual exploitation and labour exploitation during large sporting events, such as the Olympics and World Cup. The huge influx of tourists increases demand for sexual services, as well as a large and sudden spike in the need for accommodation and staffing, resulting in a workforce made up of agency staff and temporary employees, increasing use of possible unscrupulous labour providers.

Suggested Questions for Fund Managers and Pension Fund Trustees

If your investments are held by investment managers or pension funds, you can ask the following questions to ascertain the extent to which they are raising concerns about forced labour, slavery, human trafficking, and the worst forms of child labour with the companies in which they invest your money. This will encourage them to do more in this respect.

What are you doing to ensure that the company in which you are investing on my behalf is taking adequate measures to ensure that forced labour, slavery, human trafficking and child labour are not present within its supply chain?

With how many companies have you raised concerns or asked questions about the risk of forced labour, slavery, human trafficking, and child labour either within their own operations and/or those of their suppliers?

In what ways have you engaged with companies on the issue of modern slavery?

How will you be monitoring companies’ compliance with the Modern Slavery Act?

In what ways have you engaged with national and international policy makers on busin ess and human rights agendas?

What industries and asset classes do you consider to be higher risk for the incidence of modern slavery?

The report is available online here

return to the home page

Advertisements
Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: