ASCM Insights
Expose Modern-Day Supply Chain Slavery
By William “Rick” Crandall, Ph.D
If you are like many supply chain professionals, you wonder about the corporate social responsibility and ethical standards in the far tiers of your supply chain, particularly those in developing countries. You hope people are receiving adequate wages, have a safe environment in which to work and are given decent supervision. Yet, there is an uncomfortable reality that must be acknowledged: Slavery is alive and well in many areas of today’s supply chains. Some workers have entered debt-bondage arrangements — sometimes by being tricked and other times because they had no choice. What has resulted is a crisis that continues to elude many supply chain professionals. But there are things you can do to help put an end to it.
How We Got Here
It is impossible to determine the exact number of slaves in the world today, but the International Labour Organization estimates that there are almost 25 million victims of forced labor worldwide. In order to understand how someone becomes a slave, it is necessary to first recognize the migration patterns of workers and why they leave one nation for another. This process begins when someone departs his or her home country to seek a better economic opportunity or, in extreme cases, safety from war or political instability. In recent years, one only needs to witness the mass exodus of refugees from Syria and many African countries into southern Europe to see an example of the migration patterns.
Unethical labor agents prey on the poorly educated and those from regions of extreme poverty. These people are especially vulnerable to entering a forced labor situation and becoming a slave. They are at an even bigger disadvantage upon entering a new country, as they rarely speak the language or understand local customs. This makes them extremely easy to exploit.
People are forced to work in low-skilled jobs, such as those found in agriculture, food processing, fishing, textile manufacturing, electronics, mining and domestic work. Even if your industry is not represented here, it is likely your suppliers use core components from this list. For example, scarce metals and minerals are components to the electronics industry, and those components can go into just about anything of an electrical nature. In Thailand, the shrimp industry has harbored slavery on fishing boats that supply small fish to feeding mills, which then supply food to shrimp farms. Likewise, slavery has been found in the U.S. crawfish industry. For a brief period, it was identified in the iPhone supply chain.
Labor agents can serve a legitimate function for migrants by assisting them in navigating the complicated maze of government bureaucracies. However, this relationship is commonly exploited by dishonest agents. Also, a prospective worker will encounter at least two, and possibly more, labor agents in their transition from their home to another nation.
The first agent, who is really nothing more than a human trafficker, approaches the potential worker with promises of a good job in another country. In fact, this job is probably so detestable that few people would ever want it. High fees are charged to the potential worker, who, of course, cannot pay. However, this person is so desperate for work that he or she agrees to the arrangement and begins accruing a debt that there is very little chance of ever repaying.
The first labor agent then arranges for the migrant to cross the border into a neighboring country. Upon arrival, the worker is met by a second labor agent, another human trafficker, who immediately demands additional fees. Because the person cannot pay, this new obligation is added to the initial debt, thus creating an indentured servant arrangement. Any wages earned are allocated for food and housing for the worker, so little, if any, money can be used to pay off the labor agent debts. But these agents are indeed paid. They receive compensation from the companies buying the workers. Once that transaction is complete, the cycle begins again as the labor agents look for more people to bait and trap.
Figure 1 depicts a domestic company, on the far right, with its corresponding supply chain in tiers to the immediate left. The domestic company is often a multinational corporation, such as a major retailer or clothing brand. Its suppliers are sourced by other suppliers, labeled tier two and tier three. Of course, in the real world, supply chains can extend to many more tiers, with each move to the left giving the domestic company less control.
The April 24, 2013, Rana Plaza factory that collapsed in Bangladesh, killing more than 1,100 workers, was an example of using a secondary supplier to augment capacity. This practice is common in some sectors of the garment industry. Several major brands were surprised to find their labels being made at Rana Plaza because they had not authorized work to be done there.
The term shadow factory has been used to describe suppliers hired to augment either the capacity or production process needed by the original supplier. In the garment industry, labor-intensive activities such as beadwork, sewing and dying may be subcontracted to unregistered shadow factories. Just as with tier two and tier three suppliers, shadow factories are not monitored like a tier one supplier would be — in fact, they may not be monitored at all.
The Way Forward
Following are five clear steps to solve the problem of modern-day supply chain slavery.
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Maintain the integrity of your supply chain. Before globalization, our supply chains were vertically integrated. Now, they can extend around the world. What an awesome responsibility this is, to both the victims of human trafficking and your company’s good reputation. If just one part of your supply chain is tainted, the whole network is at risk. Therefore, step one is recognizing that fostering human rights is an essential part of being a good supply chain manager.
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Know what’s going on. Never forget that your tier one suppliers are supplied by their own suppliers, and so on. Your network may have thousands of suppliers at tier two and beyond. Begin addressing this dilemma by mapping your company’s entire supply chain — a formidable task that likely feels overwhelming. But new solutions, technologies, due diligence and analytics all can help. Research these options and network with other supply chain professionals to augment your knowledge in this area.
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Go beyond codes of conduct. Many companies will instill codes of conduct at their tier one suppliers with the expectation that the suppliers will do the same. The intent is to create a ripple effect that permeates the entire supply chain. Unfortunately, codes of conduct are rarely universally successful. Abiding by a code of conduct requires resources, which means raising the per-unit product cost. Of course, the business wants both ethical standards and affordability, but the supplier may have no idea how to achieve these twin goals. This often leads to the use of shadow factories, sweatshops and modern-day slavery.
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Tap into non-governmental organizations (NGOs) to help you maintain a slavery-free supply chain. A number of NGOs have emerged to assist companies as they work to map and monitor their networks. Verité, Know the Supply Chain and a host of others work with companies to help them take the necessary steps. Interestingly, one NGO was founded by Andrew Forrest, CEO of the Australia-based Fortescue Metals Group, after stumbling across slavery in his supply chain. The business worked with the supplier and convinced them to make changes. Later, Forrest started the Walk Free Foundation, an NGO with a mission to end slavery in this generation.
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Finally, just don’t go there. It’s always wise to stay away from questionable suppliers. This should go without saying, but many companies continue to fall into relationships with businesses that should have long ago been abandoned. Remember, it is never worth the price drop to risk doing business with a supplier endorsing modern-day slavery
William “Rick” Crandall, Ph.D., is a professor of management in the School of Business at the University of North Carolina - Pembroke. His primary research is in the area of crisis management and helping organizations cope with catastrophic events. Crandall may be contacted at rick.crandall@uncp.edu
The ASCM Enterprise Certification enables corporations to assess the ethical, ecological and economic aspects of their supply chains. Criteria focus on anti-corruption, human rights, enterprise risk management, climate strategy, product life cycle stewardship and more. Learn about the ASCM Enterprise Certification at ascm.org/enterprise.