Breaking the link between exploitative recruitment and modern slavery

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

This article was originally published on OECD Insights on 3 October 2016.

Ahmed, from India, paid over 1,300 USD to a recruiter to accept a position as a driver in Saudi Arabia. However, upon arrival his employer confiscated his passport and refused to pay him although Ahmed worked 12 to 14 hour days. Benny, from the Philippines, invested over 2,000 USD in recruitment fees in exchange for the promise of a well-paid factory job in Taiwan. Upon arrival Benny’s wages were half of what was originally promised to him and after three years of working 12 to 17 hour days he barely managed to save enough to pay off his initial investment, returning home with no savings. These men’s stories are not unique. A quick scan of the website of Verité, an organization committed to promoting fair labour standards and combating exploitative recruitment practices, reveals many shocking histories of migrant workers who have been subject to abuse and fraud.

Exploitative recruitment of migrant workers often results in situations of de facto modern slavery. Recruitment can involve up to seven different middle men all charging a fee which means workers incur debts in the thousands of dollars before they even take up employment. Even in situations where employment is provided as promised, these upfront debts can mean that any wages a worker manages to save simply go back to paying off their debt to the recruiter.

Issues around recruitment of migrant workers have received particular attention in the context of the Gulf countries. In this region use of the Kafala system, a sponsorship-based employment system for migrant workers, is common. Under the Kafala system migrant worker’s legal residency is tied to their employer, giving employers power over working conditions and whether workers can change jobs, quit jobs, or leave the country. This system paired with exploitative recruitment practices leads to situations where workers, thousands of miles from home and severely indebted, are at the mercy of their employers.

However de facto modern slavery is by no means an issue limited to the Gulf region. Recent research produced by Verisk Maplecroft found that almost 60 percent of countries are at high risk of using slave labour.

slavery-index

Source: Modern Slavery Index, Verisk Maplecroft

In previous articles, I have highlighted some of regulatory approaches that nations are taking to combat modern slavery at home and throughout global supply chains, including through the UK Modern Slavery Act, trade regulations in the US prohibiting imports made with forced labour, and more generally regulations promoting increased due diligence and reporting across global supply chains to promote responsible business conduct including the EU Directive on non-financial disclosure. Additionally, earlier this year an executive order was a finalised by the Obama administration which prohibits companies from receiving US federal contracts if they recently violated labour laws. This regulation has provided even more impetus to companies to ensure that they are not linked to exploitative labour practices.

In addition, tools and standards are also being developed to target the issue of exploitative recruitment practices specifically. For example the Dhaka Principles for Migration With Dignity were launched in 2012 and provide a set of human rights based principles to enhance respect for the rights of migrant workers from the point of recruitment, during employment and through to further employment or safe return. The principles align with the UN Guiding Principles for Business and Human Rights and thus also with the OECD Guidelines for Multinational Enterprises.

Verité has developed a Fair Hiring Toolkit which provides targeted guidance around recruitment issues for various actors along the supply chain including for brands, suppliers, governments, advocates, auditors, and investors. This tool kit includes a list of red flags with regard to recruiter-induced hiring traps. For example one red flag is long ‘’supply chains’’ between the worker and employer in terms of intermediaries used in the hiring process and degrees of separation such as language barriers, cultural and social differences, and geographical distances.

Brands are also taking initiative to combat exploitative recruitment processes. Earlier this year five of the world’s largest multinationals, the Coca-Cola Company, HP Inc., Hewlett Packard Enterprise, IKEA and Unilever, launched the Leadership Group for Responsible Recruitment. This initiative focuses on promoting ethical recruitment, specifically through recognizing the employer pays principle. Under the employer pays principle, workers are never responsible for their own recruitment fees.

According to the Ethical Trading Initiative 71% of companies suspect the presence of modern slavery in their supply chains. Thus it is important to promote human rights due diligence that addresses recruitment issues throughout supply chains. In this regard the OECD has developed detailed guidance on carrying out supply chain due diligence in several sectors based off of the general principles of the OECD Guidelines for Multinational Enterprises. For example the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the global standard on mineral supply chain responsibility, provides a 5 step framework for due diligence to manage risks in supply chains of minerals including forced labour in the context of artisanal mining. This Guidance is now the leading standard for avoiding child and forced labour in mineral supply chains and has been integrated as an operating requirement in the DRC, Rwanda and Burundi.

The FAO and OECD recently jointly developed a Due Diligence Guidance for Responsible Agricultural Supply Chains which also provides due diligence recommendations to manage risks related to forced labour in high risk agriculture sectors including palm oil and cocoa. Such approaches could be applied in the context of the Thai shrimping industry as well. Additionally, the OECD is also developing a Due Diligence Guidance on Responsible Garment and Footwear Supply Chains, which provides specific recommendations for addressing risks of forced labour. This Guidance will be launched later this year and will be relevant to migrant workers in textiles factories.

Resources to help businesses identify responsible recruitment agencies are also needed. This has been one of the objectives behind the International Recruitment Integrity System (IRIS) an initiative of the International Organization for Migration. As part of its principle activities IRIS is planning to develop an accreditation framework under which members can be recognized as fair recruiters. This will be based, among other criteria, on the fact that no fee is charged to job seekers, worker’s passports of identity documents are not retained and there is transparency in labour supply chains.

A strong relationship exists between exploitative recruitment practices and forced labour. Breaking this link through promoting ethical recruitment will be very important given the vast scope of the issue as well as increasing regulation seeking to prevent these practices.  The initiatives discussed in this article provide promising ways forward. In order to effectively eradicate abusive recruitment practices companies should engage in supply chain due diligence processes which take into account these risks. Commitments to the ‘’employer pays’’ principle must be scaled up. Companies faced with significant risks with regard to these issues should follow the recommendations of the Leadership group for Responsible Recruitment and use the resources being developed through the IRIS initiative.

Useful links

OECD Guidelines for Multinational Enterprises

OECD CleanGovBiz initiative

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Game Changing Trade Regulations in US Shake Up Corporate Supply Chain Responsibility


By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

In July 2015, The New York Times published an article about forced labor on Thai fishing boats. In the article they follow the story of Lang Long, a man who was shackled by the neck, working for 3 years as a slave at sea. He was one of the many Cambodian migrant boys and men working on Thai boats that supply fish to consumers worldwide. The men featured in the article are fortunately now free, but many slaves are still involved in the production of goods for global supply chains.

Indeed modern slavery is endemic within global supply chains. In recent conversations I had with some sourcing directors of large multinational enterprises, they admit that if you look closely and deeply enough, in every major global supply chain you are likely to find modern slavery. This has fuelled political moves to fight slavery in supply chains and also created serious challenges for companies dedicated to responsible sourcing.

forced labour

In previous articles I have covered some of the innovative regulatory initiatives taken to promote supply chain responsibility (e.g. the UK Modern Slavery Act, the proposed law on due diligence in France, the Swiss referendum for a due diligence, and the EU non-financial reporting directive). Currently 8 Parliaments in the EU are calling on European Parliament to follow the French example.

Some recent developments in the United States may have even more impact on supply chain responsibility with global trade implications.

This February, President Obama signed in the Trade Facilitation and Trade Enforcement Act (H.R. 644). Section 910 of this law strengthened restrictions on the import of goods into the United States produced with forced labor, closing a loophole that existed in the Tariff Act of 1930 which allowed import of such goods if the product was not made in high enough quantities domestically to meet the U.S. demand.

This law accompanied two other moves to tackle modern slavery, particularly in the fishing industry, by the Obama administration. In addition to the new act, the administration has also enacted the Port State Measures Agreement which bars foreign vessels from accessing ports if suspected of illegal fishing. Furthermore the National Oceanic and Atmospheric Administration, which regulates fishing, announced new reporting requirements aimed at developing a better understanding among US companies of where seafood imports are sourced from.

While regulation is important, enforcement is arguably even more so. Indeed the Trade Enforcement Act is already being enforced. Recently the U.S. Customs authority issued two “withhold release” orders, preventing goods from entering the country because of suspicions that they were made using forced labor.

The first order came on March 29th against imported soda ash, calcium chloride, caustic soda, and viscose/rayon fiber that was manufactured or mined by Chinese company Tangshan Sunfar Silicon. U.S. Customs and Border Protection (US CBP) believes that these products were made by forced convict labor. The second order, on April 13th, was against imported potassium, potassium hydroxide, and potassium nitrate that is believed to be mined and manufactured by the same company using convict labor.

According to CBP Commissioner Kerlikowske: “CBP will do its part to ensure that products entering the United States were not made by exploiting those forced to work against their will, and to ensure that American businesses and workers do not have to compete with businesses profiting from forced labor.”   The Business & Human Rights Resource Center is tracking enforcement of the Act on their site.

These orders are an important part of enforcing the new ban and ensuring criminals that profit from human trafficking are not supported. Effective enforcement of this provision also provides incentives to business to protect their supply chains from forced labor to guarantee all of their imports are cleared for entry into the United States.

Recently Turkmenistan News (ATN) and International Labor Rights Forum (ILRF), partners in the Cotton Campaign, filed a complaint with the US CBP. The complaint concerns the import of cotton goods made using forced labor from Turkmenistan by companies, including retail giant IKEA. The government of Turkmenistan engages in a practice where annually farmers are forced to deliver cotton production quotas and thousands of citizens are required to pick cotton or are faced with a penalty. The complaint calls on U.S. Customs to classify cotton goods, such as the IKEA products, from Turkmenistan as illicit, issue a detention order on all imports of them, and direct port managers to block their release into the United States. CBP has yet to respond.

If the U.S. government and American businesses set a precedent that forced labor will not be tolerated, other countries are likely to follow suit. However, how U.S. government follows through on implementing the new ban, is essential to this effort.

Furthermore, given the extensive pervasiveness of modern slavery in global supply chains companies must be armed with tools to protect themselves and their supply chains from liabilities under these regulations.

Strong supply chain due diligence processes should in my opinion be an accepted defence under these new laws. This should include the notion that supply chain responsibility means often not ‘cut and run’ from risky suppliers, but ‘stay and improve’. Else these regulations could have devastating negative impacts on livelihoods of legitimate businesses operating in high risk areas. The OECD has provided guidance to companies in designing such due diligence processes. The OECD Guidelines for Multinational Enterprises (the OECD Guidelines) recommend that companies carry out supply chain due diligence to identify, prevent, mitigate and account for all adverse impacts that they cover, which include child labour and forced labour issues.  For negative impacts arising within a company’s supply chain the Guidelines recommend that companies acting alone or in cooperation with others use their leverage to influence the entity causing the impacts to prevent or mitigate the harms.

The OECD Guidelines are referenced in the statutory guidance of the UK Modern Slavery Act, which note that “they provide principles and standards for responsible business conduct in areas such as employment and industrial relations and human rights which may help organisations when seeking to respond to or prevent modern slavery.’’

In addition to general recommendations the OECD has developed more detailed guidance on how these expectations can be responded to in specific sectors. For example the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the global standard on mineral supply chain responsibility, provides a 5 step framework for due diligence to manage risks in supply chains of minerals including forced and child labour in the context of artisanal mining. This Guidance is now the leading standard for avoiding child and forced labour in mineral supply chains and has been integrated as an operating requirement in the DRC, Rwanda and Burundi.

The FAO and OECD recently jointly developed a Due Diligence Guidance for Responsible Agricultural Supply Chains which also provides due diligence recommendations to manage risks related to forced labour and child labour in high risk agriculture sectors including palm oil and cocoa. Such approaches could be applied in the context of the Thai shrimping industry as well. Lastly the OECD is also developing a Due Diligence Guidance on Responsible Garment and Footwear Supply Chains, which provides specific recommendations for addressing risks of forced and child labor. This Guidance will be launched later this year and will be relevant to migrant workers in textiles factories

Regulation of global supply chains to combat forced labour is becoming increasingly common and impactful. Recent developments in the EU followed by new regulations and enforcement by the US customs authority are putting pressure on companies to monitor their supply chains more closely than ever. As the US and EU represent that world’s most important consumption markets these pressures will extend to companies globally, and have already been felt by Chinese and Swedish enterprises in the context of the recent US detention orders.

Supply chain due diligence and transparency will be increasingly important tools for global companies in safeguarding themselves from liability in light of these new regulations. The OECD has developed guidance on supply chain due diligence processes which address a range of issues including forced labour. In order to strengthen their global supply chains, companies would do well to step up and speed up implementation of due diligence in their global supply chains.

Useful links:

Global Forum on Responsible Business Conduct, 8-9 June