This page presents an introduction to and analysis of the dilemma. It does so through the integration of real-world scenarios and case studies, examination of emerging economy contexts and exploration of the specific business risks posed by the dilemma. It also suggests a range of actions that responsible companies can take in order to manage and mitigate those risks.
“How can a company practically and responsibly identify and address problems of forced labour in lower tiers of its supply chain, particularly when it extends into areas or sectors known to use forced labour?”
The dilemma for business is how to address the presence of forced labour within its supply chain responsibly as it is can be difficult to define as well as detect. Forced labour often does not occur within a company’s operations as stringent procedures will be in place to ensure good working practices. However, forced labour can be found further down the supply chain, especially when multi-national companies (MNCs) source from countries where there is a high amount of poverty and a lack of legal protection and/or where it is common practice to use recruitment agencies and labour providers, where there is no legal requirement for such businesses to be registered or meet certain standards.
A factor that makes forced labour difficult to detect relates to the presence of migrant workers, particularly those with no or false documentation as they are vulnerable and reluctant to admit to or report their forced labour status. More challenging circumstances arise where labour is trafficked and transported from their home countries, especially where families rely on victims for financial support.
According to Anti-Slavery International, discrimination is one of the root causes of slavery in the 21st century. However, it is also the vulnerable and poorest members of the community, including immigrants, minorities, children and women who are victims of forced labour. People in these groups are often easily exploited as it can be difficult for them to find employment opportunities and they are often forced to work in sub-standard working environments.
Furthermore, forced labour can take different forms: workers may still be paid but are bonded to debts that they cannot work their way out of; some are trafficked for both sexual exploitation and forced labour abroad without means to return to their home state and some are forced by the state to undertake labour vital to the country’s economy.
A 2 November 2006 Bloomberg article, Slaves in Amazon Forced to Make Material Used in Cars,1 reported that workers found in government raids in the Tucurui area of the Brazilian Amazon had not collected wages in several months and could not afford to leave. It is reported that some workers were 800km from home, working in extreme heat without access to medical facilities or clean water. These workers were burning hardwood to produce charcoal. This charcoal is used in the production of pig iron, which is then used in the production of steel for use in the manufacturing of a wide range of goods made by MNCs, including auto parts, tractors, sinks and appliances.
MNCs including General Motors, Kohler, Toyota and Whirlpool have all reportedly purchased steal made from pig iron produced by forced labour, for the manufacturing of their products. Steel made from pig iron that is produced by forced labour is currently hard to trace as it is often sourced from a third party.
The dilemma for a company is how to procure steel in an ethically responsible manner when it operates in countries where the use of forced labour is significant.
An Anti-Slavery International campaign has accused large retailing companies, including Tesco, Walmart-Asda, H&M and Zara of being complicit in purchasing products made from Uzbek cotton which is picked by forced child labourers. An estimated two million children between the ages of 11 and 17, harvest cotton in Uzbekistan under conditions described as forced labour.2 Unlike cases where children work on family farms, the Uzbek case is different in scale, organisation and government complicity. Each year, for example, the government closes schools, hospitals and offices for three months in order to boost the workforce available for the annual cotton harvest with student, teachers and government employees participating in the process.
The Responsible Cotton Network says some school administrators have used physical abuse and public humiliation to ensure that the government-imposed quota of 30-60 kilograms of cotton is picked per child per day, depending on their age.3 Children receive little or no pay for their work, and are often only provided with food. Uzbekistan is the world’s third largest cotton exporter and earns approximately US$1 billion annually.4
As yet, there is no international mechanism to properly trace the source of cotton, although such a process is in the development stages. This makes it a complicated undertaking for any company that has a policy stating that it will not knowingly source cotton to practically address this policy.
On 21 April 2008, a Newsweek article, entitled Lured into Bondage,5 reported that foreign workers at a Malaysian company, Local Technic Industry were subject to bonded labour conditions. This company makes cast-aluminium bodies for the hard-disk drives, which are purchased by western companies (including Western Digital) who distribute them onto the US market. It is reported that many major computer companies purchase these hard-disk drives.
According to the report, migrant workers were lured into working in Malaysia. Upon arrival these workers (by law) are forced to sign multiple year contracts and surrender their passports to their employers. If these migrant workers try to leave work during their employment they may be arrested and imprisoned by the authorities. These workers’ living expenses are deducted from their wage leaving very little at the end of the pay period. One worker, for example, made US$14 a month after all living expenses and taxes were deducted. This amounted to an annual salary of US$504.
The dilemma for an electronic company is how it can trace the use of its many electronic components to ensure that it does not source from companies that are likely to hire forced labour.
According to the International Labour Organization (ILO), forced labour exists in both the developing world and in industrialised countries. International standards prohibit forced labour and it is illegal in most countries. The occurrence of forced labour and its prevalence is often hidden, occurring at the margins of society, and amongst vulnerable groups.
High risk sectors include those that are labour-intensive with rapid turnover rates and seasonal shifts such as agriculture, construction, fishing, mining, the making of textiles and garments and some parts of the service sector.6
Companies may come across this dilemma in their supply chain where:
The hidden nature of forced labour and its many forms can add to the difficulty that companies face in addressing this dilemma. Forced labour can take several different forms, including:
Bonded labour: Where workers’ wages are forcibly channelled into paying for work-related goods and services, such as transportation, food and shelter. As a result they are “locked” into accumulating debt by exploitative job recruiters and/or landowners, and are forbidden from leaving the workplace. Workers' wishing to leave are often threatened by the employer, or find it difficult to leave due to the remoteness of the worksite. This occurs in many countries including Bolivia, Brazil, Côte d’Ivoire, Guatemala, Mexico, and Togo.11
Compulsory work: Where people are required, often by the government, to work on certain projects. In Uzbekistan, for example, children are forced to harvest cotton by the government with little or no compensation. Schools are often closed down during this time. The Environmental Justice Foundation claims that companies including H&M, Marks & Spencer and Zara have all purchased clothing made from Uzbek cotton.12 Similarly, Myanmar’s regime also forces villagers into working on large infrastructure projects.
Prison labour: Where convicts are forced to undertake certain labour projects such as road building, maintenance, etc. or work for private enterprise for no or little compensation. Individuals in this category may include prisoners of conscience or prisoners being “re-educated” to manufacture garments or components for electronic goods. On 17 August 2005, the China Labour Bulletin alleged that Deutsche Bank, HSBC, ING Merrill Lynch, Morgan Stanley and UBS hold shares (on behalf of clients) in a wig making company in China using prison forced labour.13
Trafficking: Where individuals are forced or tricked into going somewhere, often to other countries, by exploitive recruiters or companies with the promise of work. Once they are taken out of the country they either find themselves working in a completely different job or the terms of their contracts have unilaterally changed. Often, in these situations, employers hold identity papers or wages, creating a situation where workers cannot leave. In many instances, victims of trafficking are afraid of the consequences of approaching authorities due to their immigration status and/or threats and misinformation conveyed by the traffickers.
The provision of wages or other compensation does not necessarily indicate that labour is not forced. In Brazil, for example, workers are often recruited by prospective employers who promise them jobs in other areas of the country.14 Typically, in the agricultural and manufacturing sectors, the contracts require that the worker pay for the transportation to the work site which may be hundreds of miles away, creating a debt. Because the wages are very low, the worker is often unable to repay the debt and is stopped by force or threat from leaving the job.
The following chart from the ILO is useful in identifying forced labour:15
| Lack of consent to work (the route into forced labour): | And | Menace of penalty:(the means of keeping someone in forced labour): |
| Birth/descent into “slave” or bonded status | Physical violence against worker or family or close associates | |
| Physical abduction or kidnapping | Sexual violence | |
| Sale of person into the ownership of another | Threat of supernatural retaliation | |
| Physical confinement in the work location in prison or in private detention | Imprisonment or other physical confinement | |
| Psychological compulsion, i.e. an order to work, backed up by a credible threat of a penalty for non-compliance | Financial penalties | |
| Induced indebtedness (by falsification of accounts, inflated prices, reduced value of goods or services excessive interest charges, etc.) | Denunciation to the authorities (police, immigration) and deportation | |
| Deception or false promises about types and terms of work | Exclusion from future employment | |
| Withholding and non-payment of wages | Exclusion from community and social life | |
| Retention of identity documents or other valuable personal | Removal of rights or privileges | |
| Deprivation of food, shelter or other necessities | ||
| Shift to even worse working conditions | ||
| Loss of social status |
Examples of scenarios companies might face when operating in emerging economies include:
Bangladesh: Throughout the country, the US Department of State's 2009 Human Rights Report claims that entire families are subjected to bonded labour. Some children are forced to work in the fishing industry. The penal code prohibits forced and bonded labour. Penalties for employers found guilty of using forced labour range from a fine to one year’s imprisonment. These penalties do not discourage the practice. Furthermore, the government does not effectively enforce prohibitions against forced labour.
Large numbers of Bangladeshi women and men voluntarily migrate for work to countries such as Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates, some find that illegal fees imposed by employment agencies subject them to bonded labour situations. Others are induced into forced labour through fraudulent job offers.
Brazil: Whilst forced labour is prohibited by law in Brazil, it remains a serious problem. According to the US Department of State's 2009 Human Rights Report, estimates of forced labourers range from 25,000 to 100,000 workers. Violations tend to be concentrated in sectors which rely on internal migrant labour.
Human Rights Watch’s Submission to the Human Rights Council dated 6 April 2008 reported that, since 1995, the government has freed approximately 26,000 workers deemed to be working in conditions analogous to slavery. The vast size of the country also makes it hard for the limited number of inspectors to carry out their work effectively.
China: A number of laws prohibit forced labour and it is reported that new forced labour laws have reduced incidence of the practice.16 However, according to the US Department of State,17 forced labour persists in rural areas and the industrial sector. The ILO reports that forced labour is frequently found in factories producing various consumer goods for export, such as textiles, footwear, radios, television, sporting equipment, and many other consumer items.18
Unskilled workers are often subjected to debt bondage conditions. The US Department of State reports that it remains common for employers to withhold wages. Often, employers require unskilled workers to deposit several months’ wages as security against them departing early from their labour contracts. Although this practice is illegal, is not adequately policed by the government.
India: Despite prohibitions in the law pertaining to forced labour, it is widely practised. Employers found to be using forced labour can be sentenced to up to three years in prison. However, the US Department of State’s 2009 Human Rights Report says that successful prosecutions are rare. Similarly, a lack of adequate resources and a social acceptance of bonded or forced labour, particularly of the Dalit or ‘scheduled castes,’ also hinders government efforts to combat forced labour.
NGOs estimate there are between 20 and 65 million bonded labourers in India, including a large number of children. Bonded labour is prevalent in agriculture, but also found in quarrying, brick making, rolling ‘beedis’ and carpet weaving.19
Mexico: Although domestic law prohibits forced labour, the US Department of State20 reports that forced labour commonly persists in rural areas as well as in the industrial sector. Many children and immigrants, who are the most vulnerable to forced labour, are subjected to agricultural servitude and labour exploitation, particularly in southern Mexico. Furthermore, trafficking for forced labour is frequently recorded, particularly in factories or the agriculture sector. Mexican men, women, and boys are trafficked into the United States for forced labour, often as labourers in the agricultural industry.21
Pakistan: The law prohibits all forms of forced labour including bonded labour and slavery. However, local NGOs report that in 2009, one million people were involved in some form of bonded labour, the majority of which were in Sindh and Punjab province.22 The agricultural sector is widely known for its use of bonded sharecroppers and labourers. Other forms of bonded labour are found in the brick, carpet and fishing industries. In some rural areas it can also be found in the agricultural and construction sectors.
The government and the ILO have implemented a Special Action Programme to combat Forced Labour in Pakistan. This programme was conceived in 2001 and follows a three tier strategy, 1) strengthening legal and policy frameworks, 2) increasing the capacity of relevant stakeholders so they are able to adequately address the matter, and 3) implementing initiatives to prevent forced labour as well as rehabilitate freed labourers. In 2002, the Programme assisted a group of around 700 families released from debt bondage, mostly in the agricultural sector.
Russia: While the law prohibits forced labour, reports suggest that around one million illegally employed migrants have had their passport or identification confiscated and are forced to work without pay.
A 2008 ILO working paper23 on forced labour in Europe found that in Russia debt bondage is closely linked to the non-payment of wages, illegal wage deductions and corruption as well as criminal networks. Forced labour is prevalent in entertainment, domestic work and construction, particularly for irregular migrant workers.24 This is due to the demand for low skilled and often seasonal labour, as employers require workers at short notice and according to customer demand.
On an international level there are instruments that prohibit international forced and bonded labour which are used by most countries as guidance in their own national laws.25 Instruments include ILO Convention No. 29, on Forced Labour (1930) and ILO Convention No. 105, on the Abolition of Forced Labour (1957).
These covenants define the conditions and circumstances that amount to forced labour, and serve as point of reference for national legislation that conforms to international standards.
Forced labour is illegal in most countries and breaking national law may carry civil and/or criminal sanctions for a company. MNCs are not as likely to face criminal sanctions as forced labour is usually found further down the supply chain. However, MNCs could be sued for being complicit in the use of forced labour.
Legal action, either civil or criminal, not only negatively affects a company's brand image but may also result in high legal costs as well as fines or compensation, as well as the use of valuable management time. Some cases include:
John Doe I et al. v. Unocal Corp: This case was brought against the US Company Unocal, for alleged complicity in the use of forced labour in Myanmar during the 1990s. Unocal was part of a joint venture with the government of Myanmar to build a US$1.2 billion pipeline through Myanmar and neighbouring Thailand. Troops from Myanmar provided security and built infrastructure, using forced labour from local communities.
In 2005, a US$7.2 million settlement was reached whereby Unocal agreed to compensate the victims and set up a fund for human rights projects. Such projects included establishing health care, education and other improvements contributing to the standard of living of the general population.26
Ramchandra et al. V. Daoud & Partners, KBR et al.: In August 2008 a joint action was filed by family members of 13 men who were killed in Iraq in 2004 after being trafficked into the country through an agency. According to family members, all men believed that they were being recruited to work in hotels and restaurants in Amman, Jordon.
Instead it is alleged that a Daoud & Partners, a Jordanian security company, confiscated their passports after they arrived in Jordan. Later they were trafficked to Iraq to work on a US military facility associated with US company, Kellogg Brown & Root (KBR). It is claimed by the plaintiff’s that KBR and Daoud were responsible for the trafficking scheme – from recruitment in Nepal until their arrival in Iraq. This case is still pending before the court.
This federal case followed a 2006 action filed against Daoud and its insurance company by nine of the victims’ families in the administrative court. This court has jurisdiction over cases that involve workplace injuries and deaths at overseas military bases. In April 2008, the judge found that the men’s families were entitled to death benefits.
Even where allegations of complicity do not result in legal action, companies can still face a range of non-legal risks if perceived to be complicit in using forced labour.
These include:
For a company to ensure the responsible elimination of forced labour within supply chains it should first look to comply with national laws. Where national laws are set lower than international standards on forced labour then a company should strive to meet these higher standards. It may be advisable for a company to undertake human rights due diligence to a level commensurate with the risks of a company discovering forced labour within its supply chain.
It is recommended that due diligence is undertaken when a company sources from countries and sectors where there is a high risk of forced labour being used within its supply chains. Due diligence may be then be used to discharge its responsibility to respect human rights. This might include conducting impact assessments and social audits to gauge the likelihood and nature of forced labour within its supply chain.
Companies can seek specific guidance on this and other issues relating to international labour standards from the ILO Helpdesk. This aims to help company managers and workers understand the ILO approach to socially responsible labour practices and to assist in the development of good industrial relations.
Other actions that responsible business might take include:28
Having an explicit policy prohibiting the use of forced labour as a solid point of departure. As forced labour is often found further down supply chains it may be advisable to integrate these policies into supplier codes of conducts or to make the prohibition of forced labour a contractual obligation of business partners and suppliers. A human rights policy may commit the company to:
The company should:
As well as ensuring that there are legitimate contracts for its own employees, a company may choose to include specific requirements in codes of conduct requiring that suppliers and business partners provide their employees with legitimate labour contracts.
A company may provide suppliers with a standard employee contracts, which:
It is important to note that employment contracts presented by the supplier to a company may be fictitious or fraudulent. It may be advisable for a company to audit these contracts regularly, ensuring that they are in-line with other employment records. Furthermore, a company should be able to privately question suppliers’ employees on the status of their contracts to seek clarification and allay any suspicions of fraudulent practices.
A company can train suppliers and business partners on the company’s policy and procedures in relation to forced labour. It can also join sectoral organisations that provide training programmes, as it often can be more commercially expedient for the company.
Training can include:
Sectoral organisations, such as the International Cocoa Initiative (ICI), provide training to workers and suppliers, as expenses can be shared across a group of companies. This training sensitises suppliers and workers to change their perception of forced child labour as well as practical skills to help combat labour problems on the ground. The ICI operates in Ghana and Côte d’Ivoire and is led by the cocoa producing communities in the countries. Its training activities include people from civil society and the public and private sectors on the practical skills needed to combat the issues on the ground.
Social audits can be a useful tool to investigate whether suppliers are abiding by their contracts and the supplier code of conduct. These audits could include interviews with workers and managers, a review of company documents and an inspection of the workplace. When problems are found, corrective action should be taken by the company.
Audits of suppliers can be undertaken by company employees or third-party auditors to determine whether:
Audits could include:
When forced labour is found within the supply chain, a company acting responsibly can ensure that freed workers receive enough support in order to reintegrate into society in a positive way. Often these workers are the most vulnerable members of the community - poorly educated, disabled, migrants or victims of trafficking that cannot speak the language or fear deportation if they report human rights violations to the authorities. With the cooperation of local partners and/or the government, a company can assist released forced labourers in finding alternative sources of income and employment.
A company could do this by providing:
The Citizen’s Charcoal Institute in Brazil rehabilitates workers that had been subjected to forced labour and provides them with skills training. It also works with the Ministry of Labour and Employment to find jobs for rescued workers. Rehabilitation may include attending to any medical conditions that these workers may have sustained while working as well as working with local partners to find other forms of opportunities for employment.
MNCs can sign up to multi-stakeholder initiatives designed to develop a broader, more comprehensive response to the problem of forced labour.
Multi-stakeholder initiatives such as the International Cocoa Initiative, Responsible Cotton Network and the Citizen’s Charcoal Institute, serve as forums where a wide range of stakeholders, including trade unions, law enforcement authorities, NGOs, labour inspectorates and other groups can collaborate to resolve issues related to forced labour. These initiatives are designed with efficiencies of scale in mind and are often supported by local/state government, which effectively reduces costs and any associated risks.
The Responsible Cotton Network is an example of a stakeholder initiative set up by brands, retail associations, investors and civil society working collaboratively to halt the use of child forced labour in Uzbekistan. It has attempted to achieve this objective by seeking to influence policy makers in Uzbekistan through diplomatic channels. However, it has also resulted in retail and clothing companies ceasing to purchase Uzbek cotton.
Almost all member states of the ILO have ratified ILO Convention No. 29, on Forced Labour (1930) and ILO Convention No. 105, on the Abolition of Forced Labour (1957). It is important to note that both Convention No. 29 and No. 105 form part of the ILO’s “core conventions”. Convention No. 29 establishes the fundamental principle that forced labour is punishable as a criminal offence. No. 105 prohibits forced or compulsory labour in certain situations. Finally, ILO Convention No. 182, on the Worst Forms of Child Labour (1999) defines what constitutes this category of child labour, such as subjecting children to slavery, serfdom or debt bondage, and exposing them to work. These forms of labour are likely to harm their health, safety and sense of morality.
According to the Convention No. 29, forced labour is “work or service that is exacted from any person under the menace of any penalty, and for which that person has not offered himself or herself voluntarily.”31 The “menace of any penalty” does not have to be physical punishment or constraint; it can take other forms, such as the loss of rights or privileges.32 Victims of forced labour are often prevented from terminating employment at their discretion.
ILO Convention No. 29 excludes certain forms of labour which is not offered voluntary, including work:
This Convention has been ratified by 174 countries, with the notable exception of South Korea.
ILO Convention No. 105 on the Abolition of Forced Labour prohibits the use of compulsory or forced labour in the following situations:
ILO Convention No. 105 has been ratified by 169 countries. Interestingly it has been denounced by Malaysia and Singapore. Other countries that have not signed this Convention include China and South Korea.
Companies operating in emerging economies may encounter forced labour. According to the Maplecroft Forced or Involuntary Labour Index 2012, the 10 highest risk countries are:
| Myanmar | North Korea |
| Somalia | Sudan |
| Eritrea | DR Congo |
| Afganistan | Chad |
| Mauritania | China |
According to ILO estimates, globally there are 12.3 million people who are victims of forced labour.34 Of those approximately 9.8 million are exploited by private individuals and enterprises. This includes more than 2.4 million trafficked victims who are used as forced labour.35 Children under 18 are thought to represent 40-50% of all forced labour.36
The poor and vulnerable are the most susceptible to forced labour, such as migrants, children, indigenous peoples, women and the disabled. Women and girls, for example, represent 56% of victims forced into economic exploitation.37
According to Anti-Slavery International, discrimination is one of the root causes of slavery in the 21st century. “For example, the vast majority of bonded labourers in India, Nepal and Pakistan are those who are considered to be of "low" caste, indigenous people or those from other minority groups, including religious minorities. Similarly, caste and ethnic status underpins the use of slavery in Niger, Mauritania and Mali, where tens of thousands of people are ascribed a slave status at birth and are then considered to be the property of their "masters" who force them to work without pay. In the Republic of the Congo, Paraguay, Bolivia and Peru it is indigenous groups who are mainly affected by forced labour.”38
Other human rights that are typically associated with forced labour include the:
Right not to be subjected to torture, cruel, inhuman and/or degrading treatment or punishment (ICCPR, Article 7): By its very nature, forced labour often involves the use of degrading treatment and the “menace of penalty” forcing people to work. Security forces employed by the company may be using abusive practices or threats to coerce people into undertaking forced labour.
Rights of protection of the child (ICCPR, Article 24): Forced labour may involve entire families working to pay off a debt. There are also cases where children are trafficked for the purpose of forced labour.
Right to enjoy just and favourable conditions of work (ICESCR, Article 7): People working under conditions of forced labour regularly work excessive hours, often for little or no pay. They also are often forced to work under dangerous and unsafe conditions. Due to the very circumstances in which they are employed, their working conditions are unlikely to be just or favourable.
Right to an adequate standard of living (including access to adequate food, clothing, housing and water) (ICESCR, Article 11): Workers who are victims of forced labour often encounter limited access to adequate food, clothing, housing and living conditions (including water and sanitation). This is particularly the case because many workers will be kept in closed facilities subject to the control of the owners of the facility who show little regard for their wellbeing.
Right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay (UDHR, Article 24): Given the nature of forced labour, workers who are coerced into employment are often denied access to rest and leisure.
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