The call across the food & beverage industry is to get certified to one of the several Global Food Safety Initiative (GFSI) scheme options to ensure safe and high quality food. GFSI-benchmarked schemes require higher safety standards than what the government regulatory bodies enforce and certification to a GFSI approved schemes will help to drive food safety programs and processes toward FSMA compliance. Read this article to learn how adherence to GFSI approved schemes can take you one step closer to meeting FSMA Mandates.Download an Insight
Globally 20.9 million people are victims of forced labor and 68 per cent among them are from private sectors such as manufacturing, construction, agriculture and services. Today, the growing complexity in the global supply chain makes it challenging for organizations to gain a complete picture of their operations and to detect and prevent incidents of human trafficking and forced labor.
Forced labor, which is also known as bonded labor or debt bondage, is the most common modern manifestation of slavery. According to ILO Forced Labor Convention 1930, it is defined as ‘all work or service which is exacted from any person under the menace of any penalty and for which said person has not offered himself voluntarily’1.
The three elements involved here to threaten the forced labor include physical, psychological and the increasingly common financial pressure. With the crushing burden of legal debt, finally the victim is either coaxed or deceived against their free will to take the job or if they’ve been voluntarily engaged, they cannot subsequently leave by providing reasonable notice or contractual notice without forgoing payments or other entitlements that they have achieved. So they’re essentially forced to stay in the job against their will.
Human trafficking, on the other hand, is known as the process of forced labor. It involves the recruitment or transportation of individuals through use of force, deception or abuse of some power or vulnerability in order to exploit them for labor purposes, for domestic servitude, and other forms of slavery such as forced prostitution. Although not all forced labor has been trafficked, every trafficked victim typically is subjected to some form of exploitation.
Presently, 160 countries globally, are either source, transit or destination countries for human trafficking and forced labor. The greatest concentration of human trafficking and forced labor occurs in Asia Pacific, followed by Africa and Latin America. The Middle East is another prominent area for forced labor.
Labor migration and the menace of labor broker industry:
Labor shortage in industrializing or developing countries and labor surplus in certain countries with unemployment or underemployment leads to labor migration. The benefits of labor migration are several; receiving countries keep Foreign Direct Investment (FDI) business, employers get skilled workers, migrant workers get jobs and acquire new skills, and sending countries get migrant remittances.
However, the growth of the labor broker industry is an unintended outcome of this process. This is a network of intermediaries who extend from the receiving countries all the way back to a myriad of sending countries. These networks are typically informal. They are unregulated, and operate very often in the shadows. The vulnerability of desperate migrant laborers is often exploited by them, facilitated by corrupt government officials, largely in sending countries and at times, in receiving countries.
A Taiwan electronics factory, which is a tier one supplier to one of the world’s leading technology brands, had outsourced the recruitment, selection and management of its foreign contract workers to labor brokers, who had a network of labor brokers from around 12 sending countries. Now brokers from the sending countries selected and sent the migrant workers to the factory in the receiving countries. On behalf of the employer, the broker was responsible for procuring visas, work permits and other documentation that’s required. However, there was not much supervision of the brokers.
Now, the migrant workers most often had to borrow money from the brokers themselves, at a 60 per cent annual interest rate to pay high placement fees to the brokers. At Taiwan, they were presented real contracts, different from the ones they had signed in their homeland. These migrant workers away from home with huge debt were left with no choice, but to accept the contract. Moreover, their passport documents were confiscated for safekeeping. They also had to pay a security deposit, which is a payment withheld from their wages. If they voluntarily terminate their contract before time, they had to forgo those deposits. Thus if they leave prior to conclusion of the two year contract, they were to suffer significant financial penalty and a crushing debt.
The deep-rooted problem:
There is a host of reasons that lead to this kind of situations. The sending countries have low bargaining power. Labor brokers, in both sending and receiving countries are not regulated, and it’s a highly profitable business for them as they can charge exorbitant fees to the contract workers who typically have imperfect information, and low levels of education.
The receiving countries have inadequate regulatory frameworks and they view migrants as potential illegal immigrants. Thus their only concern is to make sure these laborers return home at the conclusion of their contracts. Then employers in the receiving countries who have fluctuating labor demands are happy to outsource the administrative burden associated with the recruitment, selection, movement and management of labor to brokers. Thus the entire system unfortunately is lubricated by corruption, collusion and in many cases criminality.
The risk to an organization from forced labor can be legal, reputational, financial and trade-related. While there are several domestic frameworks that aim to curtail forced labor, such as The California Transparency in Supply Chains Act 2012 , much needs to be done to address this issue.
Figure: Public disclosure of The California Transparency in Supply Chains Act 2012
This executive order, starting from September 2012, against trafficking of persons in federal contracts, will not just be limited to the Government contractors, but will hopefully be extended to their counterparts in the private sector, soon.
The executive order basically requires the regulatory council to amend existing federal contracting regulations. This includes specific enhanced prohibitions on human trafficking that applies to all the federal contract, detailed compliance plans and annual certifications, self-reporting of violations, and a wide range of sanctions for non-compliance including subcontract termination, contract termination and ultimately contractor suspension.
For contracts that are performed overseas, there are specific requirements including subcontractor training, reporting mechanisms, and recruitment and wage plans that prohibit the charging of recruitment fees to employees.
Sample Measurable Standards
How should companies respond?
Companies that have well developed anticorruption or compliance programs should follow a systematic risk based approach. It starts with a comprehensive risk assessment, where first the geographic ‘hotspot’ of a company’s operations are traced and then ‘red flags’, ie, the presence of migrant labor from specific sending countries are identified. Now, a focused investigation in high risk facilities is done by looking at the extent to which labor brokers manage the process on behalf of a company’s foreign subsidiary, franchisees, or suppliers. Ultimately the key here is labor traceability. And organizations need measurable implementation standards for their suppliers so they know what specifically is required of them and what is prohibited.
The next step is to have a detailed compliance plan with specific policy commitments, codes, measurable standards and reporting mechanism. The need now is to train internally as well as communicate the policies to the supply chain and monitor, audit and review the ‘red flags’ periodically.
Best Practices: Global Food Company
When one migrant worker from the supplier’s facility approached a quality control employee of a global food company who was on a visit, for help saying he was being withheld against will, incidents of forced labor came into view. The matter was escalated to the legal department and CSR group.
A review of demographic information collected during facility audit highlighted concentration of migrant workers in particular receiving countries. A comprehensive risk assessment uncovered illegal fees, deception about terms and conditions, passport retention, financial penalties etc. The supplier code of conduct and audit protocols were revised and the program is currently being rolled across the entire region to their internal staff, suppliers and auditors. A series of one day workshops are being held where the company is engaging their suppliers to voluntarily develop action plans to address these issues in their facilities and in their particular sectors and business. Since the organization has thousands of suppliers, it conducted online rapid risk assessment to fit suppliers with highest level of risk.
Effective programs to detect and prevent human trafficking in supply chain: Leveraging Technology
With limited money, resources, time and people, organizations need to make smart choices of utilizing resources so as to achieve desired results. The need now is to automate and integrate different programs with technology. An integrated program can facilitate a robust supplier hierarchy, support risk management efforts by determining high-risk regions and suppliers, guide policy and compliance management, support education and capacity building, and implement risk-based verifications and preventive actions.
It is important that policy and compliance management, legal, corporate and Corporate Social Responsibility (CSR) programs are integrated and driven forward against a common objective. Organizations must adopt a risk-based approach to their assessments and due-diligence activities, and leverage a third party to carry out tasks such as confidential worker interviews at offsite locations. It is important to use a single system to track these interview results, findings, root causes and corrective actions. Adopting a closed loop around activities such as this can ensure that the right corrective actions are taken.
Now, the need is to look beyond tier one suppliers, who generally follow the code of conduct. It is among the next consecutive tiers of suppliers that things go beyond notice and control. Here it is important to leverage technology to accumulate data about the extended supply chains. It is important to have the details of their recruitment, information about the raw material sourcing and facilitate supplier access to information. At this stage, relationships are dynamic and they will change but to make a conservative effort, understanding one’s extended supplier community is critical.
The need is to leverage data and use it to drive intelligence. While there is no shortage of information, and data, the real challenge is to convert information into intelligence. This can be done by facilitating human rights risk assessment and management by identifying risks like recruitment, hiring, and placement of vulnerable workers, supplier sourcing, labor broker involvement etc, and then performing a risk assessment and management. The next step is to identify impact and likelihood of risks, correlate and aggregate risk for better decision and finally collaborate with suppliers for risk mitigation.
For this, it is important to adopt a risk based approach to assessments and due-diligence and leverage third-party to perform confidential worker interviews at off-site locations. It is also necessary to use results of previous assessments to track progress and to use a single system to track results, findings, root causes and corrective actions.
While millions of people even today are victims of forced labor and human trafficking, global organizations are focusing on ensuring prevention of human trafficking incidents across their supply chain. Technology has evolved as a critical enabler, in tackling this menace. Today, technology can help in mapping the supply chain and maintaining a supply chain hierarchy, which in turn can improve the visibility and transparency across the supply chain. With its closed loop process to detect and prevent incidents of forced labor, technology helps in identifying and assessing risks and drives intelligence to predict probable risks.
Also, it is necessary for organizations to communicate the various policies, measurable standards and reporting mechanisms of the organization related to forced labor and human trafficking, in order to ensure compliance across the supply chain. Overall, the need is to integrate programs to prevent human trafficking and forced labor with other supply chain functions and ensure that the controls are in place.