TACKLING MODERN SLAVERY IN SUPPLY CHAINS - A GUIDE 1.0
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TACKLING
MODERN
SLAVERY
IN SUPPLY
CHAINS
A Guide 1.0
With input from:
FOREWORD
I am fortunate to be the Chairman of Fortescue Metals Group The vulnerability in our supply chain was in labour hire.
(FMG) a leading Australian company with an operating It was in the recruitment of migrant workers from poor
My commitment is to take a zero revenue of $8 billion in 2014. backgrounds. Unscrupulous labour hire agents took
tolerance approach to modern Our expenditure on suppliers on projects and operations
combined exceeded over $10 billion. Our supply chain
advantage of people’s poverty, their limited education and
their desire to seek a better life through work abroad.
slavery in my supply chain. comprises 3,000 suppliers in 19 countries mainly in Australia,
Asia and Europe. At its most complex, it is several tiers deep,
With just this single supplier:
• We found excessive recruitment fees, which in some cases
I hope you will join me. across multiple jurisdictions. exceeded the legal limit in the sending countries;
I am also the founder of the Walk Free Foundation, an • Some workers needed loans to pay for recruitment fees.
organization committed to ending all forms of modern Excessive interest rates were sometimes applied. In some
slavery. The term ‘modern slavery’ describes exploitation so cases repaying these loans required up to two years’ work,
severe that people have their liberty taken away, for someone during which time workers did not feel they could leave
else’s profit or benefit. Almost all forms of modern slavery are their jobs or send money back to their families;
illegal, yet our research indicates that it still happens in every • Workers had to surrender their passports to their employer
country in the world. upon arrival in a new country;
In 2012, when I started Walk Free, it was evident that I • We also found significant ambiguities in workers’ contracts,
would need to look into my own supply chain. This involved particularly around overtime and leave, which left workers
several steps: vulnerable to exploitation.
• Getting board-level buy-in to prevent and modern slavery Practices like this, and other forms of forced and bonded
in our business; labour and child labour, exist in many countries and in many
• Making sure this was embedded in FMG’s policies and industries. Building materials, construction, service industries,
business systems; textiles, food and drinks, automobiles and electrical goods are
• Seeking statutory declarations from suppliers that labour all vulnerable. Our homes and our businesses carry the imprint
practices were in line with International minimum of modern slavery. As business leaders it is our responsibility
standards; not to turn a blind eye, or to pretend that we are unaware of
• Working with modern slavery experts to identify areas of this, or that it is too complex to deal with. If, as business leaders,
vulnerability, through products, Industries and geography; and, we join together and address this problem, supply chain by
• Where vulnerabilities were identified, undertaking in-depth supply chain until there is no demand left for products and
audits of suppliers, devising and Implementing remediation services made with modern slavery, then we will not only drive
strategies. it out of business, but we will change social attitudes.
On the last point, in September 2012, we asked social auditing But it is not only business leaders who can use this guide and
experts Verité to attend the site of one of our major suppliers take the initiative on supply chains. It is also Governments –
and investigate the labour and living conditions of their many of whom are the biggest buyers of goods and services
employees. The supplier was co-operative and helpful and in their countries. It is investors, who can invest in companies
granted our auditors access to workers. Through the auditor’s that do not benefit from modern slavery.
detailed interviews with a sample of over 100 workers, My goal is ‘zero tolerance’ and FMG is working systematically
a confronting fact emerged: there were people working towards that. And, of course, I am not alone in this
in FMG’s supply chain whose passports were being held. commitment: there are organisations that share this
Because of excessive fees paid to agents they had crushing commitment and have taken steps, many of which are
debts to repay, and so could not leave their jobs. Were the highlighted in this Guide as best practice.
workers being deliberately enslaved by the supplier? No –
but through its failure to check recruitment practices and Andrew Forrest
through its policy of holding passports, the company was Chairman
allowing a situation to continue where workers effectively Fortescue Metals Group,
could not leave. The Walk Free Foundation
1
Through purchasing decisions
companies have the capacity to improve
the working conditions of those
employed by exploitative suppliers
whilst rewarding those who treat TABLE OF CONTENTS
workers with dignity and respect
1 FOREWORD 31 Chapter 4: Slavery in supply chains
corrective action, implementation
5 About this resource and closure
31 Developing and implementing a corrective action plan
6 Definitions
7 Modern slavery today 37 Chapter 5: Engaging with suppliers
37 Capability building
9 Modern slavery and corporate policy 37 Creating incentives
9 Why are companies affected? 37 Roles and responsibilities
9 Why should businesses act? 38 Empowering workers
38 Partnership
11 Chapter 1: The Beginning of a Framework 39 Conclusion
for Effective Standards
11 The foundation: A Code of Conduct 40 Tools
12 Ensuring the Code of Conduct flows through other 41 Tool 1: Sample Code of Conduct provisions
areas of business
43 Tool 2: Framework for Implementing a
15 Communicating the policy Communication Strategy
44 Tool 3: Risk Screening Tool
17 Chapter 2: Risk assessment for new and 47 Tool 4: Understanding industry risk
existing suppliers 48 Tool 5: Scorecard
Photo: G.M.B Akash
17 Understanding forced labour and slavery red flags 49 Tool 6: Self-Assessment questionnaire
18 Risk assessment 51 Tool 7: Questions to ask during an audit to identify
18 Step 1: Initial high level risk assessment to labour violations
identify priorities 53 Tool 8: Example questions to ask employees during a
19 Step 2: More detailed risk assessment on medium social audit
and high-risk suppliers 54 Tool 9: A Corrective Action Plan
20 Applying risk assesment to sourcing new suppliers 55 Tool 10: Making a plan for remediation
59 Tool 11: Defining Roles and Responsibilities
23 Chapter 3: Audits and On-Site
61 Tool 12: Supplier management and engagement
AKNOWLEDGEMENTS Assessments for new and existing
suppliers 62 Footnotes
The Walk Free Foundation’s mission is to end modern slavery by
mobilising a global activist movement, generating the highest quality 23 Why audit?
research, enlisting business and working with governments to 23 What makes a good audit?
drive change in those countries and industries bearing the greatest 24 Which auditors?
responsibility for modern slavery today. 24 Step 1: Preparing for an audit
Disclaimer 25 Step 2: Key steps in the audit
The inclusion of best practice company examples in this Guide is 27 Step 3: Immediate response to significant risks
identified during an audit
intended strictly for information purposes and does not constitute
an endorsement of the individual companies. This Guide reflects only 28 Step 4: Following up the audit
the views of the Walk Free Foundation.
The Walk Free Foundation encourages the dissemination of this
Copyright
Guide for information and learning purposes.
Copyright ©2014 The Minderoo Foundation
Special thanks to PWC Australia and the Chartered Institute of
All rights reserved. Printed in Australia.
Procurement and Supply (CIPS), Verite and Jean Baderschneider.
Designer Thanks also to the following organisations: BHP, Bunzl, BSR, Credit
Media on Mars, Fremantle, Australia Suisse, CitiBank, Fortescue Metals Group, General Electrics, Rio Tinto,
Stronger Together, the Cotton Initiative, the HER Project, Not For Sale,
Cover Image Made in a Free World, SEDEX, Microsoft, International Labour Rights
G.M.B Akash Forum (ILRF).
3
About
this resource
01
Beginning of a Framework for Effective Standards
Having considered some aspects of the problem, this chapter sets out the basic
policy framework which will be the foundation of an organisation’s commitment
to eliminate the risk of modern slavery from its supply chains.
Target Audience
The information in this resource is primarily aimed at Risk Assessment
02
procurement, supply chain and sustainability professionals
This Chapter explains the basics of identifying and evaluating the level of risk of
in companies, organisations and governments. It is aimed
modern slavery within supply chains. Having identified the highest areas of risk,
at those who want concrete guidance on how to reduce
companies must use a self-assessment questionnaire to delve deeper. This process
or eliminate the risk of modern slavery occurring in their
can be adapted to the tender process for new suppliers.
supply chains, either as a direct or indirect result of their
procurement practices. For the purpose of simplicity, we
Photo: Monica Ellena
03
use the terms company, however this Guide is relevant to all
Audits and On-Site Assessments
governments and any other organisation wishing to tackle
Where suppliers fall into the high-risk category, an audit including on-site
slavery in their supply chains. Finally, this Guide is intended to
inspection is the recommended approach. This Chapter examines the focal points
be a comprehensive system of meaningful action to address
and skill sets which should be demonstrable in the audit.
modern slavery within an organisation’s operations and is
designed for verification.
Corrective Action, Implementation and Closure
Version 1.0
This is version 1.0 of this Guide which provides only for the
basics of what a company should begin to undertake. There are
some companies that are doing significantly more today and
04 Having conducted an audit and identified cases of non-compliance, this Chapter
explores different options for Corrective Action Plans (CAPs). In particular
understanding a company’s leverage in enacting change, and how to have
effective grievance mechanisms in place.
05
we expect as companies adopt this guide they will naturally Engaging with Suppliers
innovate and significantly improve on the recommended Finally, this chapter outlines the various ways in which a company could engage
processes. We are thus releasing this guide now to help with strategic suppliers for continual improvement: including capacity building
companies get started. As we receive feedback we anticipate through training, worker’s empowerment and partnerships.
releasing a 2.0 version. Modern slavery awareness is increasing
fast (the Walk Free movement grows 50,000 people per week)
and consumers will increasingly demand more responsibility
from their favourite brands. This guide is an opportunity for The Tools at the end, have been selected to assist companies in implementing the
system outlined in this Guide. They can be adapted and adjusted to the particular
companies to get ahead of the curve on this issue.
September 2014
Tools needs of a company. For more information on the Tools please e-mail:
research@walkfree.org
5
Photo: G.M.B Akash
Definitions
modern slavery Forced labour Sale and Exploitation of Children
Forced labour is work or service that is taken from a person The sale and exploitation of children involves situations
Throughout this resource, the term modern slavery is used
under the menace of a penalty and for which the person has where children are transferred by one person to another for
to denote human trafficking, forced labour and slavery-like
not offered themself voluntarily.6 remuneration or other consideration; or are used in sexual
practices such as debt bondage, and the sale or exploitation
The construction sector in Qatar has come under intense scrutiny activities for remuneration or other consideration; or are
of children. All of these crimes have a common feature –
for the treatment of migrant workers building the billion dollar forcibly or compulsorily recruited for use in armed conflict.
they involve one person depriving another person of their
infrastructure for the 2022 Football World Cup. Workers from In the Ashanti region of Ghana, children sold by parents and
Modern slavery today
liberty in order to exploit them for personal or commercial
Nepal, the Philippines, Sri Lanka, Bangladesh and India have had forced to work in unsafe and unsanitary conditions in small scale While many think of slavery as a relic of history,
gain. According to the Global Slavery Index, an estimated
passports confiscated, resident permits denied or not reissued, and unlicensed gold mines called Galamseys for no pay. Galamsey unfortunately this is not the case. Various modern
30 million people in the world today live in some form of
wages withheld and payments delayed. mines operate on sites that have been concessioned to major forms of slavery, continue to occur. For instance, the
modern slavery.1
United States (US) conducted 1025 investigations
According to the ILO, forced labour refers to situations in mining interests, and are therefore unlicensed or illegal. Given
Human trafficking into human trafficking in the last fiscal year alone.8
which persons are coerced to work through the use of their illegality, Galamsey operators cannot access finance from the
Human trafficking is the act of recruiting, transporting, In 2013, the United Kingdom (UK) identified 1746
violence or intimidation, or by more subtle means such as open market and are forced into lending arrangements with loan
victims of trafficking through their national referral
transferring, harbouring or receiving a person, through any sharks who impose high interest rates. The high cost structure
accumulated debt, retention of identity papers or threats of mechanism9 and, in the same year, China took
coercive means (such as threat, use of force, deception or within which Galamseys operate fosters dependence on slave
denunciation to immigration authorities. action against 5000 alleged human trafficking
abuse) for the purpose of exploitation.2 labour as operators strive to reduce costs and sustain reasonable
criminal organisations.10
Where the victim is a child under 18 years of age, there is no Debt bondage profits. Galamsey operators prefer child labour because unlike
Debt bondage is a worker pledging their labour or the labour Today, modern slavery sometimes still takes
requirement of coercive means. It is sufficient if the child is adults, children can easily access narrow mine tunnels and shafts.
of others under their control as security for a debt; when either the form of buying and selling of people, with
both recruited and exploited through one of the recognised
people physically held in chains. However, more
forms of exploitation (e.g. slavery, organ removal, sexual the real value of the work undertaken is never applied to
commonly, victims of modern forms of slavery are
exploitation, etc).3 repayment of the debt, or the length and nature of the work
controlled through far more subtle mechanisms.
that has to be undertaken is never fully defined or limited.
Human trafficking for forced labour is rife in Thailand’s fishing In the international economy there are many
industry, with reports suggesting that many of the 300,000 In South Asia, where caste-based stratifications still dominate examples of migrant workers – some of whom
unregistered migrant workers are vulnerable to severe the social landscape, many lower caste families working in the are irregular and undocumented – being forced to
exploitation.4 Migrant workers from Myanmar, Malaysia and brick kilns are plagued for years, sometimes generations, by work against their will.
other neighbouring countries are bought by labour recruiters languishing debt. The initial debt is often incurred through loans
In 2012, 30 migrant workers from Lithuania were
and sold to boat captains, after which they are forced to work for from subcontractors which can never be repaid. The debt is then liberated from exploitative labour conditions on
months without pay until this placement fee is repaid. Once at assigned to the entire family and is not nullified even in death. a farm in Kent, UK.11 The workers were trafficked
sea, the fishermen are treated as slaves, working grueling 20 hour This means children are forced to work or take on the mounting from their country of origin to work on free-range
days where systemic beatings and torture are routine disciplinary debts of their deceased parents. Debt bondage subjugates entire chicken farms supplying to Freedom Food and
measures. The Thai government has systematically failed to families to inescapable cycles of poverty and a life of work in the Happy Eggs. Once in the UK they were held in debt
investigate either the abuses or the complicity therein of officials.5 brick kilns across the region.7 bondage, forced to work 17 hour days and held
under control by violence and verbal abuse at the
hands of Lithuanian enforcers.
In 2014, modern slavery can still take some
surprisingly ancient forms. Chattel slavery still
prevails in Mauritania, the country with the
highest proportion of enslaved people in the
According to the Global world.12 Chattel slavery refers to the condition in
which adults and children are the full property of
Slavery Index, an estimated their masters who exercise total ownership over
30 million people in the them and their descendants. Given Mauritania
is as much a part of the international economy,
world today live in some through its mining industry, as any other country,
this is not a situation that companies and
form of modern slavery. governments can ignore.
6
Modern slavery
and corporate policy
Why are companies Why should Leading financial
affected? businesses act? services company
There are an estimated 30 million Slavery in the supply chain is an investor interest in
people enslaved today, 68% are subject abuse of human rights in the pursuit ethical companies
to forced labour. The International of profits. Organisations have a duty Citing ethics and brand risk as
Labour Organization estimates that not to indulge or tolerate it, whether considerations, the company in
the profit generated by forced labour is deliberately or recklessly. This is not Australia has investigated various
$US150 billion annually.13 charity or philanthropy, it is how you human rights issues relating to
run your core business, like safety. company supply chains. In 2012,
Many industries are affected by forced
We do not talk of safety as a question of the company produced the
labour. Practices which can make a
CSR but as a core attribute of leadership. Australian Retailers and Uzbek
company particularly vulnerable to
Cotton factsheet, which outlines
it include: Prior to globalisation, companies
the potential brand risk posed
• Relying on the labour of migrant tended to source products locally.
by systemic child labour. As part
workers who have been recruited by The companies paid local taxes and
of their research, the company
labour agencies or brokers; could rely on the government to asked seven ASX-listed companies
• Having a supply chain with multiple enforce labour rights and laws. However that directly source some of their
tiers, some of which are not within its companies have increasingly sought cotton products what measures
immediate control; lower priced inputs direct from lower they were taking on Uzbek Cotton.
• Doing business across borders and cost countries. At the same time brand The responses were then used
in countries with weak regulatory awareness and consumer expectations to inform existing and potential
reputational damage environments. of brands have increased. However,
national governments in some low
investors on the ethical risks
associated with their investments.
triggered by corporate
The majority of companies will be
cost countries cannot be relied upon to
exposed to some risk of forced labour
enforce their own laws and meet the
social responsibility and slavery in their supply chains. These
risks are not always immediately evident
expectations of consumers of respected
breaches have been and are not necessarily uncovered
brands. As a result, if companies
want to buy globally at low cost, it
ranked as one of the top during a standard factory inspection.
Situations of exploitative
is becoming increasingly incumbent
ten business risks for labour recruitment :
upon those brands to undertake their
own assurance of basic human rights –
multinational firms.15 Migrant workers from India can fall into
forced or bonded labour when they pay
such as slavery.
If companies want a supply chain that
illegal recruitment fees to local agents
reflects their brand, and not a brand
in order to work overseas. In addition to
that reflects their supply chain, they
the main agent in Mumbai or Delhi who
must accept that global sourcing
is recruiting directly for an employer in
represents a responsibility as well as
one of the Gulf States, Indian workers pay
an opportunity.
aggregate fees of up to 100,000 Indian
rupees – five times the 20,000 limit Tool
prescribed by Indian law. Workers fund Standards Map is a free online
these upfront fees through loans at rates tool to help identify industry
equivalent to 60% per annum. On average, specific standards, codes and other
Indian workers get paid less than $US3000 protocols and guidelines relevant
per year so it can take these migrant to specific industries.
workers over 2 years before they start to See: www.standardsmap.org
have disposable income. This is forced or
bonded labour.14
9
Chapter 1:
01 The Beginning
of a Framework for Effective Standards
The foundation: A Code • The Code of Conduct should directly
Stronger Together
In this chapter COMPANIES can learn: of Conduct address and prohibit practices that
Stronger Together is a multi-
are well known to contribute to the
To effectively respond to modern stakeholder collaboration between
How to strengthen a company Code of Why it is important to set additional risk of modern slavery, such as:
slavery, companies first need to develop UK food chain retailers, the
Conduct with clauses on modern slavery. social performance targets for -- Charging workers recruitment fees,
clear policy frameworks which cover all Association of Labour Providers, the
procurement professionals. the relevant principles, and are backed
so they are effectively paying for the
Gangmasters Licensing Authority
How to integrate this new policy into opportunity of employment;
up by due diligence and ongoing and Migrant Help to tackle labour
both existing supplier contracts and How to communicate your policy to -- Retaining worker’s identity
performance monitoring. The first step, exploitation in the UK food and
request for tenders. internal and external stakeholders. documentation such as passports;
making a clear commitment expressed agriculture industries. Forced
-- Practices such as requiring workers
through a policy framework, is often labour is often enacted by third
to lodge deposits or bonds;
undertaken by CEOs or Boards through party recruiters targeting migrant
-- Contract substitution (where the
a Code of Conduct or equivalent workers with limited knowledge of
contract with the employer does not
statement of commitment. labour systems and standards. The
match the contract the worker signed
It is critical that the response to Stronger Together Toolkit enables
with the agent in the home country).
this issue is championed by senior employers to identify, manage,
• The Code of Conduct should include report and remedy any third party
management, and formalised in a policy
due diligence requirements in labour exploitation they find in their
that is both clear and communicated.
the case of the involvement of supply chains.18 Stronger Together’s
In the context of responding to modern
employment agencies or labour official supporters include Sedex, the
slavery, there are several features which
brokers at any stage of recruitment, Sedex Ethical Data Exchange, Anti-
are critical in a Code of Conduct:
management or hire;17 Slavery International, the British
• The rules set out in the Code of • If there is a particular raw material Retail Consortium, Food and Drink
Conduct must apply not only to the or product in the supply chain that is Federation and The Salvation Army.
company’s direct employees but also known to be high risk, it is important
to suppliers, sub-contractors and to single this out in the Code of
other business partners. This ensures Conduct. For instance Patagonia see Tool 1 – on page 41
the obligations are passed through articulates specifically that it will not
the supply chain; Sample Code of Conduct provisions
source any cotton from Uzbekistan
• The Code of Conduct must express from Verité.
because of the high risk of forced
corporate commitment to legal labour. Similarly, Nokia’s Natural
compliance, ethical standards Resources Policy requires suppliers
and fundamental human rights as of known ‘conflict minerals’ such as
described in the International Labour gold, tantalum or tin to ensure the
Organisation’s international law on traceability of these minerals to at
forced labour such as the Abolition of least the smelter level.
Forced Labour Convention, and Worst • The Code should also include
Forms of Child Labour Convention;16 provisions for grievance mechanisms
• The provisions in the Code of at the highest levels of an
Conduct should be worded to organisation in order that workers
avoid ambiguity, and include the have a confidential and safe process
prohibition of indirectly benefiting for raising any concerns.
Photo: G.M.B Akash
from or contributing to modern For some companies, developing
slavery. For example, Nestle, do not policies and responses to mitigate risk
just prohibit use of forced labour, but of forced labor will be new. This should
also state that suppliers “must under be seen as an opportunity to work with
no circumstances, use or in any way other organisations and NGOs to share
benefit from” forced labour. models and experiences.
11
ETHICAL PROCUREMENT
Ensuring the code of and if the supplier does not correct the
POSITIONS ON FORCED LABOUR conduct flows through human rights violations should a buyer
cease to work with the supplier.
An international sportswear other areas of business
company has detailed forced
Ethical Procurement Policy Contracts and sourcing
labour provisions outlined in their It is important to ensure that key
Employment Guidelines: “Business To ensure suitable visibility and focus
standards then flow through all
partners must not use forced on critical issues in supply chain
aspects of supplier sourcing and
management, many companies have
Photo: G.M.B Akash
labour, whether in the form of management, including:
prison labour, indentured labour, specific procurement standards ‘and
guidance’ that reflect the Code of • Supplier contracts;
bonded labour or otherwise. No
Conduct but provide more detail for • Tender and purchasing processes;
employee may be compelled to
work through force or intimidation supplier implementations. • Auditing and compliance action;
of any form, or as a means of • Performance standards for
An ethical procurement policy
political coercion or as punishment procurement staff.
must make it clear to suppliers that
for holding or expressing political compliance with requirements related With regard to contracts with suppliers,
Clause implemented into a on acquiring the best product for
views.” Also “Limiting access to the Code of Conduct is mandatory. these should take into account your major mining company’s the best price. Today, procurement
Multinational
to bathroom facilities or fresh This requirement applies not only requirements regarding: standard contract templates: professionals have a critical role to play
software company’s cross
drinking water is a restriction to existing suppliers but to supplier • The right to request compliance- The Contractor warrants that: in preventing modern slavery in supply
organisational approach
on freedom of movement and
selection and retention. Supplier policy related information and to audit at
to address forced labour
“It has thoroughly investigated its labour chains by selecting new suppliers
denies the basic needs of workers, The company takes a proactive
can usefully set out what the process is the discretion of, and at any time practices, and those of its direct suppliers, that have properly enforced policies
restricting employees from exiting approach to addressing human
when breaches are found. chosen by, the contract management; to ensure that there is no Forced Labour or and procedures against slavery and
production areas or the factory trafficking and forced labour across
• Requirements for the supplier to have Slavery* used anywhere in the Contractor’s forced labour.
grounds is a form of unlawful Building in systems of their operations. The company’s
adopted the labour policies of the business or by any of the direct suppliers of By keeping ethical considerations
detention and forced labour, sanctions and rewards supplier code clearly states that “the
buyer into their Code of Conduct; the Contractor; at the forefront of purchasing use of forced labour whether in the
preventing migrant workers from through supply policy • Ability of the supplier and any it has put in place all necessary processes, decisions, procurement professionals form of indentured labour, bonded
leaving the area or country by Through purchasing decisions
retaining personal identification subcontractors to be able to procedures, investigations and compliance can promote workers’ rights and labour, or prison labour by the
companies have the capacity to demonstrate they have taken
and travel documents or work systems to ensure that the warranties decent working conditions. It is company’s Suppliers is prohibited.
improve the working conditions concrete steps to implement Code
permits is a form of forced labour.” made in this clause will continue to be the thus imperative that procurement Also prohibited is support for
of those employed by exploitative of Conduct; case at all times; professionals are evaluated based on any form of human trafficking of
suppliers whilst rewarding those who • Key Performance Indicators (KPIs) the successful acquisition of goods involuntary labour through threat,
treat workers with dignity and respect. It has taken, and will take in the future,
that reflect progress towards and services that are produced using force, fraudulent claims, or other
all necessary actions and investigations to
Many buyers are developing programs implementing Corrective Action coercion.” This is monitored through
validate the warranties made in this clause. ethical social criteria. This requires
that reward suppliers who demonstrate Plans and Ethical Procurement on-site audits and opportunities to
* Forced Labour or Slavery means “slavery” and “forced the inclusion of social targets in their
particularly strong social performance. Benchmarks;20 share best practice example among
labour” as these terms are defined by the International performance targets, alongside cost,
The top suppliers get preferred supplier • Transparent Reporting: Labour Organisation (ILO) from time to time, including suppliers. The company have also
quality and delivery.
status and are given priority for -- Reporting on the results of any in any present or future ILO conventions.” joined the industry-wide Electronic
new business. A major mining company establishes Industry Citizenship Coalition (EICC)
social audit conducted; With regard to sourcing processes,
a human rights working group to eliminate conflict minerals
More information on rewards is -- Periodic reporting on the status Code of Conduct requirements should
The human rights working group brings from production. The company
included in the last chapter on Engaging of remediation plans agreed after be built into the Request for Tender
together members across the company’s requires 100% identification of
with Suppliers. an audit; (RFT) and other tender / application
divisions who meet regularly to discuss, all materials used in its packaging
Punitive measures could be part of -- Reporting on supplier’s status documents.
develop and evaluate their policy towards and hardware to the component
company policy. If included in the implementing new or improved
PERFORMANCE TARGETS human rights. The aim of the group is to level. To ensure the veracity of
contract these could impose penalties human rights policies and
Another important strategy can be identify and respond to the human rights these results the company invests
on the supplier in case of false or procedures.
setting job performance objectives and challenges the company faces and to in supplier training and capacity
misleading statements. For instance, An example of a clause that includes build awareness and networks within the development programs.
targets for procurement professionals
Buy IT Fair proposes the contracting clear references to forced labour company to address these issues.
that include a focus on contractor social
body may reserve the right to impose and modern slavery can be found in
compliance. Traditional procurement
a penalty payment of 5% of the Fortescue Metals Group’s standard
focused on purchase price, safety and
contract value and to withdraw from contract templates:
technical capabilities and procurement
the contract in the case of intentional
professionals are evaluated based
false statements.19 Only as a last resort
12 13
Communicating • The company incorporates the
International soft drink
the policy code into all its contracts and RFTs
retailer Passes it Back
and communicates how supplier
Once the policy framework is in place, In 2012 the company launched
compliance to the policy is assessed,
this should become the foundation on the “Pass it Back” program
how suppliers that comply are
which the company builds strategy for working with their 30 biggest
rewarded and what business
engagement with internal and external spend suppliers on integrating
consequences are in place in case
stakeholders and suppliers. labour rights into the supply
they fail to do so;
chain. By sharing best practices
Sharing and communicating the • The Code of Conduct is known to all among higher tier suppliers and
Code of Conduct on forced labour employees at all levels across the then having those suppliers
and modern slavery is integral to organisation; pass it back down the supply
its implementation. Staff across the • The company conducts information chain, the company is sharing
company will need to familiarise sessions for staff and suppliers to their core values and standards.
themselves with its vision and ensure that the code is understood The company’s Supplier Guiding
principles. Supply management staff and that workers know their rights; Principles are also supported
will especially need to understand • The company requires that suppliers by a 57 page workplace
the elements of the code in order to communicate the Code of Conduct to implementation guide available
communicate them to new and existing its workers; in nine different languages.
suppliers and to ensure there are proper • Relevant stakeholders understand To assure the implementation
compliance systems in place. why the company is implementing of these values, the company
A communication strategy is vital. These or reviewing a policy on modern conducts some 2,500 audits a
are steps which can form a central part: slavery and are aware of their role year and has a team of 12 core
in the effective implementation of staff dedicated to the company’s
• The Code of Conduct has been
this policy.21 supply chain and audit program.
included in all communications
with new and existing suppliers Online training modules can also
especially in the Request for support wider staff and supplier Tool 2 – go to page 43
Proposals and Quotations; training. See, for example, the Chartered
A sample framework for
By keeping ethical • The necessary standards and
processes have been communicated
Institute for Purchasing and Supply
(CIPS) Ethical Procurement and Supply implementing a communication
considerations at the forefront to suppliers; training22 and Microsoft’s e-learning
course on human trafficking.23
strategy.
of purchasing decisions,
procurement professionals
can promote workers’ rights
and decent working conditions.
It is thus imperative that
procurement professionals
are evaluated based on the
successful purchasing of goods
and services that are produced
according to their companies
Code of Conduct. This requires
the inclusion of Code of Conduct
targets in their performance
appraisal, alongside cost,
14
quality and delivery. 15
Chapter 2:
02 Risk assessment
for new and existing suppliers
Understanding forced labour and slavery red flags
In this chapter companies can learn: In order to assess the level of risk of slavery in their supply chains, companies must
first understand the features of their business which are particularly vulnerable to
How to identify the red flags of forced How to identify medium-high risk
these types of practices. This resource calls these high risk practices red flags.
labour and slavery in supply chains. suppliers based on spend, location
As explored in Chapters one and two, there are many ways that risk of modern
and type of product.
How to map suppliers – including those not slavery can manifest in supply chains. However, some of the ways to quickly judge
managed by a central procurement team. How to apply this risk assessment to that may be a high risk level include:
sourcing new suppliers. • The labour hire cycle (in particular, third party labour providers)
How to gather information on key issues from • Location
your existing suppliers in an efficient way. • Industry
LABOUR CYCLE RISKS
Practices that create risk of modern slavery occur at any point in the labour cycle
including recruitment, employment and exit. The table below outlines some of
these risks.24
Recruitment Employment Exit
Workers charged Underpayment of wages, Worker’s visa and
illegal or excessive delayed or withheld work permit is tied to
recruitment fees wage payments or a single employer
excessive or illegal
wage deductions
Workers uninformed Identity documents and Monetary penalties or
or misinformed about passports confiscated withholding of wages
terms of employment or withheld for early contract
termination
Workers not provided Workers required to stay Undocumented
with understandable, in company or broker migrants threatened
legally compliant controlled housing and with notification of
written contracts unable to enter or leave authorities if they leave
the premises freely employment
Multiple labour Physically abusive or Workers forced to
brokers and agents humiliating discipline pay financial deposits
from recruitment to and termination or “security” fees as
employment practices “runaway insurance”
Fraudulently charging Working excessive
fees for travel, health overtime beyond
checks, or work legal or code of
documentation conduct limits
Photo: G.M.B Akash
17COUNTRY SPECIFIC RISKS Step 2 is a more in depth examination of Key steps in undertaking a spend profile: 3. Supplier relationship
The risk of forced labour and slavery- the potential for human rights violations • What is the value of the contract?
An international
• List suppliers by total spend;
like practices varies both inter- in the medium and high-risk categories. The greater the contract value the
furniture retailer delves
• Categorise into spend areas by goods into sub-tier suppliers
regionally and internationally. These suppliers could participate in and/or services; greater the risk.
Going beyond first tier suppliers,
Accordingly, companies need to locate the CIPS Sustainability Index • Identify the market share with • What is the length of the relationship?
the company launched an online
reliable information on the risk profile (www.cips-sustainabilityindex.com) the top suppliers (This affects the 4. Existing information on risk Sub-Supplier Tracking System
of the areas from which they source to create a consistent sustainability buyer’s leverage). • Are there any previous or current in 2012. Through this system the
their goods or services. The Global measurement to support purchasing.
audit non–compliances related to company has identified several
Determine the Risk Criteria
Slavery Index (globalslaveryindex.org) forced labour? thousand sub-suppliers as operating
Step 1: Initial high level This stage does not require a detailed
states that the countries with the • Has the supplier been the subject of in high risk locations. These critical
risk assessment to analysis of every supplier. A review
highest numbers of enslaved people are a media or NGO report that might tiers of the company’s supply
identify priorities of the following categories of
India, China, Pakistan, Nigeria, Ethiopia, indicate there are problems with chain are the targets of current CSR
Who are the suppliers? information should be sufficient to
Russia, Thailand, Democratic Republic labour standards? interventions. By the end of the
Supply chain mapping differentiate between low, medium
of Congo, Myanmar and Bangladesh. 2014 financial year, the company
A company must first undertake a and high‑risk categories. To simplify the process, many
Taken together, these countries account plans to have all “tier 1 home
mapping of all of suppliers. A supplier companies develop score-cards to use
for 76% of the total estimate of 29.8 1. Location of production or service furnishing sub-suppliers identified
is any individual or company which to rate suppliers. See Tool 5 on page 48.
million in modern slavery.25 In terms Does the country/area have a high as providing critical materials and
of the number of enslaved persons provides goods or services to the buyer. prevalence of modern slavery or other Made in a Free World Software processes and compliant with the
in proportion to the population This includes less direct aspects of labour rights violations? Made in a Free World have developed a company’s purchasing guidelines.”
size, Mauritania and Haiti top the list supply which might also be commonly software program, Forced Labour Risk The company’s purchasing
• Where does packing occur or logistics
(The 2014 Global Slavery Index is due to handled by line-areas rather than Determination & Mitigation (FRDM), to guidelines must set out the “basic
provided? Does that place/country
procurement centrally, such as: assist companies to manage the risk of requirements any new supplier
be released in November 2014.) generally have a high prevalence of
modern slavery in supply chains. Targeted must meet before we sign a
• Transport and logistics; modern slavery or other labour rights
HIGHER RISK INDUSTRIES violations? at procurement professionals, FRDM purchase agreement with them. This
• Recruitment agents and labour includes requirements to prevent
Industries that have a particular works through a company’s spend data,
hire firms; -- Quick and accessible sources
prevalence of modern slavery in conducts a risk analysis based on industry, child and forced labour, prevent
• Packing and processing; include the Freedom House
countries with a weak rule of law product and country of supplier beyond severe environmental pollution
• Component parts for manufacturing; List, Transparency International and safety hazards, keep records of
include: apparel and footwear tier one, proposes remediation pathways
• Information technology. Corruption Perception Index, working hours and wages and have
manufacturing, agriculture, for high risk suppliers and connects
Maplecroft Ratings and the Global social insurance.” These long term
construction, mining, electronics, It is important to also look at account
Slavery Index.28 businesses to suppliers in the Made in a Free
payable spend. Whilst risk might be relationships and the investment
food processing and service work. World Network. Sample Code of Conduct
present throughout the entire web of 2. Industry sector in supplier capacity enhance the
The US State Department’s Trafficking provisions and statutory declaration
supplier relationships, a starting point Does that industry or sector have a company’s leverage to strengthen
in Person’s report (TIP) highlights the templates are also included. FDRM is
for a risk assessment is in the first tier high prevalence of modern slavery or the protection of workers’ rights.
main risk sectors and industries in their scheduled to role out in September 2014.32
country narratives.26 of a buyer’s supply chain. Buyers have other labour rights violations? This will
most visibility and leverage over their provide more targeted information Step 2: More detailed risk
see Tool 3 – on page 44
Risk assessment first tier suppliers, who can then follow about the product in that country. assessment on medium and
A fundamental aspect of both detecting up with their own suppliers. • Industries that rely heavily on low high-risk suppliers Template used by the UK
and preventing modern slavery and A risk assessment of the first tier skilled, migrant workers are higher risk, Any supplier that is rated medium or Government that includes
forced labour in supply chains begins suppliers alone cannot give full visibility • Agriculture and primary production, high risk from the initial risk screen both spend profiling and a risk
with a tailored risk assessment. This is over the supply chain in its entirety but including extraction, are higher risk should then progress to a more detailed assessment.
a two-stage process: it is a natural place to start in order to (details on high risk industries and risk assessment. Given the need to
target next steps. products are outlined below). gather information from potentially
Step 1 is an initial high-level assessment
-- Quick and accessible sources large numbers of suppliers, this is see Tool 4 – on page 47
of the entire supply chain, to divide Identify high-spend
include: the US Department of often done through a self-assessment
suppliers into low, medium and areas through a spend The US Department of Labour List
Labour List of Goods and Services questionnaire, which is sent to suppliers
high‑risk categories. profiling exercise of Goods and Services.
produced by child and forced to complete.
This will help identify not only priority
labour, Verite’s Commodity Atlas29
areas but also the company’s leverage
the US Department’s Trafficking in see Tool 5 – on page 48
therein. There may be certain areas
Person’s report, and Made in a Free
where the buyer has a higher spend,
World’s online software that helps Scorecard.
thus more leverage and potential
identify country and industry risk30,
for impact.27
and CIPS Sustainability Index.31
18 19The self-assessment questionnaire At a minimum, all suppliers rated at
The Footprint Chronicles should reveal: high risk should then progress to the
Strict due diligence The Sedex platform for A US supermarket
An outdoor clothing and
• Information about the employment next stage of risk treatment, a social
process as garment supplier engagement company supplier
technical equipment company is
audit against specific labour standards.
retailer enters Myanmar Sedex, the Supplier Ethical Data self‑assessment
site: site location and management
delivering huge results in supply An apparel company is the first Exchange, is a not for profit In response to the California
chain transparency. The Footprint systems. Many leading firms also consider this
American garment retailer to membership organisation Transparency in Supplies Chains
Chronicles, launched in 2007, is an • Information about the staff: number, process for medium risk suppliers.
enter the Myanmar market. Before dedicated to driving Act, the company has developed
interactive online map that enables gender, nationality, languages spoken, Depending on the relationship with signing off on a contract with improvements in responsible an online questionnaire to
users to identify and locate all the accommodation, forms and rate the supplier, it may also be appropriate two factories in Yangon, which and ethical business practices in assess suppliers’ policies and
factories and mills the company of payment. to undertake some capability building are now bound by the company’s global supply chains. In joining practices on slavery and human
uses in production. With stringent • Information about factors which are training either before, or alongside the strong Code of Vendor Conduct, Sedex, Suppliers complete one self trafficking. Suppliers are required
social compliance measures, the indicators of modern slavery: freedom audit process. the company invested in rigorous assessment questionnaire (SAQ) to provide information on their
company can trace all items from of association, discrimination, health due diligence including audits from and can choose to share this with supply chain overview, auditing
the raw material to the final product and safety procedures, freedom Applying risk Verité. Verité conducted four trips multiple customers on Sedex, process, non-compliance
through their supply chains. This
enables the company to see how
of movement, living conditions, assesment to sourcing in six months to assess human along with any other relevant measures, subcontracting and
changes made in the supply chain
existence of grievance mechanisms. new suppliers rights and labour conditions, ethical information, such as audit management training.
can directly influence the quality In medium/high locations answers while also educating workers on reports and certifications. The
As stated in the ‘Communicating the
of life of factory workers and local may not always be transparent, so the international business standards. SAQ collects information on the
Policy’ section of the guide, assessing
The company will monitor the site’s management proficiency of see Tool 6 – on page 49
communities. By making this company should use other sources the risk of new or potential suppliers
information easily and publically to reinforce information including factories through regular labour policies, practices and procedures;
must also be integrated into the A supplier self-assessment
accessible Patagonia has established previous audit reports, information inspections conducted by local including indicators that may be
buyer’s RFT, pre-qualification and other questionnaire template.
high standards of supply chain NGOs. In 2011-2012 the company indicative of forced or bonded
from the US State Department and evaluation processes for new suppliers.
transparency and a benchmark for conducted 170 initial audits of labour, such as holding of identity
Global Slavery Index. Once these It is critical that all documentation
making quality purchasing decisions. potential factories and rejected 33. documents, wage deductions
questionnaires are returned, the from the beginning of the RFT clearly In 2012 the company conducted made etc. New questions have
procurement team should review (and communicates the company’s policies 563 unannounced audits and 585 been added to name labour
where necessary verify) responses to
A Dutch technology on forced labour and modern slavery. announced audits of suppliers that providers used by suppliers.
develop a second-level risk score. Note,
company self-assessments A strong and stringent RFT process manufacture their branded apparel.
for supplier awareness at this point, it is possible to generate a is a company’s first step to ensuring
The company uses a self- low rating even though the initial risk their supply chains remain slavery
assessment questionnaire to build screening score was high, since that free. Questions to add to the tender
awareness of sustainable and ethical initial score is largely based on factors documentations can be the same
procurement practices amongst such as industry and country but for as those found in the supplier self-
suppliers. Higher risk suppliers which the supplier may have excellent assessment questionnaire (see Tool 6).
with a spend of over €10,000 processes in place to control.
were required to complete the During the due diligence process of
For low risk suppliers, it is important to selecting suppliers, award criteria should
assessment and provide supporting
ensure that they have as a minimum: be formulated in a way that includes a
evidence. The questionnaire,
adapted from the Electronic • A public policy on modern slavery supplier’s social as well as commercial
Industry Citizenship Coalition (EICC) that covers not only their own responsibilities. Moreover, the buyer
questionnaire, assesses suppliers’ operations, but also contractors and may need to ensure that the sections
compliance to the EICC Code of sub-contractors and has governance that address modern slavery have an
Conduct and addresses topics procedures to ensure compliance; appropriate percentage weighting of
on discrimination, freedom of • A signed statutory declaration or consideration. For example, the City
association, forced labour and child
contract, committing to enforce the of Lille in France includes sustainable
labour. The responses can determine
policy on modern slavery; development performance as one of
if the company needs to proceed
• Contractual obligations that include the award criteria in the call for tender. It
with an audit and, if so, the results
appear in the final audit report. provision for audits to be scheduled receives a 20% weighting, alongside 30%
at the buyer’s discretion, and for for price and 50% for technical quality.33
business consequences, up to and In a situation where prospective
including termination in the event suppliers are equal in terms of cost,
of failure to undertake reasonable quality, delivery and other commercial
steps to find and respond to modern measures, social performance can be
slavery in the supply chain. used as the deciding factor.
20 21Chapter 3:
03 Audits and On-Site Assessments
for new and existing suppliers
Why audit? Example:
In this chapter COMPANIES can learn: In the previous chapter we examined The audit of the Rana Plaza factory shortly
the importance of conducting a proper before it collapsed epitomises the potential
How good audits can help uncover the How to prepare for conducting a good disaster of an audit that fails to pick up a
risk assessment of a supplier base
risk of hidden slavery in supply chains. audit with a well-trained team. and then digging deeper with a self- critical situation. Auditors lacked the skills
assessment questionnaire. Once the needed to ask the proper questions and
The key steps in conducting a audit How to immediately respond to different take prompt action, resulting in the loss of
procurement team determine who the
including the opening and closing cases of modern slavery and safety issues more than a thousand people’s lives.
medium to high-risk suppliers are, it
meetings, site tour, conducting while acting in the victims best interests.
is then necessary to conduct on-site What should be the audit focus?
interviews and reviewing documents. inspections to investigate further. Auditors need to look for indicators
Audits have been identified by many of risk. These can only be uncovered
companies, including those listed for through consideration of a full range of
best practices in this Guide, as one of interconnected factors. This includes
the key mechanisms for monitoring but is not limited to:
supplier performance against agreed • The process of recruitment. What was
upon standards. Audits are not a the process, did workers pay fees, do
stand-alone solution. They should be they owe debts? Who organised their
combined with supply chain mapping, migration? How many tiers of labour
traceability and supplier capacity brokers and agents are used?;
development, to help create more • A comprehensive examination of
holistic supply chain risk management their current labour conditions. This
programs. Many companies do requires a consideration not just of
not have direct access to suppliers time and wage but also discrimination
deeply embedded in the supply document retention, living conditions,
chain. It, therefore, becomes critical freedom of movement, existence of
that companies have a system of grievance mechanisms, safety, and
verification of suppliers and sub- worker knowledge of company policy
contractors that will provide them and procedures on all of the above.
with the confidence that they need to
know their supply chain.
What makes a good audit?
The goal of supplier audits is to
verify that the factory’s practices Overall, audits should be framed
and performance are in line with the
company’s Code of Conduct against
so as to uncover any indicators
modern slavery. that suggest work and/or life
Modern slavery is a hidden crime that
occurs in an environment of deception,
are under duress, that there is an
corruption and lack of transparency. Third impossibility of leaving, use of
party labour exploitation in particular
can be concealed from open view. Audits penalties or threats, whether in the
thus need to be based on sensitive
questions, with appropriate scepticism
current labour situation or in the
applied to the responses given. preceding recruitment process.
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