Making Forced Labour Economically Unprofitable

27 August 2018
Research Innovation

Modern slavery is a crime against humanity and a crime of economic opportunity, generating an estimated $150 billion in illegal profits to traffickers. It erodes economies and communities and sits at the intersection of global issues including migration, organized crime and global business operations.

Modern slavery is driven by supply of vulnerable people, a demand for cheap labour and commodities, and sexual exploitation. Of the 25 million people in forced labour, 16 million victims are in the private economy, and more than 70 countries produce goods using forced or child labour. The impact stretches beyond any one commodity or industry, touching everything from shoes, apparel and smartphones to fishing, construction and mining.

Tackling this crime promises reverberating impacts. Slavery-free supply chains equalize the market, making forced-labour free products and companies more competitive. When children are not forced to work, they remain in school and increase community capacity in the formal economy. When people are not exploited as commodities, illegal profits fuelling organized crime decrease while security increases.

supply chain
Shipyard. Unsplash/Chuttersnap

At the operational level, the risks associated with forced labour in supply chains for businesses are significant. For example, forced labour may impinge upon the efficiency and effectiveness of business operations through negative impacts on productivity, quality, safety and security, affecting a company’s bottom line and shareholder relations. In addition, increasing legislation, regulation, and reporting requirements increase the risk of penalties associated with non-compliance. Increased public and media attention on supply chain transparency also poses reputational risks to brands with potential forced labour issues in their supply chains.

Addressing these risks is no small task. Companies face significant challenges in eliminating forced labour from their supply chains. Deep and opaque supply chains make supplier engagement in lower tiers resource-intensive. Corruption and the profitability of criminal activity associated with forced labour makes it difficult to root out. Additionally, off-shoring to progressively lower-cost locations requires comprehensive efforts to reverse, with potentially significant and negative implications on the local workforce.

Furthermore, companies have few proven practices and models to replicate and implement. Proposed solutions are often philanthropy-based, making them difficult to sustain in a competitive market where businesses are accountable to shareholders. The ability to demonstrate the medium- and long-term impact on profits and show results, such as increased productivity and a better trained and more committed workforce, will be key.

Ultimately, businesses must be partners in designing and implementing market-based solutions to end modern slavery that can be competitively sustained. While governments and NGOs spend millions in the fight against human trafficking, the buying power of businesses and socially responsible investors is in the trillions. Resources of this scale could make the fight against modern slavery a fair one, and businesses can start by taking practical steps from both the demand and supply sides.

On the demand side, businesses can address the risk of forced labour in their supply chains by integrating risk assessment tools into existing company priorities and operations. This is a particular area of focus for GFEMS’ CEO Exchange, which will partner with companies to identify appropriate tools and processes for implementation. Supply chain optimization and strategic procurement are already well-defined functions in companies. Companies can incorporate forced labour risk assessment tools into their broader optimization of purchase-to-pay processes, delivering value to investors that want well-run, effective supply chains and logistics.

Strategic procurement protocols like bid conditioning and supplier authentication and monitoring can also help companies minimize the likelihood of forced labour. Additionally, companies can take other steps, including providing training and raising awareness among employees, training sourcing specialists in total system cost approaches—versus lowest price—establishing an ethical code of conduct to promote company-wide alignment and commitment.

On the supply side, companies can support businesses in local communities that can become local suppliers. By investing in local workforces through relevant training, skill development and job placement, companies can create sustainable jobs and long-term value through enhanced productivity over time.

Real change will require not only commitment from businesses but also explicit support from governments, civil society, consumers and investors who recognize companies’ efforts to do the right thing.

Investors have particular power to create positive incentives for businesses stepping up to the challenge. Responsible investors are increasingly considering supply chain issues to understand a company’s bottom line; the sustainable, responsible, and impact investing category grew 33 per cent from 2014 to 2016 in the US, from $6.57 trillion to $8.72 trillion. At the global level, there are now $22.89 trillion of assets under professional management in the Environment, Social and Governance (ESG) realm globally, according to a report by the Global Sustainable Investment Alliance—up 25 per cent since 2014 and representing 26 per cent of all assets under professional management around the world.

Real change will require not only commitment from businesses but also explicit support from governments, civil society, consumers and investors who recognize companies’ efforts to do the right thing.

Ending modern slavery will require a 360-degree, closely coordinated effort from governments, NGOs, businesses and investors. Together we can do the right thing and deliver value to companies. Through partnership, we can end this crime against humanity and put the traffickers out of business.

The Global Fund to End Modern Slavery is a public-private partnership that seeks to catalyse and coordinate a coherent global strategy to end modern slavery by making it economically unprofitable.

This article has been prepared by the Global Fund to End Modern Slavery as a contribution to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the author and do not necessarily reflect those of UNU or its partners.

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