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Finding ways for workers to talk directly to brands will keep moving up the agenda in 2017 |
The US migrant clampdown, land grabs and slavery blind spots are among the top human rights risks for business in 2017, new research has revealed.
Indeed, a major theme of the latest Human Rights Outlook 2017 report is that human rights risks are now surfacing closer to home for Western companies just as legislation strengthens and scrutiny of business practices increases.
However, the annual research from global risk analysis company Verisk Maplecroft also notes that the number one issue across the board in 2017 is the limitation of the social audit.
"The ability of business to conduct effective human rights due diligence is fundamentally flawed because safeguards designed to identify and prevent violations in supply chains are too weak," explains Dr Alexandra Channer, principal human rights analyst at Verisk Maplecroft.
"Since many companies do not analyse or act on their audits, brands are highly exposed to violations, even among the suppliers they assess." She adds that this exposure will deepen because mandatory reporting requirements on modern slavery and supply chain due diligence will increase the demand for cheaper social audits, while also tightening public scrutiny.
Apparel factory auditing appears in the firing line
Among the key risks and opportunities to watch in the year ahead, the report notes that:
- The hardening immigration policy in the US is increasing the risk of labour abuses against undocumented migrant workers who are pushed 'under the radar';
- With a focus on production and processing, companies are susceptible to modern slavery 'blind spots' in areas such as shipping, cleaning, catering and security;
- Banks and funds financing land deals in emerging markets are running an increased risk of becoming implicated in 'land grabs' and forced evictions;
- Bribery in the recruitment of domestic and foreign workers may expose business to the risk of strategic litigation using corruption laws, as NGOs try to hold business to account for modern slavery;
- 2017 pilots of ledger technology, including blockchain, will inject transparency into supply chains, but there will be a lag before this technology can be used to prevent human rights violations;
- Given that 60% of the world's workers are restricted from unionising, according to Verisk Maplecroft data, brands are deprived of one the most effective partners to prevent abuse in the supply chain.
The 10 human rights risks to watch in 2017:
1: Social audits: Strengthening trust in auditing
The inconsistent quality of social auditing poses a significant risk to businesses that are required by law to conduct human rights due diligence, the report says. No matter how well they are conducted, the one- or two-day audit is a blunt tool when it comes to identifying labour violations because auditors may lack the time, training or competence to identify the worst and easily hidden violations, such as child labour or forced labour, or may be bribed or intimidated. On top of this, audits are only as good as the analysis and actions that businesses undertake as a result.
The pressure is set to intensify as demand for social auditing increases in response to laws that require companies to disclose and take action to prevent human rights violations in supply chains.
Taking action to strengthen the audit process is essential to ensure the integrity of mandatory due diligence. With many businesses wanting to comply with the law, while also keeping due diligence costs low, auditors will be under more pressure to rush through audits without time to conduct a proper inspection. If the credibility of auditors doesn't improve, brands will remain reluctant to share audits – and so the burden of due diligence, and more auditing, will fall on suppliers.
2: Mandatory reporting: Disclosure and due diligence laws
Expanding legislation across Western markets means mandatory human rights due diligence on supply chains could soon become the norm for multinational companies. Failure to get it right will now come with a hefty price tag in key jurisdictions since the passing of new laws in France and the Netherlands. More countries are set to follow suit, with legislation likely to emerge in Switzerland next.
Companies covered by the French Duty of Care law (Le Devoir de Vigilance), the Dutch Due Diligence Child Labour Law, and the pending Swiss Responsible Business Initiative, will have to implement human rights due diligence in their supply chain. The trend to move from voluntary to mandatory reporting means the costs of non-compliance are increasing – but Verisk Maplecroft believes making human rights due diligence a standard business practice will create commercial opportunities for early adopters of best practice.
"Mandatory disclosure makes it more likely that consumers, shareholders and investors will vote with their wallets for ethical companies who can prove their respect for human rights," says Dr Channer.
3: Supply chain blind spots: Hidden workers at risk of modern slavery
Companies focusing their human rights due diligence efforts on the production of raw materials and manufacturing are creating high risk, supply chain blind spots. The seafarers who transport 80% of global trade, truckers and workers in warehouses are mostly invisible in supply chains, despite being highly vulnerable to modern slavery and other labour rights abuses. Similarly, low-skilled workers in support services across more developed economies are often forgotten when companies conduct human rights risk assessments.
4: Migration and modern slavery: Increasing risk for migrant workers in US
A by-product of the Trump administration's stance on tightening immigration in the US is that companies with supply chains relying on low-skilled, migrant labour will face increasing risks of modern slavery. According to the Outlook, stricter deportation rules for 8m undocumented migrant workers will push them further underground, while a US-Mexico border wall would increase criminal trafficking fees, leaving migrants more deeply mired in debt and vulnerable to exploitation.
The report identifies sectors including manufacturing as those facing the highest risk, due to their dependence on migrants for informal, low-paid work. At a national level, a sharp decline in the security of America's underclass of migrant workers will also shift the US from 'medium' to 'high risk' in Verisk Maplecroft's Modern Slavery Index. For companies sourcing within the US, a revision of auditing priorities, which have traditionally concentrated in less mature markets, may now be needed.
5: Corrupt recruitment: Strategic litigation with anti-bribery laws
NGOs have shown that the bribery chain driving recruitment fees is a major cause of modern slavery, and exposes business to strategic litigation using anti-corruption laws. A new French law (Sapin II) joins US, UK and Canadian anti-corruption laws in allowing the courts to prosecute citizens and businesses for acts of bribery committed abroad, and test cases are likely to be launched against companies for modern slavery violations in their supply chains. However, eradicating corruption from recruitment requires a long-term commitment from brands.
6: Privacy: The surveillance – national security dilemma
Information and communications technology (ICT) firms are increasingly caught in a tug-of-war between national security and the right to privacy. In countries where citizens lack some basic protections, ICT firms that comply with national laws that infringe the right to privacy may unwittingly facilitate grievous violations of human rights. However, democratic governance is no guarantee of respect for privacy either, as Western democracies are adopting laws permitting greater infringement of privacy to counter the threat of terrorism. There is a lack of consensus among NGOs, business and governments around the safeguards necessary to protect the right to privacy.
7: Land rights: Rising scrutiny of the land grab money trail
Rising scrutiny of the money trail behind 'land grabs' in the emerging markets is another issue Verisk Maplecroft sees gaining more traction in 2017, as Western banks and funds are subject to a rising trend of NGOs mapping investment webs to connect land deals to capital markets. Commodities such as palm oil, sugar cane, rubber and bio fuels are driving a global rush for land. Companies not undertaking proper due diligence of land deals they are funding could become associated with forcible evictions or even violence against local land owners. The rights of land owners have the least protection in countries such as Indonesia, Ethiopia, Mozambique and Argentina, the report says.
8: Worker voice: Partnering with workers to prevent violations
Improving 'worker voice', by finding ways for workers to talk directly to brands, will keep moving up the agenda in 2017 as companies seek ways to prevent labour violations deep in their supply chains where they have less leverage.
Workplace disasters, modern slavery and demands for a living wage have led the International Labour Organization (ILO) and NGOs to argue that unions should be partners in the effort to prevent labour abuses. But according to Verisk Maplecroft data, unionisation is restricted in 42% of countries, which makes promoting social dialogue among suppliers difficult. The problem is acute in garment-exporting countries: independent unions are prohibited in China and Vietnam, for example; and 35 trade unionists have been arrested and jailed since December 2016 for participating in wage protests and work stoppages in Bangladesh.
Technology offers innovative ways to communicate directly with individual workers, allowing brands to hear in real-time what is happening on the shop floor. Platforms that allow workers to report if wages are being withheld, for example, are a safety-check on the validity of audits and give workers a voice when unions are restricted. However, virtual dialogue leaves workers highly vulnerable to retaliation if their confidentiality is compromised. And to respond to virtual complaints and address violations, brands must ensure that independent unions and suppliers collaborate.
9: New technology: Transforming human rights management
In 2017, companies are piloting new technologies that could improve the way they manage their global supply chains, especially their human rights impacts. Ledger technology (which includes blockchain technology), big data analytics and monitoring devices can all facilitate the sharing of information about working conditions and the tracking of a product's supply chain, as well as increasing the accuracy of procurement.
Ledger technology is being piloted as a type of database that can securely record and share information in real-time about transactions in a supply chain. Identifying trends in big data, from consumer-buying patterns to supply chain operations, could enable companies to make procurement more precise, and so significantly reduce human rights risks in sectors like apparel. For example, if garment buyers can plan ahead better, manufacturers are less likely to use hidden subcontractors or to hire workers without proper recruitment checks to meet volatile production demands.
And using wearables, drones, smartphones or VoIP (calls via the internet such as Skype and WhatsApp) to continuously monitor distant workplaces improves transparency, but could infringe privacy rights.
10: SDGs and UNGPs: Changing the lives of 81% of all workers
The reporting burden is increasing this year as expectations grow for companies to report on how their business and activities contribute to the UN Sustainable Development Goals (SDGs). SDG 8 on decent work and SDG 5 on gender equality give firms an opportunity to publicise their efforts to promote timely payment of wages, a safe working environment, or freedom from discrimination for the 3bn workers – 81% of the world's workforce – who live in countries
rated high or extreme risk in Verisk Maplecroft's Labour Rights and Gender Equality Index. However, the temptation to shift focus too far towards the SDGs and away from the UN Guiding Principles (UNGPs) poses a significant, though subtle, risk.
Click here to download a copy of the report, and on the following link to view last year's list:
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