What can construction and manufacturers/importers do?

Shawn MacDonald, Ph.D.
CEO, Verité

The appropriate standards around forced labor and human trafficking that design and building professionals should promote and enforce with suppliers have already been developed in both hard and soft law — an extensive body of standards and due diligence approaches — that have been tested over many decades. Various multi-stakeholder initiatives, certification bodies, industry associations and collaborations, and advocacy efforts have created monitoring mechanisms, benchmarks for performance, and other tools that provide a roadmap for how buyers can work with suppliers in any country and for any commodity or building input. Due to the work described above, adopting standards to which all business parties are held accountable is relatively straight-forward; it is the change management process within supply chains that requires long-term commitment, creativity, resources, and persistence.

The specific processes a company needs to put in place will naturally depend on the size and complexity of the company’s supply chain and its inherent risks, and legal or other obligations that may apply. Companies may want to manage the processes entirely in-house or may choose to outsource some (e.g. audits) or all of them to specialized third parties.

Labor abuses are so common across sectors, and in both rich and poor countries, that one should realistically approach them as a feature rather than a bug in the system. As a result, many companies in your value chain will have business models built around routine violations of wage and hour laws, exploitative guest worker programs, systemic ill-treatment of vulnerable groups, and other structural conditions that have made modern forms of slavery shockingly pervasive. You will need to work with your suppliers and industry peers to compel and incentivize changes in business models that have labor abuse baked into the prices and practices.

Setting Up a Risk Management System

Implementing effective management systems are the foundation for combating trafficking in your supply chain, as they are based on the realistic assumption that change is an incremental process that requires routine monitoring, adaptation, and a clear set of performance metrics. Fostering improvement over time requires a systems approach to risk management known as ‘Identify, Evaluate, Control, and Monitor.’ This is a set of processes that a company should implement to identify where there are risks of human trafficking in its supply chains in order to address identified issues, implement enduring solutions, and monitor supplier performance over time.

Establish a Supply Chain Code of Conduct

The first element of a management system is to clearly communicate expectations in all contracts and vendor agreements, usually through a Code of Conduct. A Supply Chain Code of Conduct establishes basic performance expectations for subcontractors, suppliers, and agents.1 It is important that your firm’s sourcing policy or Code of Conduct explicitly prohibits human trafficking and sets out protections and remediation for workers. A firm’s code should also address factors that are “enablers” or contributors to situations or risks of human trafficking. A subsequent Social Responsibility Agreement affirms compliance with contractors, suppliers, or agents to your Code of Conduct and applicable legal requirements. It can be a standalone document or included as an appendix to a contract.

Set Expectations for Responsible Hiring and Recruitment

Human trafficking risk is most often associated with exploitative labor recruitment systems that charge vulnerable workers for their jobs and bind them in other ways that result in a condition called debt bondage. A robust due-diligence screening process for labor recruiters and current and potential suppliers, including clear metrics, will minimize the risk of fraudulent or misleading practices.

So, it is particularly important that companies proactively ask suppliers and labor recruitment agents questions about recruitment and hiring performance metrics and share benchmarks based on a company’s policy. Clear performance indicators enable accurate evaluation over time to determine if genuine improvements are made in the recruitment practices of suppliers. Key areas to look for include transparent policies and procedures that relate to:

  • Transportation expenses
  • Training expectations and costs
  • Immutable contract of employment in appropriate languages
  • Prohibition of retention of personal documents (including passports)
  • Prohibition on deposits that bind workers to an employer
  • Clear standards for humane treatment
  • Appropriate discipline and termination systems
  • Freedom of movement and personal freedom
  • Grievance procedures
  • Expectations for workplace equality across ethnicity, gender, and other categories
  • Fair wages and benefits

Companies need to obtain enough information about the procedures above to have reasonable confidence that the supplier or labor recruiter will comply with its legal requirements and standards.

Regularly evaluating the strengths and weaknesses of suppliers’ and subcontractors’ anti-human trafficking policies and procedures will help highlight where more improvement is needed. In evaluating how well a supplier is controlling its risks, a company needs to look for either the presence or absence of good practices and ‘at risk’ practices. Screening tools can be used to choose suppliers, to develop corrective action plans, or to establish key performance indicators (KPIs) to track ongoing social responsibility performance.

First Person Feedback

A supply chain due diligence system is only as good as the information gained from workers at various levels of the supply chain. Robust compliance efforts include worker input through direct interviews or other confidential feedback mechanisms. Workers know conditions best, and effort and time must be devoted to gaining their trust and learning their needs and aspirations, as well as the problems they face. Input from nongovernmental organizations and trade unions can also help to better understand the conditions workers face.

Auditing as an Emerging Tool for Change

Audits can be used as a tool to understand and document abuses and to drive change in fundamental business practices. Audits should prioritize substantial, confidential worker input. Audits should always link to corrective action plans to correct for violations found during an audit, although it should be acknowledged that many problems (especially those associated with forced labor) are not easily remediated and require sustained engagement and new ways of conducting business that reward compliance rather than expect it, without changing underlying dynamics in that market.

Buyers should also note that many auditors are not well trained to spot forced labor risk, and that often the “scope of work” for an audit and the rigid procedures followed by many auditors result in few or even no findings of forced labor risk, even when suspect practices are widespread. Careful screening and on-going quality control of auditors is also vital.

1 Principles and Standards of Ethical Supply Management Conduct with Guidelines, Institute for Supply Management. 2020.