This year has brought an unparalleled spike in state, federal, and international legislative and enforcement efforts specifically focused on ridding the world’s supply chains of products tainted by forced labor, slavery, human trafficking, and child labor, as well as indentured servitude (collectively, “coerced labor”). The most recent such effort is the U.K.’s just-enacted Modern Slavery Act, slated to take effect in 2016.
What’s more, all indicators point to next year as one during which governments around the globe will significantly broaden and intensify their efforts to recruit (or, more accurately, conscript) the business community into this fight. Indeed, it is not a stretch to predict that today’s mounting focus on stemming coerced labor, wherever in the world it is found, may soon equal, or perhaps even surpass, the global fight against corruption via now-familiar instruments such as the Foreign Corrupt Practices Act.
Companies don’t generally welcome additional regulation. That said, there is hardly a lobby of business interests eager to be out in front, pushing back against laws created to the use of children and trafficked persons in manufacturing products and materials that ultimately find their way into streams of commerce in the United States and Europe (the geographies with the greatest volume of tainted goods, which also are developing the most aggressive enforcement against coerced labor).
If this is the first time you have seriously examined this rapidly developing compliance area, or if you work for a company that has not yet examined its own risk profile and disclosed to the public its efforts to rid its supply chain of coerced labor, there is no time like the present to get compliant. After all, the costs for non-compliance are great, ranging from brand-damaging consumer advocacy and NGO group pressures, to costly class action lawsuits, to potentially brand-ending debarment and criminal prosecution.
Traditionally, fair-labor issues and other aspects of corporate social responsibility companies’ legal and compliance functions were handled by “sustainability,” “social responsibility,” or HR specialists. But the challenges posed by today’s transnational laws concerning coerced labor, typically clustered around overseas vendors over which the typical U.S. or European company has little or no control, require a fundamentally different approach.
But before we examine how to respond to these new compliance challenges, let’s first discuss what these challenges actually are and why they must be taken seriously. To this end, the “Big Three” coerced-labor regimes are:
Click here for the most important facts about these laws and regulations as well as several others that are currently being drafted.
What follows are some basic guidelines if you are just getting started (or fine-tuning) your existing policies.
Enact and enforce meaningful policies (or add policy language) focused on identifying and eliminating risks of coerced labor within your supply chains. Such internally consistent policies or policy language should be included in codes of conduct, annual compliance certifications, standard contract language, due diligence questionnaires, supplier statements of conformity, etc.
Do not understate, overstate, or fail to state:
Standard language in supplier contracts should address, among other key areas:
Suppliers should certify that materials incorporated into products comply with (1) your company’s code of conduct, and (2) the laws against coerced and child labor in the country or countries in which they are doing business. Key substantive provisions should include representations and warranties that a supplier:
Design a risk-based labor verification/audit program to evaluate and address risks of coerced and child labor in your supply chains.
Develop and publicize internal accountability standards and procedures, including those related to supply chain management and procurement, for employees and contractors regarding coerced labor.
Assess supply chain management and procurement systems of suppliers to verify whether they have appropriate systems to identify risks of coerced labor within your company’s supply chain.
Train employees and business partners, particularly those with direct responsibility for supply chain management, on the company’s expectations as they relate to coerced and child labor, particularly with respect to mitigating risks within product supply chains.
Guarantee that remediation is provided for those who have been identified as victims of coerced labor.
Markus Funk is the founding co-chair of the CSR and supply chain compliance practice at law firm Perkins Coie, as well as a former prosecutor and Department of Justice section chief in the Balkans. He and U.S. District Judge Virginia Kendall co-authored “Child Exploitation and Trafficking: Global Challenges and U.S. Responses” (Rowman Littlefield, 2010). He can be reached at [email protected].