Analyst Insight: Revelations over the years that major brands were found using slave labor are constant reminders that modern-day slavery is a major, global issue — one that businesses large and small need to guard against, especially with regard to their supply chains. 

Even if a business is an unwitting victim of unscrupulous suppliers, the penalties, bad publicity and damage to the brand can be substantial — not to mention the negative effects on the bottom line.

According to the United Nations, some 50 million people worldwide are in modern slavery today, producing everything from footwear to garments, toys and electronics, with many in factories deliberately concealed from the public eye. At the same time, complex and multi-tiered global supply chains make it extremely difficult to have full visibility over suppliers and their labor practices. With no single tool or process to identify forced labor in supply chain operations, compliance professionals need effective policies, processes and the right global trade intelligence technologies to do the job.

Businesses today are being held to new and evolving standards, thanks in large part to the rise of ESG frameworks that focus on long-term sustainability, ethical choices and other forward-thinking initiatives. Following are four strategies that companies can put into practice to help combat the presence of forced labor in the supply chain.

Understand the indicators. The International Labour Organization (ILO) has identified 11 indicators that an individual is being subjected to forced labor: 

• Abuse of vulnerability
• Deception
• Restriction of movement
• Isolation
• Physical and sexual violence 
• Intimidation and threats
• Retention of identity documents
• Withholding of wages
• Debt bondage
• Abusive working and living conditions
• Excessive overtime 

These indicators are used by criminal law enforcement officials, labor inspectors, trade union officers, non-governmental organizations and others to identify persons who are possibly trapped in a forced labor situation. Even though forced labor can occur in any country, regardless of its economic status, a number of factors tend to contribute to an environment where forced labor can take root, including:

• Weak governance
• Poverty
• Inequality and discrimination
• Limited awareness of people’s rights
• Lack of social protection
• Large informal economy 

Especially if companies are transacting business in places characterized by these factors, they must carry out thorough due-diligence practices. Using the ILO’s indicators to ask the right questions can help. 

Know the working conditions of your supply chain. Don’t just take a supplier’s word for it — companies that are aware of their use of forced labor (or their suppliers’ use of these practices) do not freely admit this to buyers. It’s critical that businesses know the working conditions in their supply chains. This includes speaking with the supplier’s workers as an integral part of due diligence, as well as scrutinizing the policies of that supplier, especially around grievances processes, and looking for evidence of implementation and resolution of grievances. By working with NGOs who are on the frontlines of these social and political issues, companies can identify high-risk suppliers and support an organization’s ESG targets. Collaboration between businesses and NGOs also helps the latter to improve the lives of people in the communities where they’re active.

Comply with modern slavery laws. A growing number of governments have implemented or are proposing modern slavery legislation, with required company reporting and heavy fines for failure to meet reporting obligations. It’s not enough, however, to simply publish a report; there must be actual implementation of measures to tackle the risks of forced labor entering the supply chain.

In the U.S., for example, the Global Slavery Index shows that 403,000 people were living in conditions of modern slavery on any given day in 2016. According to Title 18, Section 1589 of the U.S. Code and the associated jurisdiction conferred in Title 18, Section 1596, forced labor is a federal crime. Violators may be fined up to $250,000 or imprisoned for up to 20 years; however, certain aggravated circumstances may cause the maximum sentence to be significantly increased. In addition, the Uyghur Forced Labor Prevention Act (UFLPA), signed into law by President Biden in December 2021, requires companies to conduct due diligence on all suppliers and publicly report on their efforts. Violations of the act can result in civil penalties imposed by U.S. Customs and Border Protection (CBP), which can be as high as the domestic value of the imported merchandise, depending on the circumstances of the violation. As of February 2023, more than 2,300 shipments into the U.S. have been seized by CBP for suspected affiliation with China’s Xinjiang region, where the Uyghur people are located. The burden is then placed on the importer to demonstrate how these shipments are not subject to the forced labor ban before they will be released.

Boost due diligence screening for all supply chain partners. Internal compliance programs can be extremely broad and cover a vast array of compliance areas. One related discipline that has moved increasingly to the forefront of leadership discussions involves the internal control measures that support required due diligence screening for all parties in a supply chain. This includes suppliers, carriers and all other channel or distribution partners. This due diligence screening encompasses checking for controls like sanctions, debarments or other restrictions imposed by international government bodies.  

Thorough screening is a vital component of fighting forced labor. Sanctioned and embargoed entities include those found to be using forced labor; therefore, ensuring screening beyond basic government lists via manual processes is vital. Organizations should also use in-depth ownership chain reviews. For example, one government-sanctioned party list names only 50 entities, yet leading denied party screening technology can identify over 8,600 companies associated with just these 50 entities. In addition, specialty research firms compile and maintain lists that government agencies won’t or can’t, including those of entities known to be affiliated with forced labor. Technologies that can screen against content, not only from government and international bodies, but also from these types of research firms, help businesses perform high levels of due diligence to better mitigate risk. 

The enormity of the exploitation of human labor across the globe is staggering. Yet there are actions that business leadership and compliance professionals across diverse industries can take right now, to tamp down the risk of human abuse in their supply chains.