Social Inclusion & Human Rights

Slavery in Supply Chains: Investors Can Take Action

Slavery in supply chains is a matter of concern for many enterprises. In fact, 71% of U.K. companies surveyed believe that their supply chains might involve modern slavery, according to the Ethical Trading Initiative.

However, conscientious investors don’t have to resign themselves to this. There are several steps that investors can take to make their stance against slavery clear and verify that their dollars aren’t supporting enterprises that might knowingly or unwittingly be using suppliers that allow such practices. It may take some work, but it’s possible to reduce or eliminate all forms of forced labor in an investment portfolio, from enslavement to debt bondage.

Modern slavery is defined by the Walk Free Foundation as “one person depriving another person of their liberty in order to exploit them for personal or commercial gain.” This may involve human trafficking, forced labor, debt bondage, or child labor. Such practices occur worldwide and in industries as diverse as shrimping, mining, and textile manufacturing.

Several recent court cases have illustrated the risks inherent in non-vetted supply chains. In addition to legal and financial risks, consumer-facing companies may ultimately lose market share if they’re not publicly committed to transparency. Increasing awareness of the issue has helped give investors more authority to demand action from companies within their portfolios.

Despite its disturbing ubiquity, eliminating forced labor from your portfolio isn’t impossible. Here’s how to start:

1. Ask Companies about Their Supply Chains

It’s key to find companies that are transparent about their sources of labor and materials. Companies that don’t have or won’t share clear information may be more likely to have connections to forced labor, whether they’re knowingly supporting such practices or not.

There are online resources that can help with this effort, such as KnowTheChain, which measures companies’ initiatives to address forced labor based on industry-specific benchmarks. This is one easy way to determine the leaders (and the laggards) in a particular market segment.

2. Push for Forced Reporting Rules

In 2010, California passed a law requiring large retailers and manufacturers to disclose the policies and actions they’ve put in place to eliminate slave labor from their supply chains. While the results of the law have been mixed, the push toward required transparency is an important step forward and a potential resource for investors. While the rule is aimed at giving consumers access to information, investors may find it of value, too, when trying to remove slavery in supply chains.

3. Have an Action Plan Ready

If a company’s answers don’t satisfy you, or you learn of a potential issue with unpaid labor, consider the appropriate way to take action. You can use your position as shareholder to engage the boards of public companies, making your voice heard at the table. If that fails, divestment may be the appropriate route if you have already invested. If you haven’t invested, consider removing the company from your list of potential purchases.

While most governments have outlawed forced labor, enforcement varies by region, and such laws clearly aren’t deterring everyone from these practices. In 2016, the Global Slavery Index estimated that nearly 46 million people were enslaved. But the legislative and corporate pressure that has been growing in recent years can make a real difference. Taking time to evaluate and adjust your portfolio as needed could make forced labor a thing of the past.

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