Note: This post originally appeared in September 2020 and has since been revised. 

Background

SASB’s Human Capital Management Research Project seeks to “incorporate emerging issues, evidence of financial materiality, and evolving market views” with respect to human capital in updating its 77 industry standards. In support of these efforts, Rights CoLab has convened leading labor rights experts and, with the Data for Good program of the Data Science Institute of Columbia University, created a data science project, which uses natural language processing and machine learning to surface new relationships between labor-related human rights risks and financial materiality. The results of this project will inform a set of recommendations for the updating of the standards that better reflect human rights risks.

A key objective of our work is to ensure that labor supply chain risks are better represented in the updating of SASB Standards. An obstacle that we’ve encountered in our work is SASB’s “Five Sustainability Dimensions” typology, which places “Supply Chain Management” within the “Business Models & Innovation” dimension and outside of the “Human Capital Management” dimension. While SASB’s Conceptual Framework explains that the purpose of the typology is to clarify sustainability, we find that the typology creates roadblocks in three related ways.

First, it reinforces a problem that labor rights advocates have long worked to combat: that companies treat their responsibility for workers in supply chains as a secondary concern to their direct workforce. For investors in particular, a company’s failure to adequately understand and disclose its supply chain risks means that the company and its investors have only partial visibility into that company. Second, locating the issue of “supply chain management” in a separate dimension from human capital reflects an outdated notion that producing through integrated supply chains is a business model choice, rather than a commercial necessity as it has been for the past 20-30 years. As such, virtually every company depends upon a supply chain, without which the business collapses. Third, by locating due diligence procedures in a separate “leadership and governance dimension,” SASB misses the opportunity to tie supply chain management to oversight of risk.

Notably, sustainability frameworks of ESG data providers already include supply chains within human capital management—for example, MSCI ESG Ratings—suggesting that mistreatment of workers in supply chains is a financially material risk. Others offer specific resources to help companies identify labor risks in supply chains, including the FTSE4Good Index Series (p. 2). A recent report by Refinitiv exposed a severe lack of due diligence on business supply chains, and highlighted the hidden dangers in supplier, distributor, and partner relationships.

The compilation, providing evidence across a range of industries of negative impacts on operations and profits connected to labor abuses within a company’s supply chain, lends further support to our recommendation that the typology be jettisoned.

About this compilation

Alongside our data science effort, we have created the compilation below by manually tracking evidence of financially material risks within supply chains across news sources, expert commentaries and guidelines, and client alerts of leading law firms advising corporate clients on emerging risk. To align with SASB’s industry-specific approach to standard setting, it is organized by risks that surfaced for companies according to SASB’s general issue categories. We’ve also included an industry-agnostic section for evidence of financially material risk that is not industry-specific.

Each entry points to financial impact and/or investor interest, the two aspects of SASB’s concept of financial materiality, linked to one or more of the following supply chain business risks: 1) regulatory risk; 2) reputational risk; and 3) operational costs.

Strengthened regulation is manifested in new or revised sanctions, penalties, and criminal liability for companies accused of human rights abuses in supply chains.

Example: In 2015, the United States Trade Facilitation and Trade Enforcement Act closed a loophole from a consumptive demand exemption which has led Customs and Border Protection (CBP) to issue a greater number of Withhold Release Orders (WRO), preventing products made by companies associated with modern slavery from entering the U.S market. For some companies, the impact of these detainments has had a significant financial impact: Stevia-maker PureCircle shares plummeted in 2017, and in 2020, Malaysian glove maker WRP Asia suspended its operations.

Reputational damage contributes to financial loss, loss of consumer demand, and public support, and potential divestment.

Example: In July 2020, Standard Life Aberdeen, the United Kingdom’s largest asset manager, dumped almost all of its stock in the fashion company Boohoo, following allegations of poor working conditions in the company’s supply chain. Similarly, at the end of 2019, Japanese beverage giant Kirin’s acquisition of New Belgium Brewing and entry to the U.S craft beer market was threatened, following public pressure and human rights activism regarding the company’s association with a military-run company in Myanmar.

Increased operational costs stem from short- and long-term risks to the labor force and supply of materials, as well as potential costs associated with litigation and remediation. From February-August 2020, there was an increase in companies agreeing to compensation for labor rights violations.

Example: Malaysian glove maker Hartalega Holdings, clothing factory Sheico Thailand, and electronics firm Cal-Comp Electronics all agreed to reimburse employees who were victim to illegal recruitment fees. In some cases, the cost of the repayments could total in the millions.

Our tracking began in December 2019. Entries appear in chronological order starting with the most recent news account for each section. Since an issue typically appears in multiple sources, for this compilation we selected the report that emphasizes financial impact or investor interest, and prioritized client alerts from law firms over media reports. Where there are multiple reports for a business risk that each highlight a different aspect of business risk, they are presented as a grouping within the relevant SASB industry or sector.

Besides the industry-specific reports, we include an “industry agnostic” section. This section highlights regulatory trends that have an effect on financial risk across industries, as well as academic studies that point to new understandings of the link between corporate practice and financial risk in supply chains.

This compilation is a living document, which will be updated regularly. To suggest reports or media coverage to be included in this list, email us at info@rightscolab.org.

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Industry Agnostic

U.S. Tariff Act halts importation of goods made with forced labor

US blocks $50M in imports made from forced labor and may do even more under Biden
December 2020
The US seized a record-high $50 million this year in imported goods that were produced by companies who used forced labor, and expects to do more under the Biden administration.
Demonstrates: financial impact, strengthened regulation

Importing Freedom: Using the U.S. Tariff Act to Combat Forced Labor in Supply Chains
July 2020
A guide for corporate accountability advocates from the non-profit Human Trafficking Legal Center on how to develop a petition to the U.S Customs and Border Patrol to leverage the U.S. Tariff Act and Withhold Release Orders.
Demonstrates: financial impact, strengthened regulation, reputational risk

Combating Forced Labor: The Increased Use of Withhold Release Orders and Formal Findings
March 2020
Law firm Jones Day briefs clients on risks of shipment detainment through Withhold Release Orders.
Demonstrates: financial impact, strengthened regulation

Reading the Stevia Leaves: Early Clues to Federal Enforcement of the Ban on Imports Made with Forced Labour
February 2020
U.S. Customs and Border Protection has issued thirteen orders halting importation of goods suspected to be tainted by modern slavery.
Demonstrates: financial impact, strengthened regulation

CBP Issues Detention Orders against Companies Suspected of Using Forced Labor
October 2019
U.S. Customs and Border Protection announcement of policy to detain goods believed to have been produced with forced labor by issuing a WRO.
Demonstrates: financial impact, strengthened regulation

Developments In U.S. Supply Chain Regulation

ULC’s work on Coercive Labor Practices in Supply Chains
August 2020
Legal expert, Professor Jena Martin, describes various legal paths for strengthened U.S procurement legislation to combat coercive labor practices.
Demonstrates: financial impact, strengthened regulation

Trump Administration Strengthens Efforts to Combat Human Trafficking
January 2020
Law firm Covington & Burling LLP advises clients on increased U.S. government interest in anti-modern slavery efforts, with a focus on due diligence in government procurement.
White House memorandum on efforts to enhance the effectiveness of anti-trafficking requirements in Federal acquisition.
Demonstrates: financial impact, strengthened regulation

The Emergence of Human Rights Due Diligence Laws

EU adopts a global human rights sanctions regime
December 2020
The Council of the EU establishes a global human rights sanctions regime, imposing a travel ban and asset freeze on entities, including businesses, associated with human rights abuses.
Demonstrates: financial impact, strengthened regulation

EU Mandatory Human Rights Due Diligence Law Takes Shape
September 2020
Draft report of the European Commission’s proposal to introduce mandatory human rights due diligence legislation includes potential use of civil or criminal penalties.
Demonstrates: financial impact, strengthened regulation

Many German firms ignore partners’ human rights abuses
August 2020
German ministers announce that a global supply chain law will be a top priority during the next legislative period.
Demonstrates: financial impact, strengthened regulation

Office of the EU: Study on due diligence requirements through the supply chain. Part I, Synthesis report
February 2020
EU assessing regulatory options, including potential new due diligence requirements as a legal duty of care.
Demonstrates: financial impact, strengthened regulation

Mandatory Modern Slavery Disclosure Laws

Modern Slavery legislation introduced again in Canada’s senate
November 2020
The proposed Modern Slavery Act would require mandatory modern slavery disclosure by companies and an amendment to the Customs Tariff to prohibit the importation of goods produced using forced labour.
Demonstrates: financial impact, strengthened regulation

New South Wales moves a step closer toward implementation of modern slavery reporting requirements for U.S.-based and other multinationals
March 2020
Law firm Ropes & Gray advises clients on commitment of New South Wales to modern slavery reporting in relation to the new Commonwealth reporting requirements with penalties for non-compliance..
Demonstrates: financial impact, strengthened regulation

Other New Regulation

UK to fine companies that fail to disclose imports tied to China’s Xinjiang region
The UK will fine companies which hide connections to China’s Xinjiang region to ensure that British organizations “are not complicit in, nor profiting from, the human rights violations.”
Demonstrates: financial impact, strengthened regulation

Canada Bans Imports of Forced Labour Goods: Now What?
August 2020
Amendments to Canada’s customs tariff prohibit importation of goods produced wholly or in part by forced labour
Demonstrates: financial impact, strengthened regulation

New UK law: Liability for ‘profiting from’ gross human rights abuses
September 2017
FCPA Blog: U.K. Criminal Finances Act expands legal options for UK prosecutors to fight against human rights abuses.
Demonstrates: financial impact, strengthened regulation

Retroactive Corporate Liability for Human Rights Abuses
December 2017
Law firm Pillsbury alerts clients that the U.K. Criminal Finances Act may lead to the seizure of assets held by companies that have benefited from human rights abuses.
Demonstrates: financial impact, strengthened regulation

Attorney Guidance on Litigation Risks

What responsibilities do multinationals have to those in their supply chains?
June 2020
Law firm Leigh Day describes emerging law to address labor risks in supply chains in a blog to corporate clients.
Demonstrates: financial impact, strengthened regulation

Labor Trafficking in Corporate Supply Chains— Where We Are Now
December 2019
White Paper by law firm Jones Day on increased litigation and claims.
Demonstrates: financial impact, strengthened regulation

Mitigating Risk, Eradicating Slavery
January 2019
Law review survey of the current litigation landscape regarding labor harms in supply chains.
Demonstrates: financial impact, strengthened regulation

Academic Studies

Socially Responsible Corporate Customers
July 2019
Academic study finds that “customers that influence their suppliers to act socially responsibly” have a positive impact on their performance.
Demonstrates: Financial impact, consumer interest

The Impact of Supplier Sustainability Risk on Shareholder Value
November 2018
Study shows that supplier sustainability risks are associated with a 1.00 percent reduction in shareholder wealth.
Demonstrates: Financial impact, reputational risk

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Sector: Consumer Goods

Trend to watch: increasing bans on goods produced in Xinjiang, China

US bans cotton and tomato products from China’s Xinjiang region over forced labor concerns
January 2021
The US banned imports of cotton and tomatoes produced in Xinjiang, noting that imports made cheaply using forced labor hurt American businesses and expose consumers to unethical purchases.
Demonstrates: financial impact, strengthened regulation

FLA Statement on Sourcing from China
December 2020
The Fair Labor Association is prohibiting sourcing and production of goods from Xinjiang, citing overwhelming evidence of human rights abuses and that effective due diligence is no longer possible in the region.
Demonstrates: financial impact, strengthened regulation

U.S. Bans Cotton Imports From Xinjiang Firm on ‘Slave Labor’
December 2020
The U.S. Department of Homeland Security will impound shipments containing cotton originating from the Xinjiang Production as part of efforts to increase economic pressure on Beijing over its treatment of the Uighur minority.
Demonstrates: financial impact, strengthened regulation

Auditors to Stop Inspecting Factories in China’s Xinjiang Despite Forced-Labor Concerns
Given the lack of access and heavy policing in the region, auditors can’t realistically carry out proper examinations of factories, which means that companies sourcing/ producing there cannot satisfy reporting requirements.
Demonstrates: financial impact

Fashion’s cotton supply caught in crossfire of US-China trade war
September 2020
Xinjiang cotton ban means that companies will need to investigate suppliers across the value chain, beyond first or second-tier suppliers.
Demonstrates: financial impact, industry interest, regulatory environment

U.S. May Ban Cotton From Xinjiang Region of China Over Rights Concerns
September 2020
U.S. ban on cotton from Xinjiang.
Demonstrates: financial impacts, regulatory environment

Uighur labor will be tough to avoid with about 20% of cotton connected to Xinjiang: GlobalData
October 2020
The U.S. House of Representatives passes a bill to ban importation of products made by Uighur forced labor.
Demonstrates: financial impact, strengthened regulation

Industry: Apparel, Accessories & Footwear

Trend to watch: Operations costs, lost of business, and drop in stock value for companies suspected of modern slavery (see also Boohoo in e-Commerce Industry)

Thailand: Starbucks, Disney & Tesco commit to compensate illegally underpaid migrant garment workers in their supply chains
October 2020
Following a media report on underpaid employees and the raiding by officials of two garment factories in Mae Sot, Thailand, buyers Starbucks, Disney & Tesco commit to compensate workers.
Demonstrates: financial impact

H&M cuts ties with Chinese supplier over Xinjiang forced labour accusations
September 2020
H&M said it was ending its relationship with a Chinese yarn producer over accusations of “forced labour” in China’s Xinjiang province.
Demonstrates: financial impact, reputational risk

Fast fashion giants face mounting pressure to protect supply chain workers through Covid-19
July 2020
Extinction Rebellion activists gathered on London’s Oxford Street to urge fast fashion brands to financially support suppliers overseas throughout the pandemic.
Demonstrates: financial impact, reputational risk

An Investor Guide to Addressing Forced Labor in the Apparel Industry
July 2020
Survey finds that investors recognize the importance of forced labor metrics, but need help identifying how to approach this issue. This guide demonstrates how investments may be exposed to forced labor.
Demonstrates: investor interest, reputational risk

Thai clothing factory compensates exploited migrant workers
April 2020
Thai supplier of US-based outdoor clothing brand Patagonia has reimbursed Burmese migrant workers over $100,000.
Demonstrates: financial impact

The U.S. Should Do More To Tackle Forced Labor in Xinjiang
March 2020
WRO’s required a shipment of baby clothes produced by Hetian Taida to be sent back to China before they were sold to American consumers at Costco.
Demonstrates: financial impact, regulatory environment

Spice Girls T-shirts made in factory paying staff 35p an hour
January 2019
The Spice Girls and their partner, Comic Relief, said they had checked the ethical sourcing credentials of Represent, but it had changed manufacturer without their knowledge. Represent takes “full responsibility” for the allegations and will refund customers on request.
Demonstrates: Financial impact

Industry: E-commerce

Boohoo launches independent investigation into supply chain
July 2020
The investigation will examine Boohoo suppliers’ compliance with regulations on wages and working practices during the pandemic.
Demonstrates: financial impact, reputational risk

Big shareholder dumps Boohoo over working condition allegations
July 2020
Standard Life Aberdeen dumped almost all of its stock in the fashion company and criticised its response to allegations of poor working conditions in its supply chain.
Demonstrates: financial impact, reputational risk

Industry: Household & Personal Products

Global glove importers rethink relationship with Malaysian manufacturer
December 2020
Kimberly-Clark and Ansell are re-evaluating business with a Malaysian glove manufacturer after government raids uncovered poor living conditions, a problem which an earlier third party audit did not report.
Demonstrates: financial impact

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Sector: Extractives & Minerals Processing

Industry: Metals & Mining

Landmark settlement is a message to Canadian companies extracting resources overseas: Amnesty International
October 2020
A human rights lawsuit alleging slavery and torture has been settled outside of court with Canadian mining company Nevsun Resources, showing that Canadian courts are willing to hear civil liability cases for corporate harms committed abroad.
Demonstrates: financial impact, regulatory environment

Legal ruling paves way for Canadian firms to be pursued for overseas human rights breaches as Norway’s Ethics Council prioritises working conditions
March 2020
Supreme Court of Canada rules against Nevsun Resources’ petition to dismiss allegations of human rights abuses at an African mine, hailed “a landmark ruling” for modern slavery.
Demonstrates: financial impact, regulatory environment

Customs Cracking Down on Imports of Congo Gold, Marange Diamonds
October 2019
Following the ban, importers will have to either re-export the detained shipments or submit information to the U.S Customs and Border Protection demonstrating that the goods have not been produced with forced labor.
Demonstrates: financial impact, regulatory environment

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Sector: Food and Beverage

US bans cotton and tomato products from China’s Xinjiang region over forced labor concerns
January 2021
The US banned imports of cotton and tomatoes produced in Xinjiang, noting that imports made cheaply using forced labor hurt American businesses and expose consumers to unethical purchases.
Demonstrates: financial impact, strengthened regulation

2020 List Of Goods Produced By Child Labor Or Forced Labor
September 2020
The U.S. Department of Labor’s Bureau of International Labor Affairs has added fish from China and Taiwan to it’s ninth edition of the List of Goods Produced by Child Labor or Forced Labor due to reports of adults forced to work in the production of fish on their DWF fleets.
Demonstrates: financial impact, strengthened regulation

CBP Issues Detention Order on Seafood Harvested with Forced Labor
May 2020
U.S. Customs and Border Protection will detain imported merchandise made wholly or in part with seafood harvested by the Yu Long No. 2, a Taiwanese flagged fishing vessel, at all U.S. ports of entry.
Demonstrates: financial impact, regulatory environment

Industry: Agricultural Products

U.S. bans palm oil imports from Sime Darby following forced labour allegations
The ban on Sime Darby is a blow to the industry, given that the company has been seen as a leader in sustainably produced palm oil with public commitments to responsible agriculture and human rights.
RSPO said an initial audit earlier this year did not generate any red flags against Sime Darby Plantation.
Demonstrates: financial impact, strengthened regulation

Labour Rights Violation in the Global Supply Chain of the Palm Oil Industry
December 2020
Allegations of labor abuse at multiple RSPO-certified palm oil plantations indicates the ineffectiveness of corporate ‘sustainability’ policies, weak government supervision and inadequacy of the certification scheme as a reliable supply chain metric.
Demonstrates: reputational risk

CBP issues forced labor finding for stevia imports from manufacturer in China
October 2020
U.S. Customs and Border Protection seized products and initiated forfeiture proceedings on Inner Mongolia Hengzheng Group Baoanzhao Agriculture, Industry, and Trade Co., Ltd. reports of forced labor in its manufacturing.
Demonstrates: financial impact, regulatory environment

Shares in stevia maker PureCircle plummet as ‘slave labour’
January 2017
Natural sweetener maker PureCircle has blamed an ongoing dispute with the US authorities for a fall in sales over the last six months.
Demonstrates: financial impact, regulatory environment

Industry: Alcoholic Beverages

Kirin’s US beer deal threatened by Myanmar links
December 2019
Opposition to Japanese beverage giant Kirin’s joint venture with a military-run company in Myanmar is creating headwinds for its expansion plans in the U.S. craft beer market.
Demonstrates: financial impact, reputational risk

Industry: Processed Foods

Chocolate companies ask for a taste of government regulation
December 2019
Some of the world’s largest chocolate companies are calling for regulations to discourage the use of child labor on cocoa farms.
Demonstrates: investor interest, regulatory environment, industry interest

Industry: Tobacco

Malawi: Customs and Border Protection issues withhold release order on tobacco from Malawi on allegations of forced labor
November 2019
The U.S. suspended imports of all tobacco and tobacco products from Malawi for alleged forced labor practices.
Demonstrates: financial impact, regulatory environment

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Sector: Health Care

Industry: Medical Equipment & Supplies

Blackrock and NBIM target directors at Top Glove over worker safeguarding
January 2021
Blackrock and Norges Bank Investment Management (NBIM) voted against the
Directors of Top Glove, noting that the board’s inadequate management of COVID-19 and worker health and safety is “egregious.”
Demonstrates: Investor interest

After US Sanctions, Malaysia Migrant Workers Get Millions in Restitution from Glove Makers
November 2020
Malaysian rubber glove makers to compensate thousands of migrant workers for recruitment fees totaling tens of millions of dollars after the U.S. stopped importing from them over forced labor claims.
Demonstrates: financial impact, regulatory environment

Kossan sets aside RM50mil for migrant workers remediation fee
October 2020
Kossan Rubber Industries Bhd finalized a remediation plan for its migrant workers, and will pay a total remediation fee estimated at RM50 million.
Demonstrates: financial impact, regulatory environment

Amid virus crisis, U.S. bars imports of Malaysia’s Top Glove over labour issues
July 2020
The U.S Customs and Border Protection says it found evidence of forced labour practices, including debt bondage among other practices in Top Glove’s units.
Demonstrates: financial impact, regulatory environment

Three months after US ban, glove maker suspends operations
January 2020
Glove maker WRP Asia has suspended its operations with immediate effect just three months after the U.S Customs and Border Protection announced it was banned on suspicion of using forced labour.
Demonstrates: financial impact, regulatory environment

Top Glove: US’ ban on rubber glove company a wake up call
October 2019
While acknowledging that the ban would tarnish the good image of Malaysian glove makers, Top Glove chairman Tan Sri Dr Lim Wee Chai said the U.S sent the right signal to global businesses.
Demonstrates: financial impact, regulatory environment

CBP Issues Detention Orders against Companies Suspected of Using Forced Labor
October 2019
U.S Customs and Border Protection’s issuing of withhold release orders shows that if forced labor is suspected, they’ll take that product off U.S. shelves.
Demonstrates: financial impact, regulatory environment

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Sector: Renewable Resources & Alternative Energy

Industry: Solar Technology & Project Developers

Chinese Solar Companies Tied to Use of Forced Labor
Solar companies are investigating their exposure to Xinjiang and reconfiguring their supply chains to avoid the region, noting that investors are getting nervous about risk of disruption.
Demonstrates: Investor interest

U.S. Solar Group Calls for Pulling Out of Xinjiang Over
October 2020
The leading U.S. solar-trade group is calling on companies to move their supply chains out of Xinjiang province region, citing reports of human-rights abuses and a “heightened risk of disruption.”
Demonstrates: financial impact, industry interest

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Sector: Technology and Communications

Industry: Electronic Manufacturing Services & Original Design Manufacturing

Apple’s Supply Chain Problems In Asia Include Operational Costs And Community Conflict
Apple’s operations in India and China are challenged amongst allegations of unpaid wages and the use of student labor, respectively.
In India, workers at supplier Wistron Corp rioted over unpaid wages, looting and damaging property which could cost an estimated NT$200 million ($7.1 million), while shares fell as much as 3.4%.
In China, following the prohibition of major supplier, Pegatron, for its use of student labor, new allegations against the company emerged of unpaid bonuses and wages.
Demonstrates: financial impact, reputational risk

Improvement or just Public Relations? China Labor Watch challenges Apple’s statement on Pegatron
November 2020
Apple puts Pegatron on probation following allegations of violated labor codes, yet China Labor Watch questions the reliability and accuracy of Apple’s statement.
Demonstrates: financial impact, reputational risk

Cal-Comp: A Lesson in the Importance of Worker-Driven Monitoring to End Forced Labour in Global Supply Chains
February 2020
NGO Electronics Watch reports excessive recruitment fees and costs at Thai electronics supply
Demonstrates: financial impact

Thai electronics firm compensates exploited workers in rare award
December 2019
Reuters report on Cal-Comp’s compensation of workers.
Demonstrates: financial impact, operating costs, worker compensation

Call to Industry to Prevent Forced Labour Risks
February 2019
Electronics Watch addresses excessive recruitment-related fees and expenses incurred by migrant workers from Myanmar.
Demonstrates: financial impact, reputational risk

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Sector: Resource Transformation

Industry: Industrial Machinery & Goods

Global glove importers rethink relationship with Malaysian manufacturer
December 2020
Kimberly-Clark and Ansell are re-evaluating business with a Malaysian glove manufacturer after government raids uncover poor living conditions, a problem which an earlier third party audit did not report.
Demonstrates: financial impact

Malaysia’s 2nd-largest glove maker Hartalega to reimburse migrant workers’ recruitment fees
August 2020
Hartalega Holdings will reimburse the recruitment fees previously paid by migrant workers to employment agents.
Demonstrates: financial impact

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Photo by dylan nolte on Unsplash