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, RightsCoLab is working with leading labor rights experts and a team of young data scientists from the Data for Good Program of Columbia University’s Data Science Institute to strengthen the evidence base of the financial materiality of these risks. The data science project uses natural language processing and machine learning to surface new relationships between labor-related human rights risks and financial materiality.

A key interest of the project is the relationship between supply chain risks and human capital management in the SASB framework. Whereas in SASB’s current typology, the “Supply Chain Management” general issue category (GIC)  is outside of the “Human Capital Management” dimension, evidence across a number of industries pointing to negative impacts on operations and profits connected to labor abuses within a company’s supply chain suggests that the framework should be amended.

Alongside our data science project, Rights CoLab has been manually tracking this evidence across news sources, resulting in this compilation. It is organized by industry and points to an industry-wide risk (as opposed to a company-specific risk) to align with SASB’s industry-specific approach to standard setting. Each entry indicates when the evidence points to financial impact or investor interest, the two components of financial materiality, and one or more business risks: 1) regulatory risk; 2) reputational risk; 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 harm 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.

Higher 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.

It is noteworthy that 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 new 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.

This compilation of evidence of material supply chain risks for companies is a living document, which will be regularly updated. To suggest reports or media coverage to be included in this list, email us at info@rightscolab.org.

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Industry Agnostic

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

New tough measures to tackle modern slavery in supply chains
September 2020
The U.K government is introducing powerful new measures to strengthen the Modern Slavery Act 2015 to help ensure businesses and public bodies address modern slavery risks in supply chains.
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

Guest Blog: ULC’s work on Coercive Labor Practices in Supply Chains, Part 3
August 2020
Potential for strengthened US procurement legislation to combat coercive labor practices
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

Importing Freedom: Using the U.S. Tariff Act to Combat Forced Labor in Supply Chains
July 2020
Report on the use of U.S. Tariff Act and Withhold Release Orders
Demonstrates: financial impact, strengthened regulation

What responsibilities do multinationals have to those in their supply chains?
June 2020
Law firm Leigh Day raises labor risks in supply chains in a blog to corporate clients.
Demonstrates: financial impact, risks of litigation

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

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.
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
Analysis of U.S. Customs and Border Protection forced labor ban identifies thirteen orders halting importation of goods to date.
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. l.
Demonstrates: financial impact, strengthened regulation

Trump Administration Renews Focus on Anti-Human Trafficking Efforts
January 2020
Law firm Covington & Burling LLP advises clients on increased U.S. government interest in anti-modern slavery efforts.
Demonstrates: financial impact, strengthened regulation

Labor Trafficking in Corporate Supply Chains— Where We Are Now
December 2019
Law firm Jones Day issues white paper on increased labor trafficking in supply chains litigation and claims
Demonstrates: financial impact, strengthened regulation

Memorandum: Anti-Trafficking Risk Management Best Practices & Mitigation Considerations
October 2019
White House memorandum to enhance the effectiveness of anti-trafficking requirements in Federal acquisition.
Demonstrates: Financial impact, strengthened regulation

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

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

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 damage

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

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

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Sector: Consumer Goods/ Industry: Agnostic

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, ban on goods

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Industry: Apparel, Accessories & Footwear

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 damage, operational costs

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 damage, public interest, public protest

An Investor Guide to Addressing Forced Labor in the Apparel Industry
July 2020
Guide for institutional asset managers and individual investors interested in understanding how their 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, operating costs, worker compensation

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

CBP Issues Detention Orders against Companies Suspected of Using Forced Labor
October 2019
U.S. Customs and Border Protection is CBP is firmly committed to identifying and preventing products made with the use of forced labor from entering the U.S. market.
Demonstrates: financial impact, regulatory environment

Revealed: Spice Girls T-shirts made in factory paying staff 35p an hour
January 2019
Online retailer Represent takes “full responsibility” for ? and commits to refunding customers on request.
Demonstrates: Financial impact, operating costs

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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 damage, public interest, lost market value

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 damage, public interest, lost market value

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Sector: Food and Beverage / Industry: Agnostic

2020 List Of Goods Produced By Child Labor Or Forced Labor
September 2020
The U.S. Department of Labor Bureau adds fish from China and Taiwan to it’s List of Goods Produced by Child Labor or Forced Labor due to reports of forced labor in 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, shipment detainment (WRO)

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Industry: Agricultural Products

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, shipment detainment (WRO)

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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 damage, public interest, lost investment opportunities

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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, increased industry interest

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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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Industry: Electronic Manufacturing Services & Original Design Manufacturing

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, operating costs, worker compensation

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, operating costs, worker compensation

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Industry: Industrial Machinery & Goods

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, operating costs, worker compensation

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Industry: Medical Equipment & Supplies

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, shipment detainment (WRO)

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, shipment detainment (WRO)

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Industry: Metals & Mining

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,litigation and claims

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, shipment detainment (WRO)

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