Regulators and policymakers, who have mandated conflict mineral disclosures for years, are now focused on expanding social compliance systems to include anti-human trafficking (AHT) requirements.
Human trafficking includes (but is not limited to) forced labor, child labor, and slavery, as well as coercion, abduction, fraud, and exploitation connected with labor.
While some companies are adapting their conflict mineral risk frameworks to expand to AHT, a majority are not yet moving in that direction, according to a new report from Deloitte, entitled, “Addressing human trafficking in supply chain.”
There are a couple of reasons why companies are not taking actions. One is that many companies believe their operating models are immune to modern slavery despite evidence to the contrary, while lack of a specific and widely accepted AHT risk management framework from the SEC presents a daunting roadblock to others, both from implementation and cost perspectives.
“Taking no action may increase the risk of being targeted for human trafficking violations and subjected to legal action,” the report concluded.
New regulatory requirements are compelling organizations to gain alignment at the highest executive leadership levels around how to approach this issue, establish and effectively implement policies, and develop evaluative metrics to address human trafficking beyond the “check the box” requirements to mitigate scrutiny from stakeholders and NGOs
The problem of human trafficking is immense. The International Labour Organization has estimated that almost 21 million people are victims of forced labor and that forced labor in the private economy generates $150 billion in illegal profits per year.
Research by the Ashridge Centre for Business and Sustainability and the Ethical Trading Initiative (focused on retailers and suppliers in the apparel, grocery, department store, home and garden, beverage, fresh produce, and health and personal care sectors) found that 71% percent of companies believe there is a likelihood of modern slavery occurring at some point in their supply chains.
The Department of Labor has identified some 136 goods from 74 countries produced by child or forced labor—spanning all industries and many parts of corporate operations.
Given this scope, Deloitte argues that companies need to begin thinking of AHT frameworks as a valuable asset. The group provides examples of companies that have developed proper frameworks and are reaping the benefits of being socially conscious organizations, which include:
- The ability to quickly and credibly respond to human rights issues that may be identified in the supply chain
- Heightened responsiveness and accountability to regulators, which are increasingly mandating more detailed supply chain reporting
- Reduction of a company’s legal, operational and other supply chain risks
- Strengthened brand reputation and loyalty among customer
Companies can build on their experiences in conflict minerals, or on those of other companies, to address requirements around human rights and anti-human trafficking. Those experiences apply to activities such as organizational policy development, program governance and execution, training, and auditing and disclosure. These activities should be conducted within a risk management and governance context that considers the organization’s industry, global footprint, and growth targets says Deloitte.
“Internal discovery and vigorous remediation demonstrate a company’s commitment to combating human trafficking.”