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Dirty Little Secrets of the Supply Chain

June 13, 2017
There's no chance that your company's products are the end result of forced labor, right? Are you sure?

What do these companies all have in common: Unilever, Nestlé, Colgate-Palmolive, Procter & Gamble? If you said these consumer packaged goods giants are all included in Gartner's ranking of the Top 25 Supply Chains of 2017, then you're only partially right. What they also have in common is that they were all singled out by Amnesty International (a human rights-focused non-governmental organization) as global brands that are profiting from child and forced labor.

A recent investigation of Asian agri-business giant Wilmar revealed that several Wilmar business units and suppliers have been exploiting palm plantation workers in Indonesia. Among other abuses, Amnesty International found that Wilmar's supply chain exploits women and children (as young as eight years old), pays less than minimum wage, and exposes workers to toxic and banned chemicals as well as unsafe and physically demanding tasks. Wilmar is one of the world's biggest producers of palm oil, which it sells to CPG giants like those mentioned above, who use it in products we all use and consume, such as ice cream, toothpaste, shampoo and soup. And lest you think that Wilmar's business practices are largely unknown outside of Southeast Asia, the company has been cited by several other NGOs over the past decade for such ethical lapses as deforestation, illegal sourcing and forced displacement of indigenous populations. So it's not like Wilmar is flying under the radar.

"Corporate giants like Colgate, Nestlé and Unilever assure consumers that their products use 'sustainable palm oil,' but our findings reveal that the palm oil is anything but," asserts Meghna Abraham, senior investigator with Amnesty International. "There is nothing sustainable about palm oil that is produced using child labor and forced labor."

We're reaching an inflection point where what a company says it's doing to help the planet in its corporate social responsibility (CSR) report has to be viewed with at least a critical eye, if not outright skepticism. What exactly does "sustainability" mean, anyways, if Unilever and Nestlé can both score a perfect 10 in Gartner's rankings of a company's CSR efforts.?Admittedly, the Gartner list itself is mostly a popularity contest but it makes you wonder how companies whose supply chains include suppliers under investigation for various moral, ethical and environmental abuses can possibly warrant a perfect CSR score.

Nearly 46 million people are subject to forced labor and involuntary servitude, according to the Global Slavery Index. And these abominable labor practices are paying off quite handsomely for the companies perpetrating them. Forced labor in the private economy generates $150 billion in illegal profits every year, according to Helen Carter, a consultant with Action Sustainability.

Addressing the topic of how to combat modern slavery in supply chains at the recent Institute for Supply Management (ISM) 2017 conference, Carter pointed out that companies need to spell out their specific policies toward slavery and forced labor standards, including how to protect whistleblowers. Every employee of a company, especially those at the top of the corporate ladder, should be in full support of thwarting labor exploitation. She also strongly urges that companies map out their supply chains so they can identify where their biggest risks are for exploitation, and then devise strategies to circumvent those risks.

Of course, it's not just CPG companies whose supply chains are susceptible to forced labor practices. Apple, whose supply chain Gartner constantly lauds as the gold standard, and other high-tech giants have come under fire by NGOs for their use of contract manufacturers overseas who exploit their workers. Apparel companies like Nike and H&M, also on the Gartner list, have similarly been criticized for sweatshop and slave labor abuses within their extended supply chains.

Admittedly, identifying and eliminating forced labor throughout the supply chain is a huge undertaking, especially since "bad actors have gotten quite good at hiding their subversive activities," notes Robert Kuhn, who heads the ISM's Sustainability and Social Responsibility committee. Nevertheless, "eradicating modern slavery is first and foremost a moral imperative, but it is also an issue of reputational risk and regulatory compliance," Kuhn says. Just because a company says it's all-in on CSR doesn't necessarily mean it really is.

Let's stop kidding ourselves that "sustainability" initiatives, especially those that are based on self-reported goals and accomplishments, are the be-all and end-all of how responsible a company is. The most important consideration for a company is the health and welfare of its employees, as well as the employees of the companies throughout its supply chain. That's the bottom line.

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