Modern day slavery poses risks to businesses

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Chocolate child labour in Ivory Coast

Many large corporations are at risk from a practice that most people believe to be relegated to history books: slavery.

A modern-day abolitionist movement, organised and financed by an Australian mining billionaire, is turning up the heat on companies that buy products or materials created with slave labour. Andrew “Twiggy” Forrest, the founder of Fortescue Metals Group, founded the Walk Free Foundation which publicises the problem through the Global Slavery Index.

The Index, which was suggested by Bill Gates, measures the extent of slavery around the world in order to raise awareness of the issue. The Index indicates that some form of slavery exists in all 167 of the world’s nations, The New York Times reported. The Foundation also estimates that around 45.8 million people are kept in some form of slavery.

The country with the most slaves is India with around 18.35 million; other major offenders include China with 3.39 million slaves, Pakistan with 2.13 million, Bangladesh with 1.53 million and the former Soviet republic of Uzbekistan with 1.23 million.

To make matters worse around 8.4 million of the world’s slaves are children. The nation with the highest percentage of slaves is North Korea, where 4.37% of the population is kept in bondage.

Business risks from slavery

The risk to businesses is an obvious one, they might be held liable for selling or using products or materials made or extracted with slave labour. Disturbingly, the Walk Free Foundation’s research indicates that many items produced by slaves find their way into the modern supply chain.

Prawns sold in supermarkets in the United Kingdom and the United States, are processed by slave labourers imprisoned on Thai fishing boats. Cocoa beans, an ingredient in chocolate, are harvested by slaves in the Ivory Coast, one of the world’s leading producers. Cobalt, a key material used in electronics, is mined in the Democratic Republic of the Congo, which has a high level of slavery.

Around 60% of the world’s nations are at risk for having at a least some slaves in their supply chains. Some major exporters, including India and China, have large numbers of slaves in their supply chains. Even most European Union members had a medium risk of using slave labour, the Index noted.

Legal risks from slavery

All this indicates that it is possible for a company to be selling or buying materials or products made with slave labour, and not even realise it. This creates legal risks because the United Kingdom’s parliament passed an anti-slavery law, Modern Slavery Act, that requires companies with revenues of £36 ($47 million) or more to document efforts to eradicate slavery.

Another risk companies, particularly in the United States, face is litigation filed on behalf of slaves. American courts allow attorneys to file class-action lawsuits on behalf of a group or class of people. To file such a suit, all a lawyer needs is permission of one member of the class.

That means all a human rights lawyer would need to file such a suit is to find one ex-slave. Such suits can create financial and legal risks as well as generate bad publicity and the possibility of actions such as boycotts.

Other risks include the possibility of criminal prosecution. Slavery is illegal in most nations; it is even banned by the 13th Amendment to the US Constitution. Most American states have specific laws that make human trafficking and forced labour as felonies.

The problem of defining slavery

The risk from slavery is greatly magnified because the practice is actually very hard to define. The number of people bought and sold as slaves is actually very small.

Most of the world’s slaves are kept in some form of what the 13th Amendment describes as “involuntary servitude.” Slavery as defined by human-rights groups like Walk Free is a catchall term that includes forced labour, prison labour, debt peonage, bondage, prostitution, forced marriage, conscription, sharecropping and a wide variety of other practices.

The legal definition of slavery can also be very ambiguous. In the United States, the 13th Amendment allows involuntary servitude as punishment for crimes. This means prisoners can be forced to work in America, as long as they have been convicted of a crime. Some European nations that ban slavery still require conscription, or mandatory military service, for most young men.

American prisons generate an estimated $2 billion (£1.5 billion) a year through compulsory labour, Newsweek reported. That means some US made products might be technically in violation of anti-slavery laws in other nations.

Slavery and risk management

The publicity Forrest and the Walk Free Foundation have created, may force corporations to include slavery among the risks they manage for.

Companies might be forced to retain investigators to check supply chains for evidence of forced labour. Expensive changes in sources of raw materials might be required.

It might also be possible to create insurance products, perhaps some form of bonding to protect companies from slave associated risks.

Understanding the problem of slavery and the risks it poses will be vital for many companies in many industries in the near future. Publicity about the issue is growing, and so will political pressure for business to end it.

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