A Bangladeshi man struggling to support his family borrows thousands from moneylenders to take what he believes to be a job in IT in London. But when he arrives, the recruiter takes his passport and makes him work long hours in a factory in unsafe conditions. He’s never paid. A woman from Bolivia journeys to Brazil to work in the textile industry. She works 15-hour days in a cramped workshop and isn’t paid for four months.
These workers are two of the close to 25 million people around the globe who are victims of human trafficking. They are forced into often unsafe, and many times inhumane, working conditions. Also known as modern slavery, human trafficking is a global phenomenon—no country is immune—and it encompasses both sex trafficking and forced labor. In restaurants, hotels, factories, and farms across the world, traffickers are exploiting people, a quarter of whom are younger than age 18.
Trafficking is big business, worth some $150 billion a year according to a 2014 report from the International Labour Organization. Unfortunately, consumers and investors can unintentionally contribute to this widespread problem. Through purchasing and investment decisions, we may be inadvertently support companies that allow– either intentionally or through neglicence– human trafficking into their supply chain.
Take sugarcane. One of the world’s largest agricultural commodities, it is in countless common food items—cereals, yogurts, soft drinks and flavored coffees. It’s also typically harvested by migrant and rural workers, many of whom are forced into working long hours in isolated workplaces for low wages. If purchasers, be they corporate or individual, don’t ask questions about where the sugar they are buying comes from, they contribute to demand for artificially low pricing enabled by forced labor.
What can investors do?
1) Invest in leaders, and divest laggards
Investors can make a difference by investing in companies that are tackling this issue head on. At OpenInvest, we’ve built our Invest in Ethical Supply Chains cause on research and data from KnowTheChain, a resource for both investors and companies who are concerned about forced labor risks in their supply chains. KnowTheChain benchmarks companies across three industries: food and beverage, information and communications technology, and apparel and footwear. As an example, KnowTheChain evaluated 10 companies on their approach to forced labor risks across sugarcane supply chains, including Nestlé and Coca-Cola.
KnowTheChain selects companies for evaluation based on two criteria: exposure to forced labor risk and market cap. Benchmarks focus on companies’ policies and practices, particularly their actions with first-tier suppliers, since that’s where they have the most leverage. OpenInvest invests only in companies that KnowTheChain has rated at 50 or higher.
In the food and beverage industry, Unilever ranks first out of 38 companies in KnowTheChain’s benchmark, having disclosed more information on its forced labor policies and practices than its peers. In information and communications technology, Intel Corp. ranks first. The semiconductor giant has worked to minimize trafficking by publishing a supplier list and holding unannounced audits. Intel also provides evidence that workers in its supply chains have been reimbursed the recruitment fees they paid. In apparel and footwear, Adidas takes the top spot for initiatives such as its responsible purchasing policy, and for undertaking a large percentage of unannounced supplier audits, which minimize the risk of suppliers cleaning up their workshops and factories in preparation for an audit.
2) Vote in annual shareholder meetings
Engaging with companies and voting proxies is another way investors can fight forced labor in their portfolio. In the global food sector, in particular, shareholders have been scrutinizing the financial risks of supply chain impacts and asking companies to report back. What started as just a handful of sustainability-focused resolutions filed by shareholders in 2011 jumped to 23 filed in 2017. That year, Kroger, Domino’s and Kraft Heinz received shareholder proposals around how they manage risks associated with sourcing commodities like palm oil, beef, and soy.
3) Support organizations working on behalf of victims
Organizations like UNICEF and the United Way have initiatives to help. They both provide information on how to advocate to your elected officials. UNICEF also has an “End Trafficking” events toolkit to help those interested learn how to fundraise for their child protection work. Groups like Polaris are working to disrupt the trafficking network. Here’s a comprehensive list of major organizations that accept donations.
By investing in companies that are working to eradicate trafficking in their supply chains, and by divesting in those that aren’t, investors can put their assets to work for more humane and just working conditions for all.
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