Forced Labor – How Ethical Business Leaders Can Make A Difference

by Andrew Leigh, Featured Contributor

We remain confident that we took every practicable and reasonable step to ensure that the range would be ethically produced.”

            – Deputy Chief Executive Fawcett Society, about charity T Shirts revealed as produced in forced labour conditions.
               Guardian, 3rd November 2014

In 2013 a group of Lithuanian men bought passage to Britain hoping to repay the cost through their earnings. They ended up being shuttled from farm to farm at all hours of the day or night, controlled by unlicensed labour providers or gang masters and unable to escape.

They had become slaves in all but name. [1]

Following a news investigation in 2014 retail giant Wal-Mart Stores and warehouse membership club leader Costco announced they were taking action on the evidence of forced labour in their Thailand-area seafood supply chains. [2]

For a heady moment, imagine you’re the CEO of Asda, Sainsbury’s, M&S, Tesco, Walmart or Costco. Take your choice, the salary’s juicy for all of them! Almost certainly you see yourself as an ethical leader, able to speak fluently and with some degree of passion on the importance of ethics in your business.

Not nice then to realise your company is supporting the slave trade.  Nor is it something you’d be proud of, or wish to tell your children about. Yet your organisation bought food from suppliers who did use slave labour.

Once the news surfaced, no doubt each of the real CEO’s were appalled. None presumably would condone such practices. Yet for many ethical leaders the attenuated supply chain can seem a daunting challenge, a potential disaster waiting to happen.

For example, many famous brands were manufactured under the roof of the collapsed factory in Bangladesh in May 2013. You’d have thought these companies would have enough processes in place to preclude labour exploitation. Yet apart from appalling pay, the labourers had to work in dire conditions. At least one famous brand was said to be unsure whether or not its products were made there. [3]

To warrant the title of responsible leader it’s essential to make sure your supply chain does not harbour hidden highly unethical practices like slavery. So how do you sleep at night? How do you prevent nasty surprises like the ones experienced by Asda and the others.

Five essential ethical leadership actions are:

• Make Clear Your Expectations
• Ensure Values resonate across the company
• Seek information—ignorance is no excuse
• Speak up and give a lead
• Be willing to see for yourself

Make clear your expectations

An essential starting point in mastering the supply chain and the risks it poses to reputation and company credibility, is: Make clear your expectations. When it comes to slavery or exploited labour, make clear your leadership expectations. Be explicit, saying clearly that values like dignity, respect for others and providing a safe working environment are not optional extras. They are fundamental to running a responsible business.

These expectations may eventually convert to some highly detailed metrics and audit techniques throughout the chain. But in essence they should be driven by core company values.

Ensure Values resonate across the company

Leaders in search of a squeaky clean supply chain cannot rely on clarity of expectations to deliver the result they want.  The ethical leader goes beyond talking about values and ensures core values resonate throughout the company.

The most effective leaders work hard to see their people become committed to these values. They in turn will make sure these spill over to suppliers. Thus all encounters with suppliers become an opportunity to further engage, an opportunity to model the commitment and make sure it lands.

While establishing the rules is essential, compliance is only part of the picture. If you want your core values to resonate with your suppliers so those values can seep down to their suppliers, a mind set based strictly on compliance isn’t enough…..“When it’s clear you walk the talk and live your core values every day, others are more likely to be committed as well.”
– Chief Procurement officer, Du Pont [4]

Seek information—ignorance is no excuse

Ethical leaders who want to do the right thing often don’t know what is going on in their supply chains. In a global company the chain can be so long and geographically dispersed simply checking what’s happening becomes a major logistical exercise involving considerable cost.

The obvious solution is to pay someone else to do the checking for you, for example so-called independent certification schemes. But these are no guarantee you don’t inadvertently employ slaves. Not only do such schemes not offer reliable guarantees, they are often lucrative shams sold to gullible global companies.

Many of the Bangladesh factories where workers lost their lives had been “ethically audited.” And even when audits are done systematically they can fail because they focus on products not people. It may be far better to review how a supplier obtains and uses its labour than in auditing the actual products in some fairly mindless way.

Speak up and give a lead

An important role for the ethical leader in business is not just to condemn slavery or seek to eradicate it from the organisation’s own supply chain. Being a responsible leader means giving a lead to others on the issue outside the organisation.

Negating the tolerance of slavery in this way may seem somewhat removed from what many CEO’s regard as their role—“the business of business is business”–but ethical ones know they can help world through expressing their concern in public.

For example, earlier this year, Indra Nooyi, chairman and CEO of PepsiCo spoke at the World Economic Forum in Davos. She challenged business leaders and industry captains to change the dialogue from “what do we do with the money we make” to “how do we make the money.”

By speaking up and giving a lead Nooyi showed ethical leadership.  She was not saying companies should be responsible for taking care of society as a whole. But businesses have a choice in how they go about being members of society.

In the case of forced labour, ethical leaders should do their utmost to eliminate and prevent social harm and problems linked to their activities—be concerned with the “how”, rather than just the the “what.”

It ought to concern every person, because it is a debasement of our common humanity.  It ought to concern every community, because it tears at our social fabric.  It ought to concern every business, because it distorts markets.  It ought to concern every nation, because it endangers public health and fuels violence and organized crime.  I’m talking about the injustice, the outrage, of human trafficking, which must be called by its true name — modern slavery.”
– President Obama, to the Clinton Global Initiative September 25, 2012

Be willing to see for yourself

In a company with 1000 products the supply chain is infinitely long. No CEO could be expected to personally check on the integrity and ethicality of such a chain. Even so, personal visits can inspire employees to see their leader out there taking an interest in how the chain works in practice.

All over the world slaves are forced to work and supply us with the things we buy. Raw materials and commodities like cotton, sugar, iron, gold, diamonds, coffee, timber, fish, cocoa, as well as goods like clothing, shoes, toys, and bricks come from slave labour. These commodities and goods flow into the global product chain and arrive in our homes.

Ethical businesses leaders can help stop this by taking responsibility and being seen to actively wanting to clean up the supply chain.

The customers care too

In your briefly imagined role as CEO at one of the retail concerns mentioned earlier, you probably agree with all of the above, yet still feel reluctant to pursue the issue in a proactive way, in case you upset your customers.

You’d be wrong to worry about that. An Ipsos Mori poll published in June 2014 found shoppers take the issue of ethical practices seriously in their buying habits. For example, four out of five (83%) say ethical standards of retailers matters to them. Two in five (39%) say their shopping decisions have been influenced by that in the last year.

The killer punch from this poll is that at least two out five consumers say they’re willing to spend more on a product if the company acts in an ethical way. A slightly greater proportion said it’s not enough to be told a company is ethical, “they need to prove it to me.”

Customers care about the supply chain too. Over half (62%) said  “it’s important to me that retail companies are clear about where they source their raw materials, components or ingredients from.

Not just “regrettably unavoidable”

For some business leaders though, forced labour and child slavery are not totally unacceptable– merely “regrettably unavoidable.” One justification is the complexities of the supply chain which can make eliminating unethical practices seem a far-fetched aspiration.

Yet ethical leaders know forced labour can indeed be eliminated and they don’t need to tolerate it in their supply chain. In 1997 for example, demands for more accountability in how the oil industry conducted its affairs was regarded as “hopelessly naïve.” Yet by 2013 two thirds of the industry was covered by financial transparency. [6]

Similarly there was a commendably proactive approach in the cocoa industry in which business tackled the complex supply chain, with at least one leading company publishing its child labour policy.

Two centuries ago business played a central role in the movement to end the transatlantic slave trade. Today many international business leaders carp at the prospect of additional legislation requiring them to monitor the extent to which their supply chains are at risk of using forced labour

The failure of business leaders to publicly advocate reductions in forced labour shows the extent to which we remain far short of ethical leadership in business. Yet there are an increasing number of exceptions in which business heads like Indra Nooyi, chairman and CEO of PepsiCo do step out and give a lead.