Point of View

Supply chain leaders must address modern slavery to mitigate risk and save millions from forced labor; it starts with visibility

April 16, 2020

Consumers are increasingly holding businesses accountable for their whole value chains—from emissions and business disruption to the alarming rise of modern slavery. Every year, more than 9 million people enter a modern slavery industry that profits approximately $150 billion, having trapped 46 million people worldwide. Governments’ and non-governmental organizations’ (NGOs’) budgets to tackle modern slavery are pitiful, but enterprise supply chain leaders can make a valuable difference. Visibility is a major barrier to addressing modern slavery, and there are business, legal, and, most of all, moral reasons to change that. Technologies like blockchain are improving supply chain transparency and traceability in progressive cases (see Exhibit 1 from our upcoming Enterprise Blockchain Top 10 report, and our coverage of IBM and Accenture’s work), and platforms are bringing vast amounts of data together. Outsourcing is no longer an excuse to overlook poor ethical practices.

 

9.2 million people enter modern slavery every year, with 46 million suffering worldwide

 

Approximately 60% of modern slavery is associated with supply chains, covering forced labor in factories, farms, and other typically outsourced activities. It’s certainly a private sector issue. While governments and NGOs try to eradicate modern slavery, last year, the UN only rescued 66,000 slaves out of the 46 million, and it prosecuted just 7,000 criminals out of almost a million. The small number of successes is unsurprising when considering that the UN’s budget to tackle modern slavery last year was 0.23% of modern slavery’s $150 billion in profits.

 

Modern slavery regulatory acts are spreading worldwide. The UK is a progressive example; it legally requires board-level reporting. Lawsuits face companies that fail to act, but it’s not only a reputational or financial risk (although media and investor attention is rising), it’s also a legal risk. Supermarket giant Tesco provided a recent example; a child found a prison laborer’s call for help inside a Christmas card.

 

Supply chain management is now the #1 use case for enterprise blockchain adoption, and we hope that the transparency it brings will enable atrocities like modern slavery to be rooted-out

 

As blockchain sweeps through supply chains (Exhibit 1), leaders must bring it into the fight against modern slavery; but as Exhibit 1 outlines, modern slavery isn’t on executives’ radars, despite the scale of the problem. Luckily, there are partners ready to help, backed by enterprise success stories.

 

 

Exhibit 1: Supply chain management has emerged as the hottest enterprise use case for blockchain

 

Popular use-cases for enterprise blockchain adoption

(by number of blockchain engagements)

 

 

Source: HFS Research, 2020, approximately 640 blockchain engagements across 12 service providers covered in our upcoming Enterprise Blockchain Top 10 report, including (alphabetically) Accenture, Cognizant, DXC, EY, IBM, Infosys, KPMG, LTI, Mphasis, NTT DATA, TCS, and Wipro

 

 

Mekong Club helps businesses visualize and roadmap the problem to eradicate modern slavery from their supply chains

 

“Most firms have spent the last 20 years auditing their Tier 1 suppliers, and typically present zero issues, but when you dig beyond than that to the second and third tiers, most companies don’t know; here lies their vulnerability…”

 

—Matt Friedman, CEO Mekong Club, speaking at a recent supply chain conference

 

 

 

Friedman also cited the worrying statistic that 72% of UK supply chain professionals have no visibility beyond their first tier, while 77% think modern slavery is happening at some point in their supply chains.

 

A Mekong example involved a Hong Kong manufacturer that trained all staff, at all levels, and all their suppliers, for awareness of and to combat modern slavery. Mekong investigated whether migrant workers had been forced into debt (one prominent form of trapping workers in forced labor), in which case the factories would pay. It implemented anonymized hotlines for employees to report issues, and it ramped up auditing and employed third parties for surprise visits to interview employees, and to look at the books.

 

Many firms are going through similar transitions with Mekong Club. Friedman explained that the brief process follows this path: they know nothing, then they see the risk, look at their systems, address the risk, put in place new systems, and finally ensure that these measures are sustainable.

  

Platforms like SGS’ TransparencyOne are reconnecting value chains that have grown apart

 

SGS’ TransparencyOne platform maps companies’ value chains, connecting customers and suppliers and building trust to influence behaviors and promote sustainability. TransparencyOne acts like a social B2B network similar to LinkedIn, where individual companies are responsible for their data input. SGS takes responsibility for onboarding and monitoring clients’ suppliers across all tiers via SaaS from Azure Cloud. Examples of these clients’ motivations were discussed at a recent Microsoft sustainability event:

 

  • Danone wanted to reassure customers about safety, contents, and ethical practices at supplying farms.
  • Mars is aiming for 100% sustainable rice (for the Uncle Ben’s brand), which consumers can verify by scanning a bar code that takes them to farmers’ profiles and Mars’ efforts to reduce their water consumption, etc.
  • Macy’s wanted to integrate its supply chain into one platform.
  • Intermarche is leveraging the growth in France’s organic food consumption by using SGS’s platform to certify that products are 100% organic. It has logged 5,000 suppliers in 50 countries and moved all its private labels onto TransparencyOne in three years.

 

SGS found that 95% of suppliers give them full visibility, while many provided more information than required. Leaders can leverage supplier enthusiasm to set examples for their whole supply chain to follow.

 

A warning note: Transparency involves discovery throughout the supply chain—you might not like what you find. But after discovery, you can target investigations on high-risk areas, identified and refined through platform analytics; it’s better if you or a partner like SGS discover malpractice than your customers or the media.

 

 

The Bottom Line: Addressing modern slavery is not just about brand image and mitigating business risk—it’s a moral (and legal) obligation.

 

Enterprise leaders don’t want to ignore or facilitate modern slavery, and neither does their business—even for shareholder profit. Visibility, however, remains a barrier to even the most well-meaning executives taking action.

 

Blockchain is rapidly maturing among enterprises and their supply chain services providers, while platforms like TransparencyOne and Mekong are collating the necessary data to tackle a problem like modern slavery. Supply chain leaders are in a privileged position, with the partners and tools at their fingertips to simultaneously improve their business practices and, more importantly, save millions from a lifetime of forced labor.

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