The holiday retail season is an ideal time to check that forced labor and bribery—two top and interconnected supply-chain threats—do not undermine the success of your critical sales period.
Not long ago, many in the business community viewed ensuring a supply chain free from the taint of “forced labor”—an umbrella term that includes trafficked, child, slave and indentured labor—as primarily a PR/marketing concern. After all, the skeptic argued, can a U.S. or European retailer or manufacturer really control what goes on in a factory in China, India, Brazil, Vietnam or other distant locations?
In fact, this is virtually the same view many had in 2000 of the Foreign Corrupt Practices Act, the now-familiar 1970s enactment that was essentially unknown for most of its statutory existence. From the enforcers’ perspective, however, the answer is simple: today’s companies are expected to police their supply chains like never before, regardless of how difficult this may be.
The real-world challenges facing companies trying to ensure supply chain integrity are, in fact, undeniable. Nevertheless, during the past five years or so, legislatures in the U.S., Europe and elsewhere have recruited—or, perhaps more accurately, conscripted—the business community into the global effort to rid supply chains of forced labor (and bribery). But before we address the question of how to protect yourself, let’s consider some compliance realities and why forced labor has joined the FCPA as today’s leading compliance challenge.
Compliance Reality #1: Forced Labor Is a Very Real Threat to Your Supply Chain
The motivation for the veritable groundswell of legislation and enforcement efforts is as clear as it is laudable—forced labor has reached epidemic proportions, and it is an issue that must be taken seriously. While bribery and corruption can certainly take place without forced labor, the opposite is not true; bribery of foreign officials such as immigration, factory and labor inspectors is part and parcel of virtually any foreign operation systematically using forced labor. And there are many such foreign operations. Consider these recent best estimates related to forced labor:
Compliance Reality #2: Legislators and Enforcers Are More Serious About Forced Labor
While the specifics concerning some recent initiatives might be debatable, it is clear that forced labor in supply chains is no longer simply grabbing the attention of a handful of advocacy organizations. Retailers and manufacturers—in particular, those that are public-facing—can expect mounting pressure from advocacy and consumer groups (“soft scrutiny”), as well as from associated governmental/law enforcement sources (“hard scrutiny”), both squarely focused on their supply chains.
This increased focus on supply chains has been especially evident in relatively recent enactments of, and amendments to, forced labor laws in the U.S., Europe and elsewhere. Some of the latest developments demonstrate why exercising strict control over supply chains is today’s business imperative:
Specifically, they must answer questions concerning, for example, what they are doing to audit suppliers and to maintain internal accountability standards. Making false or misleading disclosures threatens to draw consumer and class action lawsuits and government attention. (See the flow chart below detailing the California Act’s requirements and logic.)
Review this Human Trafficking/Forced Labor Laws & Regulation Comparison Matrix for more information.
Compliance Reality #3: Failure to Take Compliance Seriously Can Cause Devastating Reputational/Brand Damage (Or Worse)
On the “soft scrutiny” side, organizations such as China Labor Watch, KnowTheChain, Slavery Footprint, Global Exchange and Free2Work, as well as such media outlets as Al Jazeera, CNN, Conscious Magazine, The New York Times and TIME magazine, are increasingly scrutinizing the conduct of “Western” companies with transnational supply chains originating out of the developing world. Their high-profile focus has been on companies with household names selling directly to consumers, but it has also expanded to a broader class of retailers or manufacturers.
Compliance Reality #4: Compliance Is Challenging, Serious AND Achievable
The previous summary points out the ever-more-intense supply chain compliance expectations concerning both forced labor and bribery/corruption. Given these new realities, retailers and manufacturers of all sizes must ensure the following:
Yesterday’s compliance thinking will not meet today’s requirements in these developing, specialized areas. Experienced and practical approaches are critical to developing and implementing a supply chain compliance program, as well as to updating an existing program with a compliance tune-up. Contact experienced counsel to talk you through the challenges as well as the solutions to supply chain compliance.