Tackling modern slavery in your company’s supply chain? Consider your role in altering the rules of the game, empowering people and changing exploiter incentives

Week of 25 January 2021

Tackling modern slavery in your company’s supply chain? Consider your role in altering the rules of the game, empowering people and changing exploiter incentives

Director of the United Nations University (UNU) Centre for Policy Research James Cockayne and a team of fellow researchers conducted an 18-month study “to answer a simple question: How can fighting slavery contribute to sustainable development?” The researchers find that the answer to that question is, on the surface, quite simple: Fighting slavery contributes to sustainable development “[b]y maximizing people’s economic agency – their ability to make choices, for themselves, about how to develop and use their own capabilities and how to use factors of production such as land, labour and capital.” The report provides ample ammunition for companies looking to make the case for host governments to place greater emphasis on tackling modern slavery. Of particular relevance for companies, it provides food for thought for companies looking to tackle modern slavery in their supply chains, who can now consider their role in transformation strategies (altering the rules of the game), empowerment strategies (addressing people’s vulnerabilities) and disruption strategies (changing exploiter incentives). The report provides further learnings from and for highest-risk sectors, including apparel, fisheries, cattle, cotton, construction and palm oil.

The resulting study, Developing Freedom: The Sustainable Development Case for Ending Modern Slavery, Forced Labour and Human Trafficking, unpeels this seemingly simple answer to provide deep analysis of the ways that modern slavery can impede development. It also provides case studies and learnings for key sectors in which forced labour is prevalent: Apparel, Fisheries, Cattle, Cotton, Construction and Palm Oil. The case studies focus on these sectors in 14 key countries: Bangladesh, Brazil, China, Ethiopia, India, Indonesia, Malaysia, Myanmar, Nigeria, Philippines, Thailand, the UK, the US and Uzbekistan.

The study was based on literature reviews, quantitative data analysis, surveys and mixed methods case studies.

We highlight below some of the key learnings and findings from the study that are most relevant for companies seeking to address modern slavery in their own value chains.

To start: according to the report there are ten ways in which modern slavery impedes development as “denial of agency ripples through the economy, leaving everyone worse off”:

    1. “Slavery reduces productivity. It demotivates workers, and leads to inefficient labour allocation. This pushes capital towards rentier sectors, reducing overall economic productivity.”
    2. “Slavery creates intergenerational poverty. The negative health, human capital formation (education) and income impacts of slavery spill over to victims’ families and communities. They are transmitted through generations. Transatlantic slavery may account today for 72 per cent of income disparity between African nations and the rest of the world – and 99 per cent between these and other developing countries.”
    3. “Slavery institutionalizes inequality. Rent-takers use their profits to entrench their power and institutionalize structural inequality. Addressing this later can be very expensive: it cost the UK a payment of 5 per cent of Gross Domestic Product (GDP), paid off over 180 years, to buy out British slavers in the 1830s.”
    4. “Slavery weakens multiplier effects. Slaves lose control of their consumption, savings and investment choices, reducing economic multipliers. Consequently, emancipation leads to measurable jumps in economic activity.”
    5. “Slavery discourages innovation in production. It demotivates both workers and exploiters to innovate, since workers will not enjoy the benefits, and exploiters may lose rents. This can lead slavery-based industries to become inefficient, uncompetitive and unsustainable.”
    6. “Slavery produces a capital market failure. Capital markets tilt unfairly towards firms whose low costs rely on illegal labour practices. This is anti-competitive and inefficient.”
    7. “Slavery hits the public purse. It reduces income and consumption tax receipts, and increases direct expenses to the public budget. UK Home Office researchers estimated domestic costs from modern slavery to be GBP 3.3 to 4.3 billion per year.”
    8. “Slavery weakens governance. It corrodes trust, increases social stratification, ethnic fractionalization, violence and conflict. And it impedes State formation and investment in public goods and infrastructure. This generates negative economic impacts, as well as political ones.”
    9. “Slavery fuels corruption and illicit financial flows. Slavers bribe and corrupt officials to protect the slavery system, further weakening governance. Exploitation of migrant workers may, in some cases, be an illicit transnational financial flow.”
    10. “Slavery harms the environment. Slavery rests on illegal management practices that often also disregard environmental protections. It coincides with deforestation, illegal and over-fishing, unsustainable agricultural practices, and negative impacts on biodiversity and carbon capture.”

How can modern slavery be tackled?

The report delves into the “systems approach” that is needed to end modern slavery. These findings provide helpful food for thought for companies looking to tackle modern slavery in their supply chains:

    • “[W]e can understand modern slavery as systems that emerge out of the interaction of three components: the institutional environment; vulnerable people; and exploiter strategies. We call this system-oriented framework for analyzing modern slavery ‘Developing Freedom’ because it has, as its objective, the identification of the factors that work to restrict enslaved people’s freedom – and thus the identification of the types of interventions that will allow that freedom to be developed.”
    • “The ‘Developing Freedom’ model seeks to address this significant lacuna [related to lack of connections between the anti-slavery community and human development scholarship and practice], by encouraging interventions transforming the environmental factors that may be conducive to exploitation; disrupting exploiters’ strategies for exploitation; and directly empowering people.
    • Although initially for development actors, we note this system-oriented framework is particularly helpful for companies looking to tackle modern slavery, as it leads to a reflection on the role companies can play in the following three areas: transformation strategies (altering the rules of the game), empowerment strategies (addressing people’s vulnerabilities) and disruption strategies (changing exploiter incentives)
    • Transformation: “The first pathway through which interveners can seek to impact systemic outcomes is transformation of the institutional environment to make it less conducive to exploitation of vulnerable groups.” The focus here is less on “formal written rules, and more about how formal and informal rules interact and operate to shape the extractive, rentier systems we know as modern slavery.” This is about “[u]nderstanding these interventions not as efforts to address ‘structural drivers’ or ‘root causes’, per se, but rather to alter how structural and environmental factors interact with people’s vulnerability.” In particular “Top-down, brand-based auditing has a role, but may not be effective if it does not factor in local norms and environmental factors that allow exploiters to work around audit. … It may need to be combined with bottom up approaches that empower workers, such as ‘worker-led social responsibility’.”
    • Empowerment: This “involves working to increase the ability of vulnerable people, when confronted by potential exploitation, to use the resources with which they are endowed and that are available in the environment, to resist that exploitation – and indeed to flourish.” This is about both “prevention (of vulnerability being exploited), or indeed of empowering victims” but also about “empowering survivors.”
    • Disruption: “The third intervention pathway for reducing modern slavery is through disruption of business practice and exploiter strategies. Slavery persists because it costs less to exploiters than the expected present value of the resulting future earnings generated by the exploitation, less the expenses for carrying out that exploitation on an ongoing basis. Only by changing that calculus will we remove the incentive to exploit.” This is about making slavery “economically unprofitable”, which can be about making forced labour more costly, or making free labour cheaper.

What are some findings and lessons from the highest-risk sectors and geographies?

    • Cattle sector (Brazil): The report concludes that “Slavery in that sector is a product of: a development model, and government investment and policies, that encourage meat production in places where the State’s power is weak; supply chain practices that foster competition on labour cost by primary producers; a pool of vulnerable, landless working poor; exploitation strategies combining traditional norms of social dependency with debt bondage.” But at the same time, the country “has developed a powerful toolkit for disrupting slavery, including multi-stakeholder collaboration, labour inspections and the dirty list (lista suja) – which financial actors use to guide decisions.”
    • Palm Oil (Indonesia, Malaysia, Nigeria): The sector relies on having a “pliable” and flexible workforce able to come in during peak seasons, but this also increases vulnerability to forced labour, especially for migrant workers. The report determines that given the many geopolitical complexities of the palm oil supply chain, “[d]evelopment actors have an important role to play in promoting coherence across the resulting regime complex, based on maximizing worker and smallholder economic agency.” Companies producing and sourcing palm oil should also take note of their role in ensuring that they partner with trusted, responsible suppliers and of the opportunity to strengthen practices of smallholder farmers.
    • Cotton (Uzbekistan): The decades-long prevalence of forced labour in Uzbekistan’s cotton fields is well-known. The study finds that recent decreases in modern slavery in Uzbekistan’s cotton sector is a result of the government’s “changed approach” under President Mirziyoyev, including: “1) disruption pressure from a concerted international campaign; 2) falling rents from cotton due to the negative development impacts of forced labour; 3) effective engagement by the World Bank, ILO and international donors (including EU and US) and bilateral partners to transform the value chain; and 4) civil society pressure.” The researchers believe that the relative success of the Uzbekistan case “provides insights about what works to dismantle systematic forced labour, how legacy systems may continue to operate even after the State turns away, and the need to consider remedy.”
    • Fisheries (Bangladesh, India, Philippines, Thailand): The risks of modern slavery in the fishing sector are diverse and “vary significantly by context.” For example, in India, the Philippines and Bangladesh, women and children face higher slavery risks in fish processing, while migrant men face higher risks while working on foreign fishing vessels. Thailand, meanwhile, has “attracted significant attention” due to the scale and severity of slavery conditions for migrant workers, but more remains to be done (“ILO analysis suggests 10 per cent of workers (tens of thousands) in the sector are still in forced labour”). Governance of fisheries remains “highly fragmented” and governments and development agencies have failed to coordinate effectively across borders. Companies sourcing from this sector will need to be aware of these governance gaps and drive traceability to the source as much as possible.
    • Garments and apparel (Bangladesh, Ethiopia, India, UK): Per the report, “Garment production can drive growth, industrialization and poverty-reduction (including for women), but competition for foreign investment can leave workers vulnerable to exploitation.” What’s more, unsustainable retailer purchasing practices like “late payments and unrealistic pricing” incentivise further exploitation of workers by suppliers. And, “In settings from Leicester to Tamil Nadu, the garment production business model relies on access to a ‘captive’ workforce: vulnerable to exploitation due to migration status, language skills, indebtedness and social marginalization. Workforces are atomized and casualized.” This suggests a clear role for retailers to transform their own practices to avoid placing higher burdens on supply chain workers.
    • Construction and infrastructure (India, Myanmar, Qatar): “Construction employs 7 per cent of the world workforce, but accounts for 18 per cent of forced labour,” and it “differs from other [sectors] because it fixes capital to a certain spot.” There are a few results of this. For one, workers need to travel to the construction site, and so end up taking on the burden of recruitment costs; in effect “workers subsidize construction.” Also, “forced labour becomes a way to assert political and even military control” over the revenues derived from controlling buildings and built infrastructure. Finally, because construction is often financed domestically, foreign actors have limited leverage over the sector. The report points out that major construction projects around mega-sporting events could help disrupt this by forcing local actors and governments to improve working conditions (for example, hosting the FIFA World Cup in 2022 has been source of pressure on Qatar to introduce new regulations to protect migrant construction workers).

Download the full report here: James Cockayne, Developing Freedom: The Sustainable Development Case for Ending Modern Slavery, Forced Labour and Human Trafficking, United Nations University (January 2021)

You can also download specific case studies, key findings, and a synopsis of the full report on the Developing Freedom website.