Mandatory transparency, discretionary disclosure

23 November 2016

Genevieve LeBaron - Professor of Politics and co-director of SPERI

New transparency regulations in some places theoretically require companies to report on forced labour in their supply chains, but a new review finds that’s not what’s happening

The challenge of governing labour standards globally has never been greater. Incidents such as Apple’s detection of ‘bonded servitude’ at its major subsidiary factories in China; the discovery of slave labour in the Thai prawn industry, which supplies Walmart, Tesco, and Costco; and the skyrocketing death rate for workers constructing stadiums for Qatar’s World Cup have drawn international attention to the severe labour exploitation that’s being fuelled by discount-driven consumer markets.

Activists have become increasingly adept at linking severe labour exploitation back to the big brand corporations, whose purchasing practices shape working conditions within global supply chains. For instance, the Asia Floor Wage Alliance, in conjunction with local trade union and labour rights organisations, recently traced conditions at the Next Collections factory in Bangladesh – where workers were ‘routinely forced … into 14-17 hour shifts, seven days a week amounting to workweeks of over 100 hours’ and paid poverty level wages of $0.20 to $0.24 USD – back to clothing manufacturer Gap.

Amidst calls for greater corporate accountability for labour standards, companies and governments have passed a flurry of initiatives intended to address and prevent modern slavery and forced labour in global supply chains.

On the government side, these include transparency legislation like the UK Modern Slavery Act and California Transparency in Supply Chains Act, which require some large manufacturers to disclose any voluntary measures they are taking to verify their supply chains against human trafficking and slavery.  On the corporate side, companies are investing in new social responsibility programmes, and have expanded ‘ethical’ auditing initiatives and NGO partnerships to monitor labour standards.

Yet, by most measures, and across many sectors and regions, labour exploitation remains endemic. I am in the midst of writing a new book (to be published by Polity next year) that will explain why these new governance measures are failing to protect the world’s workers.  The answers are complex and vary across sector, supply chain, and governance initiative.  Here, I want to flag just one small but important part of the story, which relates to the problems of measuring the effectiveness of new legislation and private initiatives.

Transparency to what end?

None of the new laws require companies to consistently report on a standardised and specific set of indicators (e.g. the prevalence and known incidence of forced labour in their supply chains), or to provide straightforward and consistent information about whether the measures they are taking to combat exploitation are actually working. Rather, under transparency law, companies can report on pretty much any aspect of their corporate social responsibility programmes that they’d like.  And unsurprisingly, most companies elect not to report information about the actual risks or patterns of forced labour, human trafficking, or modern slavery within their supply chains, nor on the progress they are (or are not) making towards combatting such practices

According to one recent review of 230 company statements produced to comply with the UK Modern Slavery Act, ‘35% of statements say nothing on the question of their risk assessment processes, which is surprising for statements that are intended to be based around a due diligence approach. Two-thirds do not identify priority risks, whether in terms of countries, supply chains or business areas.’  In short, under the new transparency legislation, companies are reporting, but they are reporting on vague and general issues related to social compliance rather than providing information on the real problems.  As the recent review notes, ‘most statements do not go further than general commitments and broad indications of processes.’

Until companies are transparent about the risks of forced labour in their supply chains and provide baseline data about the scale of such risks, it won’t be possible to evaluate whether the measures they purport to be taking to address these risks are actually working. Given the tenacity with which companies tend to triumph their successes, the lack of hard evidence confirming progress is suggestive of the opposite – that these new initiatives are doing little to alter the status quo.  The business of forced labour in global supply chains cannot be combatted without reliable and consistent information about the patterns of forced labour within global supply chains and the effectiveness of public and private governance efforts to combat them.

This blog was first published on the SOAS blog and is reposted here with the author’s permission.

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