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Why Fashion’s Failing the Forced-Labor ‘Litmus Test’

From New York to Germany to Norway to the broader European Union, enthusiasm for mandatory due diligence legislation is ramping up across the globe. Coupled with import bans on goods made with forced labor, the human-rights regulatory landscape could soon look very different for brands and retailers used to skating by on their codes of conduct, a wing and a prayer.

The time for non-negotiable standards is now labor campaigners say. One decade after the introduction of the United Nations Guiding Principles on Business and Human Rights, voluntary efforts to eliminate modern slavery from global supply chains “are failing.” Most of the world’s largest companies, the Business & Human Rights Resource Center and KnowTheChain noted in a recent report, haven’t yet implemented the most basic human-rights due diligence.

Even much-vaunted modern slavery acts have done little to address egregious labor abuses lurking in the shadows, since many focus on disclosure over mitigation and are weakly enforced, the report said. In contrast, due-diligence requirements linked to financial penalties, such as the U.S. Customs and Border Protection’s seizure of shipments linked to suspected forced labor, have “brought rapid transformation in high-risk sectors and geographies.”

With the dearth of such levers, overall progress has been both limited and slow. Of 56 companies KnowTheChain assessed three times over five years, one-quarter (25 percent) haven’t conducted a “baseline” human-rights risk assessment of their supply chains. Nearly half (45 percent) have yet to publish a list of their first-tier suppliers, and 64 percent haven’t engaged with stakeholders such as trade unions, local nonprofits or policymakers on forced labor in the countries where their suppliers operate. Another 68 percent of businesses do not disclose “even the crucial step” of adopting responsible commercial practices, such as planning and forecasting.

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In its latest forced-labor benchmark, published in July, KnowTheChain identified allegations of worker exploitation in the supply chains of more than half of the world’s top 37 apparel and footwear companies, including reports of forced labor. On average, benchmarked firms scored 41 out of 100 possible points, with luxury mainstays such as Hermès, Louis Vuitton and Prada performing “particularly poorly.”

KnowTheChain recorded a “tendency” among the companies toward written policy that isn’t effectively implemented throughout the supply-chain tiers through practices such as engagement with workers and their representatives, better buying guidelines and effective grievance mechanisms.

Only two fashion firms, in fact—Adidas and Lululemon—stood out for employing increasingly robust policies to flag and eliminate modern slavery, KnowTheChain said, adding that they “demonstrate strong commitment and effort to eliminate forced labor, demonstrating this is both achievable and commercially viable.”

“Efforts to address forced labor provide a significant litmus test: if companies cannot identify and eliminate one of the most egregious forms of abuse, there is little chance for the broader human-rights agenda,” the report said. “So far, companies are failing this test. Exploitation stubbornly persists in global supply chains, with an estimated 16 million people trapped in forced labor in the private sector and evidence suggesting higher levels of exploitation than ever before. The impacts of the Covid-19 pandemic have only exacerbated vulnerabilities and suffering.

It’s these poor average corporate scores and continual presence of forced labor in supply chains that highlight the need for regulation with liabilities and penalties “to enforce effective human-rights due diligence, centered on meeting workers’ needs,” it added. Such an approach requires “meaningful and safe” engagement with rightsholders such as worker representatives to determine actual and potential risks and strategies for remediation, so that any harm, including the risk of retaliation, can be “prevented and addressed.”

“Change is coming, as indicated by global momentum towards greater regulation of companies’ human-rights efforts. Governments are stepping in where companies have failed to act and are requiring companies to initiate steps to protect workers,” the report said. “Policymakers have a golden opportunity to shape corporate responses to forced labor and so initiate the change needed to bring greater equality to workers in global supply chains and transform the way companies and markets operate worldwide.”