Hidden forced labour in developed economies

Forced labor is the most commonly identified form of modern slavery and is defined by the International Labour Organisation (ILO) as “all work or service which is demanded from any person under the threat of any penalty and for which the said person has not offered himself voluntarily”. Globally, more than half of the 40.3 million victims living in some form of modern slavery are subjected to forced labor, according to the latest figures published by the UN’s International Labour Organization (ILO) and the Walk Free Foundation. Forced labor, and related practices likely exist in the operations or supply chains of numerous businesses and are generally more common in developing countries.

Many governments have ratified or adopted Human Rights and forced labor policies promoting the respect for fundamental rights. At the state level, the ILO adopted the forced labour convention in 1930 with the aim to suppress the use of forced labor in all its forms irrespective of the nature of the work or the sector of activity in which it might be performed. Since then, 178 of the 187 members have ratified the convention, however ratification from the United States and South Korea is still pending. Individual companies have demonstrated commitment in this area by supporting initiatives such as the principles on human and working rights set out in the UN Global Compact initiative.

The level of exposure to forced labor risk is linked primarily to the following factors:

• Vulnerable populations: Low-skilled workers, many of whom are from migrant, low socio-economic, or culturally and linguistically diverse backgrounds, are more vulnerable to coercion than others. Some of the approaches used by exploiters are debt bondage, withholding of wages and excessive working hours
• Business models and sectors: Multiple layers of outsourcing and the subcontracting of temporary staff on informal and last-minute contracts lead to companies often not knowing where their workers are coming from. This is a very particular characteristic of the mining, agriculture and construction sectors
• Poor management practices: Lack of oversight of third parties, vague policies and standards and/or no grievance mechanisms play a key role in sustaining forced labour practices

Where multiple high-risk factors co-exist, there is a higher likelihood of forced labor occurring.

Research undertaken by Focus on Labour Exploitation (FLEX) found that this need for flexibility, combined with weak protection or enforcement of employment rights at the low-paid portion of the market, has created a workforce at risk of abuse or exploitation in London. A survey completed by 134 workers found the following:

• 50% of workers have no written contract
• 36% report not being paid for work completed
• 33% have experience verbal or physical abuse while at work

According to the Greater London Authority, “Accurate statistics on forced labour are scarce because of the way data is collected and analysed and due to problems identifying forced labour. The boundaries between forced labour and labour exploitation are contested, which makes it difficult to detect forced labour…At the core of forced labour is the nexus between an individual’s vulnerability and a setting in which this individual’s work or services can be exploited for profit without too much risk of discovery or prosecution. Tackling forced labour therefore requires attention to both of these.”

Forced labor in the construction sector has been also observed in the Arab countries and Australia, with large-scale sporting events being noteworthy for the public scrutiny that has been generated regarding potential human rights abuses among the workforce.

In line with this, companies should strengthen their human rights due diligence to mitigate forced labour risks by:

• Identifying whether workers are being contracted at very low cost compared to the real market
• Inserting clauses into contracts with contractors and suppliers that allow for the imposition of fines or termination of contract upon findings of forced labor
• Allowing freedom of association, as worker’s unions can reduce the vulnerability of workers. Similarly, establishing independent grievance mechanism including protection for workers or whistleblowers
• Informing  employees and subcontractors of forced labor and make policies and efforts visible
• Conducting annual audits of suppliers as a monitoring mechanism

AGCS supports its clients to identify and assess material risks and develops recommendations on how to mitigate these risks. In a fast changing world, AGCS identifies emerging issues and develops risk management strategies.  

Our consulting team is available at: AgcsSustainability@allianz.com

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