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Julie DiMauro: A compliance plan to keep forced labor and human trafficking out of your supply chains

In January, the U.S. Supreme Court declined to consider an appeal by three companies — Nestle SA, Cargill Inc., and Archer Daniels Midland Co. — that sought to dismiss a lawsuit alleging they aided and abetted child slave labor on coca plantations in Africa.

The case will continue in the lower federal court in California, and the laborers who filed the class-action lawsuit back in 2005 will amend their complaint to reflect changes to judicial law in human-rights cases.

The laborers alleged that they had been forced to work in cocoa fields for long hours with no pay in the Ivory Coast. They argued the companies were aware that their suppliers – Ivorian farmers — were dependent on child slave labor on these plantations.

In 2010, a federal trial judge dismissed the case, ruling (among other things) that the laborers had not identified any company conduct with a direct effect on the wrongful actions by the farmers.

A divided panel of the Ninth U.S. Circuit Court of Appeals said the allegations raised the inference that the company knew child slavery existed in its supply chain but had put revenues ahead of human welfare.

The class-action litigants still have the burden of proving their case, and showing that there is sufficient connection to the United States.

The International Labor Organization (ILO) estimates that 21 million people are enslaved today, or forced into labor, and 1.5 million of the victims are in Europe or North America.

In December 2014, the U.S. Department of Labor issued a report on labor conditions around the world that listed six countries (among a total of 74) where the cocoa industry employed underage children and indentured laborers. Instances of child labor were reported in four of the listed countries: Cameroon, Ghana, Guinea and Sierra Leone. The others, Ivory Coast and Nigeria, resorted to both child labor and forced labor.

The U.S. federal government has strengthened its protections against trafficking within the contractors its own agencies employ, noting that the government is the largest single purchaser of goods and services in the world.

In California, the state’s Transparency in Supply Chain Act of 2012 requires retail sellers and manufacturers doing business in the state to disclose their efforts to eradicate slavery and human trafficking (defined by the United Nations as the illegal movement of people, typically for the purposes of forced labor or commercial sexual exploitation) from their direct supply chains.

Last year, the UK enacted the Modern Slavery Act, obligating businesses with annual returns of more than £36 million (about $50 million) to make a yearly statement setting out what steps it has taken to ensure that human trafficking and slavery are not taking place in any part of its business or supply chain.

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There are several steps companies can use as a starting point to more effectively accomplish human rights compliance goals and prevent violations and reputational harm in this area of increasing regulation.

First, companies can leverage what they already have in terms of anti-corruption and antibribery processes and build out from there, using the ingredients of training, due diligence monitoring, risk assessments and reporting for an effective slavery and human trafficking review.

Training should occur early and for a wide array of employees. Employees need to understand what slavery and human trafficking mean, the red flags indicating either or both might be present in the company’s supply chain, and the reporting mechanisms they should use after detecting any abuse or potential for it.

The firm must institute internal controls and oversight procedures, so once any suspicions about abuses are raised, certain investigative protocols kick in.

A variety of departments must share information to make this possible, including procurement departments, human resources, compliance and audit teams.

And as the company evolves and grows, the due diligence monitoring and risk assessments performed on its business lines must continuously evolve.

To get such insight when the business supplier is half a world away requires the creation of some strategic body — a team that includes at least one senior manager (such as the chief compliance officer, among others) from the contracting firm and the supplier. Ideally, this team should hold regular meetings about whether any signs of abuse have arisen and any further steps the company can take to prevent them.

This team’s existence will demonstrate that supply chain management has the endorsement and commitment of senior leadership.

Finally, although requests-for-proposal often ask would-be service providers to provide information about their labor policies and initiatives — and final contracts may address those items — the supplier must appreciate that the purchasing business can (directly and without warning) investigate further.


Julie DiMauro, a contributing editor of the FCPA Blog, is a regulatory intelligence specialist in Thomson Reuters’ Regulatory Intelligence group in New York. Follow her on Twitter @Julie_DiMauro and contact her at [email protected].

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