As the unfortunate news of wide-scale underage worker exploitation has broken this week, many are shocked at the sheer scale of the issue. While typically thought to be associated with developing economies, underage labor issues have a long-standing history in developed economies as well. And these issues are growing exponentially as systemic ramifications from the pandemic continue to drive labor shortages.

This recent news is a sober reminder that while climate-related monitoring and goals have taken center stage in recent years, continued diligence around performance monitoring around social factors remains necessary.

But how could such egregious violations go unchecked, especially given the numerous Fortune 500 brands associated with this issue? Oftentimes, these violations lie hidden in the complexities of a company’s supply chain, where 70-90% of ESG impact metrics live across environmental, social, and governance factors, which include labor practices, EHS, business ethics, and working conditions.

With a 70% increase in underage labor since 2018, data shows this phenomenon is not relegated to specific industries or supplier types, but rather lies throughout supply chains with suppliers that may be outside a company’s traditional monitoring strategies or marked as lower tier risk historically.

With heightened scrutiny on labor practices and conditions, companies can expect additional reporting requirements and stronger enforcement measures of existing labor laws based on initial responses from federal agencies responsible for monitoring and penalizing labor violations.

But what can you do as a business leader to manage the changing dynamics of risks in this space?

• Recognize that when using and sourcing suppliers, there’s always a potential to import risk around underage labor.
• Review and refine your supplier code of conduct and get commitments in writing.
• Review your sourcing and procurement safeguards, consider expanding your list of Tier 1 suppliers to include a broader array of service types, and don’t' assume US-based companies are automatically lower risk.
• If purchasing through an agent, validate their sourcing procedures and consider cyclical audits.

Adding these simple controls can significantly reduce your exposure.

While an incredibly complex issue, there are tools and technology available to support your risk reduction and compliance efforts at scale. Avetta’s supply chain risk management experts are available to reassess your supply chain risk through an updated lens using the Avetta One platform. Utilizing our Potential Impact Evaluation methodology, we can provide supply chain risk strategy and ensure proper monitoring across an expanded view of risk by vertical, geography, and function.

Sources:

• California Transparency in Supply Chains Act https://oag.ca.gov/SB657
• CBP on Hoshine WRO https://www.cbp.gov/trade/programs-administration/forced-labor/hoshine-silicon-industry-co-ltd-withhold-release-order-frequently-asked-questions
• Child labor exploitation in the US https://www.yahoo.com/news/alone-exploited-migrant-children-brutal-172915245.html
• President Biden/US Federal Government Response https://www.nytimes.com/2023/02/27/us/biden-child-labor.html
• USMCA Forced Labor Provision https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/23-Labor.pdf
• USTR on Tridonex https://www.cbp.gov/trade/programs-administration/forced-labor/hoshine-silicon-industry-co-ltd-withhold-release-order-frequently-asked-questions
• Uyghur Forced Labor Prevention Act https://www.cbp.gov/trade/forced-labor/UFLPA
• Withhold Release Orders/TariffAct of 1930 https://crsreports.congress.gov/product/pdf/IF/IF11360

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