Key Takeaways:

• Child labor is a human rights issue that involves harmful work that jeopardizes the health, safety, and morals of children.  

• Factors contributing to child labor include poverty, lack of access to education, cultural norms, survival strategies in conflict zones, and inadequate laws and enforcement.

• Child labor poses reputational, legal, financial, operational, and contractual risks to companies.

• Effective steps to preventing child labor include conducting due diligence on all tiers of suppliers, embedding anti-child labor clauses in contracts, performing regular supplier audits, providing training, and immediately implementing remediation plans if child labor is discovered.

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Combating Child Labor in Global Supply Chains

Worldwide, over 160 million children are engaged in child labor. While the world had seen steady progress in reducing child labor over the past couple of decades, more families have fallen into poverty since the COVID-19 pandemic, forcing millions more children into child labor. This in turn has made supply chains more vulnerable to this tragic human rights violation, necessitating strong action from international businesses and organizations.

This year’s World Day Against Child Labor takes place on June 12^th with the theme of “Let’s act on our commitments: End Child Labor!” In order to help spread the word on this important human rights topic, this post will discuss:

1. What child labor is and why it occurs

2. The risks of child labor in supply chains

3. Best practices for addressing child labor

What is Child Labor?

Connected to broader issues of forced labor and modern day slavery, the United Nations defines child labor as comprising “work that children are too young to perform and/or work that, by its nature or circumstances, is likely to harm children’s health, safety or morals.” Such work includes exploitative industrial work, agricultural labor, mining, and the forced labor of modern day slavery. Some of this work is extremely hazardous. The International Labour Organization (ILO) estimates that 73 million children work in unsafe working conditions, leading to an approximate 22,000 children killed at work every year.

There are several reasons why child labor occurs. These include:

• Poverty and Economic Factors: The most common reason for child labor is poverty. Families often need the additional income, pushing children into the workforce at a young age.

• Lack of Access to Education: In areas where education is not accessible or is unaffordable, children are more likely to enter the workforce early. This is compounded by the belief that work develops skills that are more relevant to their economic reality than formal education.

• Cultural Factors: In some cultures child labor is considered a norm, with children expected to contribute to family work and income from an early age.

• Survival Strategies of Families: In conflict zones or disrupted societies, child labor is seen as a survival strategy. In such contexts, children work to provide basic needs for themselves and their families.

• Inadequate Laws and Enforcement: In many countries, laws regulating child labor are either inadequate or not effectively enforced, leading to increased child labor practices.

Understanding the Risks of Child Labor in Your Supply Chain

In addition to child labor being a human rights violation that causes extreme harm to its victims, it also poses several risks to companies and their supply chains. Understanding these risks helps business leaders create both a moral and financial business case to combat child labor.

The risks of child labor violations in your supply chain include:

1. Reputational Risk: The discovery of child labor within a company's supply chain can severely damage company reputations. For example, two well-known U.S. athletic shoe brands suffered reputational damage in the 1990s when child labor was found in their supply chains. Despite thirty years of efforts to rectify these practices, the stigma associated with these human rights violations still persists, affecting consumer perceptions and brand value.

2. Legal Risk: Companies can face legal consequences if found complicit or negligent in preventing child labor in their supply chains. Over the past decade there has been a spate of forced and child labor regulations that increase the amount of due diligence and governance companies must apply to their supply chains. Most recently, Canada’s Bill S-211, the Fighting Against Forced Labour and Child Labour in Supply Chains Act, came into effect on 1/1/24, mandating that large companies must report annually on their organization’s activities, policies, and procedures to prevent forced and child labor within their workforce, including supply chains. Failure to comply could result in fines of up to $250,000.

3. Financial Risk: Companies also face direct financial risk should child labor be discovered in their supply chains. This includes potential fines, loss of business, and the cost of implementing corrective measures. There can also be a direct impact on sales. For example, one large American apparel retailer implicated in child labor scandals in the 2000s in India faced boycotts and significant backlash, which threatened sales and long-term revenue streams.

4. Operational Risk: Child labor can lead to operational disruptions, especially if regulatory actions are taken against a company or if urgent changes in the supply chain are required to address compliance issues.

5. Contractual Risks: If child labor is discovered, it could lead to breaches of contract and severing of business relationships. Companies are increasingly adopting strict environmental, social, and governance (ESG) requirements for their contractors and including ESG clauses in their contracts. It’s therefore more important than ever to have ESG compliance programs and tools in place for your supply chain.

What Can Be Done About Child labor?

The good news is that there are several important steps that companies can take to combat child labor in their supply chains:

Before Working with a Supplier:

1. Conduct Due Diligence: Evaluate your contractors’ labor practices and compliance with local and international labor laws. This includes checking past incidents of labor violations and assessing both your primary contractors and their subcontractors. You must ensure that all layers of your supply chain, even beyond tier one suppliers, adhere to labor standards against child labor. Tools like Avetta’s subcontractor management solution can help your organization accomplish this kind of extended due diligence.

2. Define Expectations Clearly: Include specific clauses against child labor in contracts to ensure legal and ethical standards are understood and agreed upon. Such clauses should be binding for subcontractors as well.

3. Scrutinize Industries and Regions Known for Child Labor: According to the U.N., some industries to watch out for are manufacturing, mining, construction, agriculture, and domestic service. Regions with the highest rates of child labor, meanwhile, include Africa, Asia, and the Pacific.

While Working with a Supplier:

1. Perform Regular Comprehensive Supply Chain Audits: Conduct regular inspections and surprise audits that reach beyond your first-tier suppliers, checking throughout your supply chain for compliance with your anti-child labor policies.
   
   As Avetta’s HSE & Sustainability Principle, Michael Ford, explains, “Many management programs focused on supplier due diligence, focus on the top tier suppliers, those who receive contracts, unfortunately the lower tier suppliers engaged to help deliver services are ignored or missed, as are the associated risks found at this level.”

2. Provide Ongoing Education and Support: Require training and offer resources not only to primary contractors but also to their subcontractors to ensure they understand the importance of adhering to labor laws and the implications of child labor.

3. Promote Transparency and Communication: Transparency should be a key part of your relationship with your suppliers. Create an open communication and feedback process that ensures every supplier in your supply chain is able to participate in a continuous dialogue about aligning with your child labor standards. One of the best ways to do this is to employ digital tools that provide continuous visibility and communication with your suppliers.

After Discovering Child Labor in Your Supply Chain:

1. Carry Out Immediate and Inclusive Remediation Plans: Implement corrective actions that address the immediate welfare of the child workers and rectify the labor practices at your affected contractors’ and subcontractors’ facilities.
   
   Such a plan may not necessarily involve terminating business with that supplier. According to Katie Martin, Avetta’s Director of Sustainability, “Immediately terminating business connections can push vulnerable people into even more exploitative conditions. Instead, you need to determine the best way to mitigate that risk, which could include children having appropriate PPE for the job, not operating heavy or dangerous machinery, and attending school for at least five hours a day.”

2. Report and Collaborate: Work with local authorities and international bodies, if necessary, to report and resolve the issues in a manner that prioritizes the well-being of affected children.  

3. Review and Reinforce Monitoring: Asses the effectiveness of existing monitoring processes, mechanisms, and tools. Then develop and implement a plan for enhancing them to prevent future occurrences.  

Conclusion

Preventing child labor is an important human rights issue that every international company should be focused on. It’s good to know that by proactively managing supply chains through rigorous due diligence, continuous monitoring, and comprehensive education at all levels, companies can help reduce child labor effectively. If your organization is seeking expert advice on improving supply chain practices to safeguard against child labor, especially in deeper tiers, don’t hesitate to reach out to an Avetta expert. Together, we can create a responsible and compliant supply chain environment, allowing us to “act on our commitments to end child labor.”

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