Since 2019, the Interfaith Centre for Centre for Corporate Responsibility, supported by the Principles for Responsible Investment, has led a collaborative engagement with the apparel companies benchmarked by KnowTheChain in 2018. A group of more than 60 global investors has been engaging apparel and footwear companies asking them to address supply chain labor rights abuses, including forced labor, exploitative recruitment practices and working conditions, and impacts of the Covid-19 pandemic.
Phase 1 of the Engagement: Focus on policy and practice
While significant gaps remain (see benchmark report), it is positive to note that all of the 33 companies benchmarked in both 2018 and 2021 improved since 2018 (though for six companies the improvements were very limited). Notably, significant progress can be seen among Asian apparel and footwear companies.
The strongest improvements could be seen on the theme of Recruitment, an area of focus of the investor group:
- + 9: Nine more companies have published a policy prohibiting recruitment fees in their supply chains since the 2018 benchmark.
- + 5: Five more companies reported that workers in their supply chains have been repaid for recruitment-related fees.
- + 8: Eight companies newly disclosed how they are supporting responsible recruitment in their supply chains, such as through mapping recruitment corridors in their supply chains or training labor agencies on responsible recruitment.
Phase 2 of the Engagement: Focus on Remedy and a Just Recovery
Even before the pandemic, reports of forced labor were skyrocketing and factors that create a breeding ground for exploitation and forced labor have dramatically worsened during the pandemic: poverty, discrimination, a lack of labor protections, and restrictions on movement. At a time when millions of apparel workers across the world are waiting for payment of their legally owed wages and benefits, only just over 1 in 10 companies (11%) could demonstrate several remedy outcomes for workers, such as the repayment of unpaid wages or recruitment fees.
Phase 3 of the Engagement: Focus on worker centric due diligence based on worker voice and responsible purchasing practices
The focus will move to looking at whether companies are adopting robust human rights due diligence approaches to address forced labour risks in their supply chains in alignment with the UN Guiding Principles, the OECD Guidelines, the ILO core labour standards, and the vast swathe of regulatory due diligence requirements coming on stream globally.
Robust due diligence processes examine companies’ own impacts on their supply chains – including through the impact of irresponsible purchasing practices and looking at how they are ensuring that workers’ rights to freedom of association and collective bargaining are protected. Companies should be adopting responsible purchasing practices like prompt payment, accurate forecasting and reasonable lead times as well as ringfencing labour costs as a baseline necessity for responsible business. Without such practices, companies are at risk of creating conditions which make it difficult or impossible for suppliers to comply with supply chain policies on human rights and working conditions.
Investors interested in joining the engagement are invited to contact David Schilling at dschilling@iccr.org.
What Participating Investors Are Saying
Julie Tanner, Managing Director, Christian Brothers Investment Services
Julie Tanner, Managing Director, Christian Brothers Investment Services
“KnowTheChain benchmarks have strengthened our engagements and enabled us to distinguish companies that are taking important and replicable steps from those that whose inaction is putting vulnerable workers at risk. It is imperative that companies address exploitative working conditions in their supply chains, including forced labor and human trafficking—and we need to see proof on the ground: Policies are no longer sufficient; companies need to show that their policies and processes make a difference for workers. As a responsible investor, where portfolio companies continue to fail to remediate abuses, we will use the power of the proxy and vote against boards to stand in solidarity with workers in global supply chains.”
David Schilling, Director—Human Rights, Interfaith Centre for Corporate Responsibility
David Schilling, Director—Human Rights, Interfaith Centre for Corporate Responsibility
“ICCR members have focused on workplace human rights in supply chains for decades,” said David Schilling, senior program director, ICCR. “Some leading companies have made good progress, but the sector, as evidenced by the KnowTheChain benchmark, has not sufficiently filled the gap between, policy, processes and performance. To do so, companies and their suppliers must engage workers as agents to transform the garment sector from the ground up, where workers receive a living wage work under safe and healthy conditions.”
Fiona Reynolds, CEO, Principles for Responsible Investment
Fiona Reynolds, CEO, Principles for Responsible Investment
“The investor community must come together and mobilize and protect the rights of the millions of workers that are in situations of modern slavery and human trafficking today. This is why the PRI has been supporting the ICCR KnowTheChain engagement on forced labor in apparel supply chains since its inception. With our five-year human rights program, the PRI will ensure investors play their part to ensure respect of workers’ rights in global supply chains.”
Vincent Kaufmann, CEO, Ethos Foundation
Vincent Kaufmann, CEO, Ethos Foundation
“Companies with sound supply chain management pay workers their legally owed wages and severance pay. We urge investors to use tools such as KnowTheChain to identify risks and steps companies in their portfolios need to take to remedy detected shortcomings.”
Fredric Nyström, Head of Responsible Investment, Öhman
Fredric Nyström, Head of Responsible Investment, Öhman
“We are deeply concerned about working conditions in global supply chains. For this reason, we are an active member of the ICCR KnowTheChain engagement focused on the apparel sector. We believe that strong governance and ESG practices include upholding human rights and that failure to comply makes it more difficult for companies to reach their full potential. Investors like us are prepared to act where companies lack human rights due diligence and show a sustained track record of human rights abuses.”
Saskia Kort-Chick, Director of Social Research and Engagement, AllianceBernstein
Saskia Kort-Chick, Director of Social Research and Engagement, AllianceBernstein
“AllianceBernstein is deeply troubled by the mounting evidence of forced labor, including in the apparel sector. KnowTheChain’s resources and investor engagements have been a helpful resource to us, as we undertook internal training on modern slavery and engaged companies on the topic.”
Resources
KnowTheChain Investor Statement: More than 160 global investors with US$6 trillion in assets under management publicly demonstrate support of the United Nations’ Sustainable Development Goal 8.7 to eradicate forced labor. The investors commit to integrating analysis on companies’ efforts to address forced labor in their investment analysis, voting, and engagement practices.
KnowTheChain investor resources: Resources include investor brief on sectors where forced labor is a high risk, such as the apparel, food, construction, and forestry sectors. The investor briefs highlight key risks, gaps in companies’ practices, examples of good practices, and questions for engagements.
Data on 180 companies: A data set on 180 companies in the apparel, food, and ICT sectors, alongside scorecards with company-specific recommendations, is available for download.
Rankings: The benchmarks allow to view peer comparisons by country, (sub)sector, and theme.
Why use KnowTheChain?
Vaidehee Sachdev, Impact Analyst – Social Pillar Lead, Aviva Investors
“Benchmarks such as KnowTheChain allow us to identify risk exposure of portfolio companies to forced labor—and, crucially, the risks rightsholders are facing. We have signed the KnowTheChain investor statement to show our support to the Sustainable Development Goals, in particular SDG 8.7 to eradicate forced labor. We also use the benchmark data to distinguish companies that have taken steps to eradicate forced labor from those that fall behind. The KnowTheChain benchmarks also provide excellent tools for investors just starting to consider forced labor risks. KnowTheChain’s data and insights are essential to unravelling the complexity of global supply chains and the risks hidden within them.”
Investors interested in learning more about KnowTheChain, its investor statement and investor engagement are invited to contact Áine Clarke at aclarke@business-humanrights.org.