Addressing Forced Labor Risks in Lower Tiers of Electronics Supply Chains – Examples of Company Practice

• Cisco discloses ringfencing labour costs by working with key partners to address labour costs independently of production costs to ringfence the workforce from supply volatility and provide workers with more financial stability. It discloses providing quarterly forecasts to manufacturing partners and reviewing demand forecasts on a monthly basis.
• Samsung states that it has payment support funds to improve the payment terms between suppliers of different tiers and to “provide interest-free loans to suppliers to make cash payments to their sub-suppliers within 30 days”. Samsung discloses using an automated system to handle requests to suppliers for the supply of parts which sets the delivery date based on the lead time agreed to in advance which cannot be reset without prior approval.
• No ICT company has disclosed data on the number or percentage of workers paid a living wage, but Hewlett Packard Enterprise discloses that in FY2021 it “helped establish and actively participate in task force specifically researching and planning how to introduce living wage measures across the electronics supply chain.”

Seventy-five percent of companies in KnowTheChain’s 2022 ICT benchmark have adopted the Employer Pays Principle, which notes that no worker should pay for a job, and the costs of recruitment should be borne by the employer. Such costs have previously been absorbed by workers and have gone unaccounted for. Yet no company discloses specifically integrating recruitment-related costs in its supply chains into purchasing practices or into supplier contracts and orders.

Civil society organizations note that meaningful supply chain reporting in the ICT sector should include disclosure of purchasing practices, namely:

• % of orders/volume for which wages and other labour costs (such as wage increases) are isolated/ring-fenced
• Order placement and lead times
• Details on payment times (Including average and maximum payment times)

As an example, Corning has disclosed that ”97% of small disadvantaged suppliers are paid in 60 days or less”, that the average length of its contracts is two years, and that 15% of all orders are changed after an order is placed.

• HPE states that it gathers supplier feedback following all training to understand “how their systems or conditions have improved.” It states “suppliers who regularly attend [its] trainings perform better socially and environmentally – they are more likely to have higher audit scores, and understand how to address and correct non-conformances faster than those who do not participate in training.”
• Intel reported working with its suppliers to develop their own corporate responsibility programmes, and states that it has required 50 of its suppliers to work with three of their own suppliers to address forced labour risks. It states that this has resulted in: second-tier suppliers implementing changes to their own recruitment policies, expectation setting with labour agents, and returning US$1.2 million in fees to workers.
• Cisco states “trainings were offered to both contract manufacturers who assemble Cisco products and component suppliers who provide parts to contract manufacturers”, which included “next tier supplier management training … including communicating the RBA Code to their next tier and how to implement the RBA Code within their next tier.” It states that based on pre-and post-assessments, suppliers gained a better understanding on the RBA code requirements, and on supplier management of lower tiers. It states that in 2022 it sponsored four suppliers which included one component supplier and its recruitment agency to attend RBA’s RLI Forced Labour and Responsible Recruitment Due Diligence Trainings in Taiwan.

Why is it Important?

The ability of companies to disclose their supplier lists in the ICT and other sectors indicates that supply chain transparency is possible without any detriment to business. In fact, making a supplier list publicly available can yield benefits, such as identifying unauthorized subcontracting and receiving early and real-life notice from stakeholders where violations in a company’s supply chains arise. It further builds trust among workers, consumers, and other stakeholders and makes commitments to good labor practices more credible.

Disclosure of Supplier Names and Addresses

• HPE discloses the names of its component and commodity suppliers (in addition to the names and addresses of its final assembly suppliers).
• HP discloses the names and countries of its commodity suppliers (in addition to the names and addresses of its final assembly suppliers).
• Companies in other sectors disclose both the names and addresses of lower tier suppliers also. For example, VF discloses the names and addresses of its first- to fourth-tier suppliers.

Disclosure of Supply Chain Workforce Data

• Amazon discloses the percentage of women workers per first-tier supplier.
• Intel discloses the percentages of women and migrant workers in its supply chains based on 2022 data “primarily from Tier 1 suppliers but also some limited deeper tiers”.
• HPE discloses that its supply chain responsibility program, which appears to cover more than 95% of its supply chain spend and includes component suppliers which are second tier to the company, has reached 187,811 workers through its supply chain responsibility program and that 87,668 and 3,803 are women and foreign migrant workers respectively. It additionally reports that it has 3,328 female supervisors or managers in its supply chains.
• Companies in other sectors go further and disclose workforce data for lower-tier suppliers. For example, Dick’s Sporting Goods discloses the total number of workers, and number of female workers, and the number of male workers for its second-tier suppliers. Decker’s supplier list includes several data points for its second-tier suppliers: the number of workers, the number of female and male workers, whether there is a trade union and a worker committee, and the percentage of foreign employees.

For more information on what supply chain disclosure labor rights groups in the electronics sector deem vital, see the reports of Electronics Watch and GoodElectronics Network (GE), the Centre for Research on Multinational Corporations (SOMO), and the Business, Human Rights Environment Research Group of Greenwich University (BHRE).

For more information on why supply chain transparency is a key part of human rights due diligence, see the rationale from the Transparency Pledge.

Freedom of association is an enabling right and an effective instrument to tackle forced labor. Where workers can exercise their right to freely associate and bargain collectively, strong improvements in wages and working conditions have been evidenced, across sectors and sourcing countries.

Examples from the ICT sector remain extremely limited. Hewlett Packard Enterprise reported that in 2021 it worked with a final assembly supplier, a union, a third party expert and an NGO to address concerns raised by an NGO. It states that it spoke with a large sample of worker and union representatives, and that the supplier engaged in a six-month programme of improvement that included training, worker engagement, and heightened monitoring focusing primarily on effective grievance mechanisms and more effective engagement with the union.

Intel and Apple disclose the percentage or number of supplier facilities that have negotiated collective bargaining agreements with workers.

Examples from other sectors include H&M which has entered a Global Framework Agreement with IndustriALL and IF Metall focused on freedom of association and collective bargaining in many of its production markets at its direct suppliers and their subcontractors. The company states that to monitor implementation it has set up National Monitoring Committees in Bangladesh, Cambodia, India, Indonesia, Myanmar, and Turkey.

Effective grievance mechanisms help companies detect early warning signs and solve grievances before they escalate or manifest in a more systemic way. Companies can ensure that workers in the lower tiers of their supply chains have access to such a mechanism, by opening and communicating their own grievance mechanism to supply chain workers, ensuring lower-tier suppliers have such mechanisms in place, or by working with third parties to ensure such mechanisms are available and communicated to workers.

• Intel discloses that one of its audits verified that the grievance mechanism of a supplier was available also to workers of lower-tier suppliers. It also notes that it filed a grievance with the Responsible Minerals Initiative regarding one of its gold refiners in Tanzania following media reports of human rights abuses.
• Corning states that it expects suppliers to include provisions in their supply chain agreements with their own suppliers to provide formal grievance mechanisms for their workers and that workers below the first tier may also access Corning’s third party reporting mechanism.
• Dell states that in China, its auditors provide communication cards to workers with its helpline information “for use by workers interviewed during audits of factories in our first and sub-tiers” which implies that lower-tier workers have access to the mechanism.
• Samsung states that it is collecting opinions on the improvement of the hotline system from suppliers through interviews with workers during on-site audits and compliance management workshops. It states that it has been conducting a survey on the satisfaction of those who submit grievances since 2020.
• HP discloses partnering with Issara and one of its major suppliers and the recruiters working with that supplier as well as the workers, where Issara “manages a safe space for workers voices to be heard.”

Companies in other sectors go further and disclose evidence that grievance mechanisms have been used by workers at lower-tier suppliers, thus indicating that the workers are aware of and trust the mechanism. Lululemon discloses the number of grievances received from workers in the second tier of its supply chains. Adidas discloses details on grievances received via its mechanism, which include grievances regarding lower-tier suppliers.

Worker-driven monitoring refers to monitoring undertaken by independent organizations such as local worker-led organizations, unions, or local civil society partners. Such organizations are able to conduct in-depth investigations and worker interviews as they are on the ground year-round, understand local conditions, and are trusted by workers. Worker interviews are carried out with an understanding of the power dynamics between workers and management, preferably in the absence of managers and outside of the workplace. Crucially, such monitoring must be independent of influence from the buyer.

Worker-driven monitoring has led to strong improvements for workers across sectors. As an example, the not-for-profit Electronics Watch and its local monitoring partner, the Migrant Worker Rights Network, undertook three years of worker-driven monitoring at the Thai electronics manufacturer Cal-Comp and engaged in dialogue with the company and its buyers. This process led to a settlement with 10,000 migrant workers who were reimbursed their recruitment fees. Worker-driven monitoring, which included in-depth interviews with workers and recruitment agencies, tracing of recruitment channels, and gathering of evidence, helped identify the full extent of the issues migrant workers are facing and define the remediation.

As evidence of the positive results of this approach increases, buyers including the UK government have begun to adopt this model.

The OECD Due Diligence Guidance for Responsible Business Conduct state that companies should, “in relation to human rights impacts, consult and engage with impacted rightsholders and their representatives in the determination of the remedy.”

• Samsung demonstrated some engagement with impacted rightsholders following an allegation of forced labor when it interviewed more than 200 migrant workers from different countries of origin.
• HPE discloses that when a supplier identified instances of workers from Nepal having paid recruitment charges, it fully reimbursed the workers and worked with HPE to survey workers and found “high rates” of satisfaction with the reimbursement program. HPE’s migrant worker standard states that where fees are charged, suppliers must “consult with all migrant workers to assess the degree and amount of fees” and engage workers in the reimbursement schedule and plan.
• Apple states that in 2021 when it discovered two instances of worker payment of fees at a supplier in Taiwan, fee amounts to be repaid were determined based on the range of fees identified in worker interviews and through cross-verification with labour agencies and suppliers.

Electronics Watch, an independent monitoring organization, that has worked with electronics companies to remediate forced labor cases in their supply chains, notes that including workers in the remediation process “would have better protected workers and might have helped accelerate systemic improvements. [It would also demonstrate that companies] value migrant workers’ involvement and voices to drive systemic solutions to forced labour.”

• Intel discloses that it audits both second- and third-tier suppliers and reports that recruitment-related fees have been returned to workers in the lower tiers of its supply chains. It notes that eight such cases in its second tier have been resolved with fees being paid back to workers. It further cites a case that involved “returned monies and passports” at a third-tier supplier.
• Best Buy reports that it supported two factories that moved production from China to Taiwan and Thailand, where it was aware of an elevated risk to foreign migrant workers, through which it set “clear requirements regarding recruitment fees, resulted in 294 workers from Vietnam and 156 workers from Myanmar being reimbursed for their recruitment fee — more than $72,000 in total.”
• Microsoft discloses an example of remedy below the first tier. It states that one of its suppliers “made substantial efforts to establish the sub-tier supplier management system in FY20, supported by site visits from [its] team and additional capability building.” It states that this supplier identified two forced labour non-conformances and required their lower tier suppliers to repay $216,000 to 104 workers.
• Companies from other sectors have demonstrated financial support for suppliers providing remediation to workers. For example, the apparel company Brooks shared the cost of recruitment fee reimbursement with a supplier factory.

The OECD Due Diligence Guidance for Responsible Business Conduct state that the companies should “seek to assess the level of satisfaction of those who have raised complaints with the process provided and its outcome(s).”

• In an allegation regarding the supply chains of HP, Western Digital, and Seagate Products, workers expressed some satisfaction with the remedy, which included direct hiring and the return of passports.
• Intel reports that since 2014, its first and second tier suppliers have returned more than USD 25 million in fees to 21,000 workers through its audit program. It states that according to the RBA standard for the investigation and repayment of fees to workers, 20% of workers must be interviewed and interviews must be conducted in their native language/in a language they can understand. It additionally states that it uses RBA Voices to survey workers and determine if they are satisfied with the fee repayment amounts