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

• HP discloses that it is supporting its suppliers to improve their forecasting ability and to track working hours more accurately. As a result, it reports suppliers have implemented IT systems to improve the management of shifts. HP also demonstrates the impact of these changes for its supply chain workers—it states that by increasing lead times with one final assembly supplier and improving communication, workers are now assigned eight-hour shifts instead of 12-hour shifts.
• Corning reports that it ensures prompt payment to suppliers.
• Hewlett Packard Enterprise discloses that it provides monthly demand forecasts to its suppliers and shares its business outlook, including forecasting, with suppliers during quarterly reviews.

Thirty-one out of 49 companies in KnowTheChain’s 2020 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 efforts to train purchasing staff on this principle or on integrating recruitment-related costs in its supply chains into purchasing practices, let alone processes to actually integrate such costs 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)

• HPE reports that it extended training to its indirect suppliers and partnered with companies including Dell and NVIDIA and suppliers to deliver training to three lower-tier suppliers, including on how to assess and address key risks in their own supply chains.
• Intel discloses that it asked 50 first-tier suppliers to work with at least three of their own suppliers to address forced labor risks, resulting in a number of policy and procedural improvements at the second-tier level. Its supplier Micron states that it requires its suppliers to have a documented and established supplier management program in place that describes the methodologies that it applies to its suppliers or sub-contractors. It states that the methods involved could include sub-supplier selection, technology, background, production/ manufacturing capabilities, scorecards or performance evaluations etc. It states that it should also include risk assessments and sub-supplier audits.
• Dell reports “train-the-trainer” initiatives for sub-tier suppliers and states this includes establishing risk assessment processes to ensure that its standards can be cascaded to other tiers of supply chains. The company discloses a pilot model which it states it is trialing with two of its larger suppliers “to assess and increase the efficiency of their own supplier audit organizations.” It states that examples of what the model includes are a reinforcement of skills for social environmental responsibility focus areas, including capacity building in 2018 and 2019 “reaching auditors who perform multiple functions and have not yet received specific SER training.”

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

• HP discloses the number of workers of its final assembly suppliers.
• Amazon discloses the percentage of women workers per first-tier supplier.
• 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.

[No examples available yet from the ICT sector.]

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.
• Microsoft states that “workers in our sub-tier suppliers who do not have direct business contract relationships with Microsoft utilized [its] hotline to report [grievances].”
• Apple discloses that it “continues to support” the whistleblowing mechanism of the International Tin Association’s International Tin Supply Chain Initiative, which allows grievances at mining level to be reported in local language.
• 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.

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.

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.
• Ericsson discloses that an NGO report in Malaysia revealed that migrant workers were working under conditions linked to forced labor at a potential supplier further up its supply chains. It states that it contacted its first-tier suppliers “that may include the concerned supplier in its upstream supply chain.” It states that the relevant suppliers demonstrated through dialogue and supporting documentation that remedial and corrective actions, including the reimbursement of fees, had been taken.
• 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 HP’s, HP, Western Digital’s, and Seagate Products’ supply chains, workers expressed some satisfaction with the remedy, which included direct hiring and the return of passports.