Podcast - How can we eradicate modern slavery?

With Fred Waelter, Principal Consultant in Sustainable Supply Chains at BSI

Matthew Chiles: Hello, my name is Matthew Chiles and welcome to The Standards Show, the podcast that brings you the stories behind the standards.

In this episode, we’re looking at the issue of modern slavery. Fred is Principal Consultant in Sustainable Supply Chains at BSI. He has nearly 20 years of experience in social compliance, social auditing and corporate social responsibility. I spoke to Fred about the issue of ethical and transparent supply chains and the role of consumers, particularly Gen Z, in exerting influence over brands and organizations. 

We began with Fred describing the complexity of supply chains: one in the fashion industry through the case of a garment, and then a very different one in the food sector.

Fred Waelter: If we want to look at the fashion supply chain, it's helpful to start with a finite type of garment. I can give you an example of a denim skirt with some buttons and rivets on it. Potentially it’s distressed denim, with some man-made holes in the garment to make it look a little worn.

If we take this as an example, there are the raw material suppliers, which includes the suppliers of the denim itself, the thread that's used to sew the panels together and the other items, like the rivets and buttons, which are made in other factories that specialize in the pressing of metal or metal surface treatment. 

So you've got these suppliers, the zipper supplier, potentially, and then you've got the actual primary factory. That primary factory could have a variety of different situations going on. You could have one primary factory that has embroidery happening on-site, but the embroidery might be carried out by an on-site contractor – which is another company that sends workers to the factory, though they're not directly employed by it. 

There's another potential situation which is subcontracting, of which there are a couple of different flavours so to speak. One is what we would call overflow subcontracting, which is essentially when the factory is at capacity. 

In this situation, they have to take the entire item and say “we were going to make a thousand skirts, but we don't have the capacity to do that. Here's 200 skirts’ worth of material and embellishments, go and make 200 skirts for us.” Therefore, the subcontracted factory does 200 skirts and the original primary factory does 800 skirts to make up the order. That's what we class as overflow subcontracting.

There's also process-specific subcontracting, which is where the actual processes that are needed for the production of the final goods are done at another site. 

For example, it could be off-site contractors that are doing the embroidery. So, what you see in the factory is a semi-finished product, or ‘intermediate goods’, packed into some plastic bags that are then taken down the street to the factory that is going to do one process on those garments and then send them back to be completed in-house. 

There's one other fun thing which, obviously, you can tell I'm a little bit jaded from having audited in factories for 19 years! We also see prison labour which is actually done through subcontracting schemes. It's typically done illegally whereby the warden is the one who is accepting the order and giving it to the prisoners to work on. 

The prisoners are not paid, because this isn't an established system. So simple stitching – or anything that's a low-level, low-skill sort of job could be outsourced to a prison as well. 

Then it goes back to the factory and finally to an unwitting consumer, probably here in the United States, not knowing much about the situation, nor particularly knowing the difference. So that's a little bit about garments.

Fred Waelter: What's interesting is that shrimps are grown in ponds, they're not just fished out of the ocean. In these ponds, they eat something called fish meal –  made from trash fish, which is fish that is caught but people don't want to eat. So boats go out, they catch this trash fish, it's made into feed, the feed mill makes the feed for the shrimp, and then in these hatching ponds, somebody feeds it to the shrimp. 

If you want to look at the human cost of this process, you have to know where those people are from and who is actually contributing to the supply. This includes the people in the vessels catching the trash fish.

There are also people in the fish meal plants or factories and people on the farms with the hatching ponds. Most of those people are typically non-nationals of the country in which they work. If we think of shrimp, a lot of people think of Thailand where a lot of the shrimp production workers are in fact from Myanmar or Cambodia.

These people speak Burmese or Khmer, but they don't speak Thai – leaving them vulnerable to exploitation. So when you juxtapose the situation of, say, Chinese workers in a Chinese factory making garments with Burmese or Cambodian workers on vessels, factories or farms in Thailand, you can see that the situation is quite different. The workers speak a different language, come from a different country, and do not know the local legal infrastructure or how to raise grievances.

“Just looking at the product, you can see that the actual manufacturing supply chain is not always going to be the same as the pool of labor, or the geographical location from which the workers are from. This makes a huge difference if you're a client, like a retailer or brand, that's trying to do the right thing by sharing your requirements with the employment site with which you're working.”

So, with the garment factory or the shrimp vessel as examples - how you go about sharing that information, and making sure that it's clear is actually quite difficult because you're dealing with different languages, geographies, legal infrastructures and so on. It’s very complex. 

People don't think about this when they bite into a piece of shrimp, right? It's actually quite a complex situation when it comes to social compliance.

Matthew Chiles: Fred had spoken about consumers not necessarily being fully aware of the conditions being faced by workers producing the products they buy. So I went on to ask him if the problem is that consumers want transparent and ethical supply chains, but aren't necessarily following through with their purchasing decisions. So, are consumers ‘wish buying’ and just hoping that the goods they buy are ethically sourced?

Fred Waelter: People do care about social compliance when it comes to where their goods are made, how they're made, and working conditions. I think that if people imagine themselves in that situation or they think about the original origin of the item they're buying, they would be a little bit concerned. I believe that it is something that they would be willing to pay a little bit more for, or at least be willing to do a little more research on.

Younger consumers are probably more likely than older ones. But, what it comes down to right now with financial pressures, and inflation above 8%, is that people don't have as much disposable income anymore. 

And so, if they wanted to choose a more ethical solution for a product or service, they probably could have done so in the past but maybe they're not in a position to do so now due to budgetary concerns.

The other thing is, most of the time if you compare two items, the first thing you look at is not where the item was made, and who made it. Because you can't see that. However, you can see the quality of the item or the way it looks. So people are obviously going to put that front and center still, and just hope that everything is ok where it was made.

But if you look at different types of consumers and the brands they might buy, when thinking about a consumer that might buy from Patagonia, Lululemon or Nike, they're probably somebody who is willing to pay a little bit more because they want that brand. They want reliability in terms of quality, and they want to know that the items are ethically sourced. 

I think those companies that I just mentioned have done a really good job at trying to explain what they're doing to ensure social compliance in their supply chains, and to really get it out there so that customers know they’re paying a premium, but are getting a little bit of assurance when it comes to the social compliance question.

Whereas if you look at a company like Dollar General, people are looking at volume, what's cheap, and what is there right now rather than where the items come from. How these companies are positioned in the marketplace when it comes to the statements they make publicly about their social compliance programmes and their supply chains, is very different from what you're going to see from Patagonia or Lululemon –  just because they're different price points and product types. 

“In a nutshell, I don't think the financial crisis is helping us when it comes to getting people to pay a premium a little more often for something that is sourced in a socially compliant fashion.”

But there are brands that survive and thrive having the image of being a responsible procurement kind of company.

Fred Waelter: Does sustainability matter more to the Gen Z market and how do they feel about this whole topic? Well, comparing them with the baby boomer generation, it's really that they are growing up in a completely different environment. They have always had the internet and been able to search for something on their smartphone or on a computer. 

They can find out a lot more information about a product or where it comes from, and they are accustomed to having information at their fingertips. And, importantly, they are accustomed to information being shared with them in a way that is innovative and sort of gimmicky. 

A great example that is not gimmicky is a company called Westrock Coffee Company. They have a Farmer Direct Verified® programme. So you can go to a store, purchase beans from farms that have been visited by staff from that organization, and on the label, you can scan a QR code with your phone which will tell you exactly which farms those beans were sourced from.

So you can get an idea of where the beans you are buying for the coffee you are going to brew today came from, which farmer, which country, and whether they were paid a proper rate of compensation. I think that Gen Z will really like this kind of function for a product that they might want to buy. They want to look up that information because they feel like it's important. 

If you compare that to a baby boomer, they walk into a store, see a QR code, and they don't even know what it is or how to scan it. I think that the only thing to remember about Gen Zers is that they have a little bit less in the way of income that they are able to spend, simply because they're younger in their lives and careers. 

They don't have such a high salary, but maybe they want premium things and they want to know more about supply chains. They want to know that things are transparent, they want to be able to have all the bells and whistles about traceability that are available just by looking at the label, but they may not have the money to pay for it. 

A lot of clients have even engineered their social compliance programmes to focus on this a little bit more, in that they don't want to put so much information out there that people aren't either willing to pay for or they're not able to digest.

Modern slavery describes a range of exploitative practices, including forced, compulsory and child labour; debt bondage; and human trafficking. It focuses on the shared features across these legal concepts and refers to situations of exploitation that a person cannot refuse or leave often due to threats, violence, coercion, deception or abuse of power and vulnerability.

The impact is huge. This criminal practice affected 49.6 million people worldwide in 2021, according to estimates from Walk Free, the International Labour Organization and the International Organization for Migration, with 27.6 million people in forced labour. Criminals profiting from this make approximately $150 billion every year from the proceeds of these crimes. More than 70 per cent of all modern slavery victims are female. 

It can affect many sectors and industries. The food processing industry has seen modern slavery in their factories and plants, where workers are forced to work long hours in poor conditions to pay back debts or for little or no pay. 

Farming and agriculture is also heavily impacted by modern slavery as workers are used to pick crops, tend to farmland and process raw materials, again, in poor conditions. Often illegal fishing boats will spend months at a time at sea. 

Modern slavery can also be found in construction. The common use of subcontractors can make understanding the true source of labour and treatment difficult for owners of projects. 

In healthcare, contract workers are hired to meet increased patient care demand. These workers are often hired through third party recruitment and talent acquisition agencies, which limit visibility over working conditions and employment practices.

The issue of modern slavery isn’t only a serious one, but a growing one. In the UK alone, the number of potential victims of modern slavery referred to the National Referral Mechanism has risen from 2,340 in 2014, to more than 12,700 in 2021, with the true number of victims likely to be far higher as the numbers continue to climb. 

Close to 8,000 people were referred from January to June this year alone. It's for reasons such as these that, as part of the United Nations Sustainable Development agenda, there is a global call for action to bring about the eradication of modern slavery practices. 

In the next session, Matthew Chiles speaks to Ryan Lynch, Practice Director for Sustainability at BSI, and Helen Carter, Lead Consultant at Action Sustainability about Corporate social responsibility (CSR) and governance. Find part 2 of the modern slavery podcast here.