Fundamentals of ESG: Understanding Human Rights (Part 2)
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July 14, 2022 - In part 1 of this series, we discussed how human rights plays a role in the social aspect of environmental, social, and governance (ESG) planning initiatives. Here we’ll examine some of the human rights risks in terms of your organization’s supply chain.
What Do We Mean by the Term “Human Rights?”
The human rights contained in the International Bill of Rights, which was developed in part from the Universal Declaration of Human Rights (mentioned in part 1 of this series). These include things like the right to life and physical security; the right to freedom of thought, expression, and religion; the right to privacy; and the right to food, water, and shelter.
These are also defined as the labor rights that make up the ILO Core Conventions. The ILO is the International Labor Organization, which is made up of employers, employee representatives, and government representatives. Workplace rights defined by the ILO conventions deemed as most significant include no forced labor or human trafficking, no child labor, free of association and the right to collective bargaining, and non-discrimination.
Human Rights Risks in Supply Chains
Now lets’ take a closer look at some of the fundamental workplace rights that have been defined by the ILO core conventions.
According to the ILO convention, forced labor is defined as "all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily." Forced labor is an egregious human rights violation as it infringes upon the most basic right that we have as a human being, which is our ability to have control over ourselves. You may think that forced labor is rare, or that it’s easy to spot. The fact remains that it is much more common than is acceptable, as demonstrated in the ILO chart below, which illustrates that significant money is made through this type of exploitation in both legitimate and informal supply chains and worksites.
Forced labor can also be a lot more subtle than people realize and can manifest itself in ways that may not be visible to most people. For instance, workers may not feel empowered to refuse overtime or may understand through informal channels that refusing simply isn’t an option. There are also many seemingly innocent or ignorant administrative pitfalls that tacitly trap a worker in a situation in which he or she cannot escape. This risk is particularly heightened for migrant workers who have been recruited through a series of agents. They may find themselves far from friends and family and are unable to leave a workplace for years due to repayment of loans, fees, recruitment costs, or who simply have their personal documents such as passports taken until the employer or recruiter chooses to let them leave. There are many documented cases of workers leaving their home with the promise of decent working and living conditions and being trapped in employment that significantly differs from what they’d been promised, and with little legal recourse.
The ILO has developed indicators of forced labor, which are potential signs that the risk may be present within a workplace.
Examples and Indicators of Forced Labor
- Mandatory/excessive overtime
- Retention of documents
- Restricted movement (“bathroom pass card”)
- High monetary fines/penalties
- Withholding of wages/delayed payments
- Debt bondage/loans with high interest rates/recruitment fees
- Dormitory curfews
- Misleading contracts or agreements
- Abusive working and living conditions
The ILO defines as child labor working conditions that are “mentally, physically, socially, or morally dangerous and harmful to children” or work that simply “interferes with their schooling.” Child labor is particularly egregious because its victims are uniquely vulnerable and are not able to advocate for themselves. Not only is this a violation of the basic human rights of an individual child, but it has a broader societal impact, as it robs the next generation of the development and fulfillment of its potential so desperately needed in many parts of the world.
Organizations without effective hiring and recruitment practices expose themselves to the risk of inadvertently employing child labor, thus exposing your workers and business to unnecessary risk. This can often be an even greater risk within your supply chain, where you have less visibility and control, especially where effective supply chain due diligence practices are lacking.
Since some products and commodities have been identified as having a higher prevalence of being associated with child labor, the US Dept of Labor has developed a List of Goods Made with Forced or Child Labor intended to help companies make informed decisions about where they focus their due diligence efforts.
Effective or ineffective management of human rights issues can have positive or negative impacts on your business. This has become, and is increasingly becoming, a requirement of your customers and investors. If you’re unable to articulate how you treat your workforce and local communities, you put your organization at a disadvantage.
Similarly, there are direct business costs associated with how you manage your workforce. Employees who don’t feel respected are not likely to stay with an employer. The costs of recruiting, hiring, and retraining involve direct costs and indirect costs of staff time, training time, and impacts to quality and productivity.
Follow along with Ryan Lynch’s Fundamentals of ESG three-part series to better understand the implications of human rights risks as part of your organization’s environmental, social, and governance planning efforts.