Risk of Slavery, Trafficking and Labor Abuse in Supply Chains Expected to Increase

As manufacturing becomes increasingly automated, the risk of slavery, human trafficking and labor abuse in supply chains is also expected to rise, according to Verisk Maplecroft’s 2018 Human Rights Outlook.

The report presents five issues that will pose “significant challenges to the reputations, operations and supply chains of multinational companies.” Automation tops the list, with an estimated 56% of jobs in Southeast Asia’s key manufacturing hubs potentially affected.

Compliance, certification, threats to human rights defenders, and investor expectation for businesses to take up social responsibility round out the list.

Verisk Maplecroft analysts assessed the threat of job loss as a result of automation across 21 sectors. They identified agriculture, forestry and fishing, manufacturing, construction, retail and hospitality as the industries where the risk is highest.

Within manufacturing, workers in the garment, textile and footwear (GTF) industry are at particularly high risk of losing their jobs to automation. And in Southeast Asia, where a significant percentage of manufacturing workers work in the GTF sector, increased labor rights violations are likely to accompany automation and job loss.

Automation will create new jobs, but ones requiring skills that the displaced workers are unlikely to have. These workers will find themselves unemployed and competing for a limited number of jobs, the report notes, “unless their countries start now to reskill and prepare workers to adapt to their gradual replacement by more efficient machines. The dark side of automation could therefore mean fewer alternatives to exploitative work and a spiral into modern slavery that renders the [UN Sustainable Development Goals] irrelevant.”

As the figure below shows, factory workers in Vietnam, Cambodia and the Philippines are particularly vulnerable.

More than 85% of GTF jobs in Vietnam and Cambodia are at high risk of automation. In addition, more than three-quarters of these jobs are held by women, and as the report points out, “with fewer women in work — or more women forced into slavery — these countries will struggle to achieve [UN Sustainable Development Goals regarding] gender equality.”

While a number of due diligence and disclosure laws have passed or are in the works around the world, their effectiveness varies.

For instance, Australia is expected to pass the Modern Slavery Act this year. The law would require Australian companies with revenues of 100 million AUD or higher to release an annual report detailing any efforts to stamp out slavery in their supply chains, Reuters reported.

However, there are no penalties aside from potential reputation damage, and this is true of many due diligence and disclosure laws concerning human rights abuses in supply chains, the Verisk Maplecroft report points out. Not one of the eight major pieces of legislation analyzed by the research firm — including the U.S.’s Section 1502, the Netherlands’ Child Labor Due Diligence and the U.K.’s Modern Slavery Act — can boast both high impact and scope.

This suggests that new legislation, no matter how well intentioned, is unlikely to keep up with the increased risk of labor abuses. Robot manufacturing will not replace human factory workers as long as the cost of wages is lower than the cost of the machines. As wages rise in emerging economies and technological advances continue, however, factories will be inclined to automate.

Alexandra Channer, a lead analyst at Verisk Maplecroft, says that “the adoption of automation technologies by companies will be gradual, but the unintended consequences for millions of workers in brand supply chains is likely to be severe. Responsible sourcing departments, in particular, need to identify and understand the adverse effects of automation on human rights, and work with civil society and governments to mitigate the impacts within their own supply chains.”

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