This week: Business: It’s time to act. Decent work, modern slavery and child labour

Business: It’s time to act. Decent work, modern slavery and child labour

Altiorem is an online library and resource centre dedicated to facilitating, promoting and influencing the investment and broader finance industry towards long-term, sustainable and purposeful allocation of capital.

We are lucky enough to have some fantastic individuals summarise insightful research, and we will be regularly introducing the reports.

This week’s research in the spotlight is from United Nations Global Compact. Find our complete summary here.

Overview

As society has advanced, it has become increasingly common for companies to prioritise profits above everything, including human rights. Decent work cannot exist where modern slavery and child labour persist. Despite human rights violations being a crime, it is concerningly widespread. The elimination of all forms of forced and compulsory labour is being driven by United Nations Global Compact (UNGC).

According to the 2018 report by the UNGC, it is hard to understand the extent of these violations without looking at the figures surrounding these problems. The figures are alarming. An estimated 25 million people are in forced labour and 152 million children are estimated to be victims of child labour and almost half of these children are doing work that is hazardous in nature. The profits made from forced labour are at an estimated $150 billion per year.

Many reasons drive modern slavery and child labour existence. Factors such as poverty, poor governance, lack of transparency, closed political space, crime, and corruption. Businesses play an important role in the effort to completely eradicate human rights violations and decent work deficits in the global supply chain. To help companies change the world for the better, UNGC outlines five necessary steps to put an end to modern slavery and child labour.

First Step
Acquire commitment and resources. Management should publicly commit to ending modern slavery. Corporate policies and strategies should be revised to make sure that it is aligned with their commitment. It is also important to allocate additional resources to make sure that all of these can happen.

Second Step
Assess the actual and potential labour rights risk. These include risks that arise from the supply chain as well as those due to the economic condition of the country. The company could also have a policy dialogue with Governments to discuss how the laws and policies should be improved to reduce the risk of modern slavery.

Third Step
Identify corporate leverage, responsibility, and actions. This can be done by assessing the scale of the company’s responsibility as well as the leverage of the company with its suppliers and agents.

Fourth step
To comprise remedy, mitigation and prevention of harm to workers. The company needs to ensure protection as well as compensate and apologise to victims of human rights abuses in their company. The company could also build relationships with trade unions and independent worker representatives to pre-empt labour rights violations from occurring.

Last step
Details how to report, monitor, review and improve. The company should publish a modern slavery statement to communicate its commitments and actions. By doing this, it can increase its credibility and transparency with suppliers, investors, workers, and other key stakeholders. Also, the company should develop key performance indicators specifically for modern slavery to track progress in reducing risks.

As more investors are realising the importance of sustainability and considering environmental, social and governance (ESG) criteria in their financial decisions, it is becoming crucial for companies to comply with these steps. Not only investors but financial institutions have started to take sustainability into account as part of their operations.

Financing an industry which produces products or services exposes the risk of contributing to child labour, slavery or human trafficking in the supply chain. Consequently, there is an incentive for companies to become more sustainable in their operations as it will affect financing decisions from investors and financial institutions.

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