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Business and Human Rights Newsletter

No.5 【Human rights issues in supply chains】

In an increasingly globalized world, companies must consider not only quality, cost and delivery time when procuring materials, but also understand and work to improve the human rights conditions of workers and local communities in their supply chains. Large corporations are leading a global trend of increased efforts in this regard, but a rapidly changing landscape can also mean it is challenging to respond nimbly to problems. In this issue, we will examine human rights issues in corporations' supply chains using an example of seafood.

Human rights abuses in supply chains: Thai seafood farming industry

Several consumers have filed class action suit cases against major European and U.S food/retail companies related to forced labor in the Thai seafood industry, including a class action case brought by three California law firms in August 2015. In these cases, plaintiffs convey their concerns that consumers have been unknowingly buying products containing raw materials that were sourced from or have ties to forced labor and human rights abuses in Thailand. These cases are attracting international attention and forcing companies to examine their supply chains and human rights policies more closely. One of the catalysts for the international attention, was a Guardian report released in June 2014. The Guardian reported on serious human rights abuses in the Thai shrimp farming industry, including the use of forced labor without pay, food being withheld from employees, beatings and even murders onboard ships. Workers from Burma and Cambodia told of labor brokers who promised to introduce them to work in Thai factories or on construction sites, but instead sold them to suppliers who enslaved them on the boats. This testimony not only revealed ongoing forced labor issues but also included problems of migrant workers.

The Trafficking in Persons report published by the U.S. Department of State annually ranks countries according to the severity of human rights abuses. Thailand has been ranked in the third and lowest tier for two years in a row since the 2014 report. With regard to revelations above, it was alleged that major Thai shrimp farmer Charoen Pokphand ("CP") supplied problem shrimp to many major US and European supermarkets including Walmart, Costco, Tesco, Carrefour and Morrisons. Upon receiving these reports, Carrefour announced publicly that it conducts audits of all its related suppliers, but admitted it did not check right to the end of its complex chains. Morrisons announced that it would halt all business with CP because its ethical trading policy forbids the use of forced labor by suppliers.

Taking a different approach, Walmart, Costco and Tesco announced that they would work with their suppliers in taking corrective actions, rather than cutting ties. For Tesco, the problem was not a question of choosing different suppliers, but rather the need for all companies procuring shrimp from Thailand to recognize that such human rights issues exist in the Thai shrimp farming industry. For its part, Tesco announced that it would not ignore this issue going forward, but strengthen collaborative efforts with international bodies and NGOs.
Each company's approach is different, but all took ownership of the human rights issue as their own human rights issue and are attempting to tackle it.

Industry initiatives on this issue

Japan imports 12,000 tons of the roughly 500,000 tons (an approximate value of USD7.3bn) of shrimp exported by Thailand each year, meaning it is not disconnected from the problem. Although there was no direct criticism of Japanese companies in the articles, but they would be well advised to consider how they will address this issue as all of the US and European companies named have made their response measures clear.

In September 2014, ten UK retailers (including ASDA, M&S, The Co-operative Food, Sainsbury's, Tesco, Waitrose and CP Foods UK) launched "Project Issara" in response to this issue. It is a joint effort between the public and private sectors with the goal of remedying forced labor and developing ethical procurement channels in the fishing industry. The project includes dialogue with major Thai fishing exporters who hold sway over fishmeal suppliers and investigation of supply chain labor procurement and management processes by experts in the field (Anti-Slavery International, Faro Global and Emerging Markets Consulting). It established a migrant worker hotline by which workers can request direct assistance, not only in Thai, but also in other major languages spoken by migrant workers in Thailand including Myanmar, Lao and Khmer.

It is not uncommon for a Japanese company to understand and control its own direct suppliers. However, one company on its own, facing budgetary and personnel constraints, may find it difficult to exert influence further down the supply chain, or confirm the situation on the ground on a global scale. The participants in Project Issara cooperated together as well as with civil society to facilitate continuous supply chain monitoring and establish a remedy for victims. In this way, they can endeavor to meet their responsibility to respect human rights, pursuant to the UN Guiding Principles on Business and Human Rights. This responsibility includes a responsibility not to contribute to cumulative human rights impacts, or be directly linked to impacts through the company's business relationships (e.g. with suppliers).

The issue in Thailand can further serve as an example to Japanese companies that it is important to establish a plan for implementing socially responsible procurement and work to make real improvements to serious issues uncovered in their operations through not only internal action, but also a multifaceted response in cooperation with outside institutions and experts.

Team profile: Yuki Teramoto

PhotoYuki Teramoto, a member of our CCaSS Tokyo team, assists clients with a variety of services including supply chain, creating shared value, business and human rights, and integrated reporting.
Yuki also has experience in financial audit, internal control system development consultations and internal control assurance for both domestic and foreign financial institutions.