THE MIGRANT CRISIS AND SCM: In the shadows

The ongoing migrant crisis poses an array of potential problems for international businesses. Addressing weak links in a supply chain – and the looming additional threat of climate change migration – may require new approaches, writes Martin Allen

While the topic of mass migration has been bumped off the UK’s front pages by the Brexit saga, the issue – and its considerable, wide-ranging impact – has most certainly not gone away. If anything, the complexity of the issue has broadened as unscrupulous human trafficking operations looking to exploit vulnerable people become increasingly sophisticated.

The Institute of Risk Management warns that businesses need to be cognisant of all aspects of their working practices and aware of every link in the supply chain and the impact if something goes wrong. The UK’s Modern Slavery Act 2015 includes a transparency and reporting clause requiring larger organisations to make an annual slavery and human trafficking report setting out what they do to “ensure that slavery and human trafficking is not taking place in any of its supply chains, and in any part of its own business”.

It may be generally assumed that only the food and agricultural industries carry the risk of exploitation in their supply chains but there have also been instances in retail – particularly clothing, where huge well-known companies have been shown to have been using child labour at the root of the supply chain. Clearly this has major implications for brand perception and reputation and, interestingly, two historic cases focused on companies preaching good CSR practices in their advertising.

An increase in migrant stowaways and labour exploitation are among the key challenges threatening global supply chains, according to a report by the British Standards Institution. Its most recent Screen study highlights migration as one of a number of major threats to supply chains currently facing businesses.

Jim Yarbrough, global intelligence programme manager at BSI, says shifts in supply chain risk are being driven by dramatic changes in the geopolitical landscape. “The concern is that as supply chains change – with Chinese companies moving operations to Africa, for example, or the US sourcing goods from other South-East Asian nations – major implications will also evolve.

“Increased exposure to labour exploitation, terrorism, corruption and natural disasters must be a consideration for companies making changes to their supply chain, and best practices must be maintained in order to prevent threats to business continuity or corporate social responsibility.”

As conflict, together with political and economic conditions, continue to drive mass migration, businesses have to contend with the double-edged challenge of security and corporate social responsibility risks. The BSI report records an increase in stowaway and labour exploitation risks stemming from migrants travelling along three major flows: Central to North America; Intra-South-East Asia; and Africa and the Middle East to Europe.

BSI has also flagged some regression in countries such as Brazil, where budget cuts are reducing the resources available to carry out inspections which could increase the risk of migrant labour exploitation. It says that around half all CSR incidents recorded by BSI in 2018 involved migrants. The often desperate need for income to support family leads many vulnerable individuals into labour exploitation and compels companies to invest in a more thorough understanding of their supply chain to truly assess the risk of migrant labourer exploitation.

In particular, there are some key areas to focus on in addressing some of the potential weak links in the chain. Dependency on third-party recruitment firms for contract workers or temporary workers can increase company exposure to forced labour and/or workers subject to exploitative working conditions. The charging of recruitment fees in particular puts migrant workers at risk of debt bondage. Document retention – the withholding of passports – is another red flag. In addition, working with third-party suppliers or subcontractors that are not regulated by the same standards (such as the employment of unregulated, informal labour at a higher risk of non-payment of wages or excessive working hours) is also a big risk factor.

A focus on existing migration patterns is one thing, but the picture could be about to get even more complicated. Direct threats from higher temperatures, more frequent droughts, floods and storms, and water scarcity are well-documented as the primary effects of climate change. Less heralded is how these events drive modern slavery risks, both in countries where the effects of climate change are expected to be most severe and in less directly threatened countries in Europe and North America. By the middle of this century, there could be over 140 million climate migrants, mostly from Sub-Saharan Africa, South Asia and Latin America as a combination of tougher growing conditions, poverty, erratic food prices, and conflicts over scarce resources forces people from their homes.

Sustainability non-profit organisation, Forum for the Future – which last year published <2°C Futures, a report looking at what climate resilience might look like for businesses in 2040 – sees a requirement for existing supply chains to be ‘reimagined’ in a more sustainable way if some of these risks are to be averted. It highlights the need for sustainable supply chains to forge ways of creating and distributing goods that get turned into products that people need, in a way that builds social and environmental capital across the producer communities.

It uses the terms ‘value chains’ or ‘value networks’ to describe this new take on the commercial, one-way nature of ‘supply’, encouraging businesses to recognise the contributions of all parties to their operations, adding that truly ‘valued’ chains have the potential to tie the world together at a time when it risks fragmenting.

Will Dawson, associate director for climate and energy at Forum for the Future, points out that when it comes to climate change responses, businesses tend to focus on what is easily quantified such as temperature change and rainfall. But he adds, in doing so, business leaders can miss out numerous interconnected and powerful forces that can combine rapidly and unpredictably to create unseen problems and opportunities. “Decision-makers would do better to consider quantitative factors affecting their business’s future alongside richer, multi-factor qualitative scenarios, which research like <2°C Futures affords. Being closer to the whole picture, they will be able to better understand and test their business strategy, operating models and supply chains, while also being able to identify and take action on the risks and opportunities ahead of them.”

While slavery affects all sectors, industry risk data from Maplecroft shows the food and beverage, agriculture and seafood, construction, manufacturing and transport industries are most exposed to the practice. These sectors also face a perfect storm of rising interest from investors, NGOs and consumers in their social and climate policies alongside the global expansion of modern slavery laws and mandatory reporting legislation.

Sofia Nazalya, senior human rights analyst at Verisk Maplecroft, says that companies can mitigate the increased risk of slavery and forced labour entering supply chains by carrying out human rights due diligence including direct stakeholder engagement, disclosing modern slavery risks identified in their operations and supply chains, and developing standards and initiatives within the wider industry in collaboration with other businesses, vendors and partners.

She adds: “The European migrant crisis is not the only event to have exacerbated modern slavery risks. As the number of climate migrants surge, so too will modern slavery risks. Best practice measures for addressing modern slavery and climate change together includes aligning approaches to business policies, strategy, systems, supplier codes of practice, KPIs and training programmes, helping to raise awareness of social and environmental issues. It’s also important to integrate both issues into responsible or sustainable sourcing programmes – businesses should map the operations of their suppliers and subsidiaries, including those working within climate-sensitive regions, where environmental and social policies are inadequately implemented.”

Businesses are also urged to set up audit programmes for the highest risk areas identified in mapping exercises, and collaborate with industry peers, suppliers, governments, NGOs and other local partners to share knowledge, good practice and on-the-ground projects.

Nazalya says: “By ensuring strict compliance and demonstrating commitment to tackling modern slavery and forced labour, companies are able to reduce the risk of direct or indirect links to human trafficking in their supply chains.”



This article was published in the January-February 2020 issue of CIR Magazine.

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