March 27, 2007
Shareowner Activism Precedes Development of SRI Slavery Screen
by Bill Baue
Most slavery exists far up the supply chain, and auditing practices do not yet exist to monitor for
slavery at second- or third-tier suppliers, so it is too early to enact an enforceable slavery
Many people file slavery in the annals of history, abolished by Abraham Lincoln's 1863 Emancipation
Proclamation. Unfortunately, there are more people enslaved in the world right now than at any
time in human history--an estimated 27 million, according to Free the Slaves (FTS), a Washington, DC-based non-profit whose mission is
to end slavery worldwide. The modern global slave trade is gaining increasing attention with the
recent publication of books such as
Disposable People by FTS President Kevin Bales and Not for Sale by
University of San Francisco Ethics Professor Dave Batstone.
Socially responsible investors (SRIs) have long
addressed issues that fall under the umbrella of slavery. For example, SRI human rights and labor
criteria typically screen companies for policies prohibiting forced labor, bonded labor, and child
labor, according to Lauren Compere, chief administrative officer at Boston Common Asset Management. SRIs are also
starting to address slavery more systematically--the Spring Symposium of the Social Investment
Forum (SIF) International Working Group
(IWG) at the World Bank is focusing on
the modern slave trade, human trafficking, and child sex tourism.
"A wave of interest
has crested recently among social investors so that we can start evaluating a set of strategic
initiatives to engage investors and corporate leaders," said Prof. Batstone, a keynote speaker at
the symposium. "I fully expect the SRI community to take a leadership role in addressing modern
slavery and use its leverage to shape company policy so that all people can be free to work."
"The SRI community is really only starting to address human trafficking and modern slavery as a
screen unto itself," Prof. Batstone told SocialFunds.com. "I imagine in the initial phase,
advocacy will take the form of behind-the-scenes consultation among companies willing to address
the issues, and shareholder resolutions will be filed at companies unwilling to address the
Few if any global corporations directly enslave workers--supply chains are the
primary locus of slavery, particularly in emerging economies and developing countries in Asia,
Latin America, and Africa. Slavery is pervasive in a number of different supply chains, according
to Jolene Smith, executive director of Free the Slaves, who is also presenting at the IWG
"It's likely that what I'm wearing and eating today in some way contain
slavery," Ms. Smith told SocialFunds.com "The amount of slavery in any given product is usually
very small--we're looking at a little bit of slavery in a whole lot of products."
same time that slavery is practically everywhere, it is also nowhere, hiding from scrutiny far down
the supply chain where raw materials originate--primarily in farm fields and mines, according to
"As SRI companies, we feel like we've had progress engaging with companies on
the first tier of the supply chain--it's really getting down to the second and third tier where you
find slave labor, for example in the pig iron that is being used for vehicles that Toyota is making,"
Ms. Compere told SocialFunds.com. "We don't have a good mechanism in place for monitoring and
auditing even first or second tier suppliers, never mind reaching down to the bottom of the supply
A November 2006
Bloomberg story exposed slaves in Brazil who went unpaid for months making the charcoal used to
fire the pig iron that goes into cars and many other products. In December 2006, Boston Common
sent Toyota a letter expressing concern over the allegations. Toyota first examined its supply
chain independently, then later joined forces with the Automotive Industry Action Group (AIAG), a collaborative effort to address these
Dan Viederman, executive director of Verité, which monitors and audits labor conditions in supplier
factories around the world, explains how most social auditing is inadequate to the task of
uncovering hidden issues in workplaces, such as trafficking, forced labor, and child labor.
"Without gathering information from workers themselves in a secure way that provides workers
with protection from retaliation and comfort that their views are being solicited seriously and
sensitively, it is extremely difficult for auditors to identify these serious risks," Mr. Viederman
told SocialFunds.com. "Trafficked workers, slave laborers, and children--the most vulnerable and
oppressed workers--are the least likely to share information in a standard audit."
few companies--maybe a handful in total--are looking at suppliers below their first or second
tiers, and fewer still in the raw material or primary material suppliers," he added. "There's no
reason why good quality social compliance practices can't work at those levels, but they require
companies to push 'responsibility' down several levels, and the farther it gets from the global
brand, the harder it is to enforce or even to devote resources to it."
Ms. Smith of Free
the Slaves points to existing models--not from labor monitoring but from environmental monitoring.
"Organic cotton is a model we're considering, because it requires certification throughout
the chain of custody," Ms. Smith said.
Mr. Viederman also endorses collaborative efforts
by industries or groups of brands--"but sectoral efforts need to ensure that they meet highest
common denominator standards rather than lowest common denominators," he said.
2006 saw the launch of the Athens Ethical
Principles, a set of seven commitments including zero tolerance for human trafficking. Signatories include Manpower (MAN), Procter & Gamble (PG), and Microsoft
operations in the Czech Republic.
"The Athens Principles are a major step in the right
direction, and I believe they will be even stronger when they change one of their requirements,"
said Ms. Smith of Free the Slaves. "Right now, the Athens Principles ask businesses to urge
their contractors and suppliers to be free of slavery, but don't require it."
Smith agrees with Prof. Batstone that shareowner engagement must precede screening to first give
companies "the benefit of the doubt" and the opportunity "to do research on their supply chain and
to join with other businesses in their industry to root out slavery at its source."
will come a time in a few years when it will make sense to have an investment tool called a slavery
screen that rewards companies that are actively fighting slavery and divests from companies that
are actively encouraging slavery," Ms. Smith said. "We're not there yet."
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