By prioritising due diligence of core production and processing activities, brands have created supply chain blind spots where modern slavery risks are high
- Workers who transport and distribute goods are invisible on supply chain maps, yet they are highly vulnerable to labour exploitation
- Subcontractors providing support services ‒ such as cleaning, catering and security ‒ for business HQs are rarely subject to the same oversight applied to Tier 1 suppliers
- Since the production of promotional materials such as leaflets or free gifts is not a core business activity, it may be outsourced to subcontractors without the usual due diligence
Tier 1 suppliers and labourers on farms and in factories have always been at the heart of businesses’ auditing programmes. However, the overriding focus on the production and processing phases of the supply chain has created blind spots. The seafarers who transport 80% of global trade, and the truckers and workers who store and pack goods in warehouses, are mostly invisible in supply chains. Similarly, the low-skilled, low-paid workers who provide support services in low-risk economies, like cleaning, security or catering, or who produce promotional materials, are often forgotten when companies conduct human rights risk assessments.
Workers in these blind spots are highly vulnerable to modern slavery. Cleaning, catering and security are likely to be provided by subcontractors that hire migrant workers on a temporary basis or as casual labour. Many seafarers are poor and low-skilled – primarily from the Philippines, India, China and Eastern Europe ‒ and they lack the economic freedom to quit work if mistreated and physically isolated at sea.
Challenges and opportunities
Reports last year of seafarers left unpaid for months or abandoned on detained or bankrupt container ships underscore the risks that blind spots in the supply chain can pose to business. Seafarers are at risk of modern slavery not just because they, like truckers, cross national jurisdictions, but because they lack state protection. It is up to the country where a ship is registered to enforce maritime labour rights, but many owners register ships under 35 so-called ‘flags of convenience’ – countries that offer competitive rates for ship registration and less stringent regulation.
Cleaners or security guards make up only a tiny proportion of a company’s total workforce and tend to work at the business’s HQ, so they are rarely considered at risk. In reality, the lack of oversight and precarious nature of their work puts them top of the list of workers vulnerable to modern slavery in low-risk developed economies. As producing promotional leaflets or free gifts, or cleaning offices, are not part of a company’s core activities, these materials or services may be commissioned without the usual due diligence.
Germany case study on use of flags of convenience (FoC)
Explaining the data
Germany is one of the top five ship-owning countries in the world, with almost 4,000 German-owned ships of more than 1,000 gross register tonnage, such as small cargo ships to super-tankers. However, 80% of German-owned ships are registered under a foreign flag of convenience (FoC).
The chart illustrates the hidden risks to German shipping, by identifying the FOC countries in which 3,070 German-owned ships are registered and assessing these countries against our Maritime Labour Rights Index.
Whereas Germany receives a low risk score of 8.48 out of 10.00 in this index, the average index score for a German-owned FoC ship (weighted by the number of ships registered in each country), is 5.23, which is medium risk. The Liberian flag is flown over almost 1,200 German-owned ships, but has a high-risk index score of 3.87.
Dr Alex Channer
Principal Analyst, Research
Summing it up
Modern slavery at sea hit the headlines last year when the Malaviya Seven ship was detained in the UK for months under suspicion that the crew were working in conditions of modern slavery. In August 2016, the UK authorities gained powers to step up ship inspections and detain ships holding seafarers in servitude.
Seafarers’ wages and working conditions are often the first to suffer when ship owners or shipping companies compete at ever lower prices to transport ever fewer goods. Seafarers also lack state protection if owners register a ship under a ‘flag of convenience’ to avoid higher costs and stricter labour regulations in their own country. Panama, Liberia and the Marshall Islands – which host 40% of world ship tonnage in their registers – are all high risk in our Maritime Labour Rights Index.
Verisk Maplecroft’s top 10 human rights issues for business in 2017
- Mandatory reporting: Disclosure and due diligence laws
- Supply chain blind spots: Hidden workers at risk of modern slavery
- Migration and modern slavery: Increasing risk for migrant workers in US
- Land rights: Rising scrutiny of land grabs’ money trail
- Social audits: Strengthening trust in auditing
- Corrupt recruitment: Strategic litigation with anti-bribery laws
- Privacy: The surveillance–national security dilemma
- Worker voice: Partnering with workers to prevent violations
- New technology: Transforming human rights management
- SDGs and UNGPs: Changing the lives of 81% of all workers