Forced Labor in Seafood Supply Chains

June 16, 2016 EcoVadis

Introduction

Shrimp tacos. Blackened catfish. Grilled mahi-mahi. Salmon burgers. The amount of ocean products consumers can purchase from grocery stores and restaurants is bountiful and varied. While environmental repercussions of overfishing have traditionally been the focus among seafood consumers, labor practices in the seafood industry supply chains have recently emerged as the most discussed Corporate Social Responsibility (CSR) issue plaguing the sector. Numerous 2015 media reports exposed slave conditions in the Thai fishing sector. Western multinationals linked to these practices through their supply chains into damage control and Western governments responded by imposing trade sanctions on Thailand. While most large retail companies have publicly denounced forced labor in their supply chains, reports continue to link major retailers such as Costco, WalMart, Kroger, Whole Foods, and others to forced labor in their seafood supply chains, and they are often blindsided by these allegations.

This paper explores why forced labor in seafood industry supply chains continues to grab headlines, tarnish brand images, and challenge procurement teams – and what they can do about it.

Background

In 2012-50% of exports came from developing countries. Thailand, the target of much of the attention in Southeast Asia, is the third largest seafood exporter in the world. According to the U.S. State Department, Southeast Asian countries, and notably Thailand, are also sources of widespread modern slavery. -The primary catalyst for this is the usage within the Thai fishing industry of a significant number of migrant workers, a group particularly vulnerable to modern slavery. According to government figures, 80% of Thai seafood workers are migrants from neighboring countries. NGOs put this number at an estimated 200,000 migrant workers. A long history of ethnic tension with neighboring countries incentivized Thai fishing companies to employ Cambodian and Burmese migrant workers using such practices. This catalyst of discrimination is not unique. Slavery is a complex subject that remains difficult for companies to prevent by themselves.

While the Thai seafood sector has been the center of attention in the media reports, the response by governments, NGOs and consumers will impact companies across all sectors and locations. The U.S. State Department responded to the media reports by blacklisting Thailand – essentially placing constraints on Thai trade similar to those placed on North Korea. The revelations forced the U.S. to amend its Tariff Act, which previously enabled goods known to be produced by slaves to enter the country due to domestic demand exceeding supply. The E.U. issued a “yellow-card” against Thailand, which is a warning status that a boycott will follow if Thailand can’t get its ducks in row around the issue.

Just this month the Port State Measure Agreement (PSMA) went into effect (reaching the threshold of 25 countries having ratified it), which is a strong positive step. This agreement, which is designed to end illegal, unreported and unregulated fishing (IUU), mandates requirements and interventions that vessels have to comply with in order to enter signatory ports, and ultimately barring ships suspected of participating in IUU fishing.

slavery, seafood industry, thailand

Implications for the Seafood Sector

Current legislation regarding forced labor in supply chains, including the California Transparency in Supply Chains Act and the UK Modern Slavery Act, require companies to disclose their efforts to identify and prevent supply chain forced labor. In order to identify where slavery is possible in their supply chains, due diligence measures are necessary, requiring companies to engage various stakeholders before engaging in appropriate remediation. France is now following the lead of the U.K. and the U.S. with their own transparency law expected in late 2016.

Consumer advocacy and human rights groups have responded with lawsuits alleging the use of forced labor in seafood supply chains and have targeted large corporations over the last several months. Costco was recently sued over claims that the shrimp they sell are harvested with forced labor, and for deceiving customers by not including advisory statements about slavery on their products. Nestle is also facing consumer led lawsuits over claims that their cat food contains fish from forced labor in Thailand – this suit now includes Mars and Procter & Gamble. These impacts are indicative of growing concern by consumers and regulators for the labor and human rights supply chain workers, particularly in the seafood industry. The decision by the U.S. to eliminate loopholes in its Tariff Law could potentially cause a greater number of consumer-led lawsuits, making it essential that companies proactively address forced labor in the seafood supply chains.

The Difficulty of Supply Chain Due Diligence

The difficulty for seafood buyers is the opaque nature of global supply chains, exacerbated by rampant corruption and bribery in countries where vast amounts of seafood are sourced. The enabling variables span multiple tiers of the supply chain, including recruitment and transport subcontractors—many of which seafood buyers are unaware of. To add to the complexity, fishing vessels operate offshore, often in international waters, where they are able to avoid regulatory oversight and inspection obligations-making slavery easy to conduct and virtually undetectable. The Responsible Fishing Scheme was launched in early 2016 to raise standards in the seafood sector—including in labor practices. The standard is currently the only global standard that audits for compliance on-board fishing vessels. The standard still falls short of auditing recruitment practices, an area warranting increased scrutiny as their practices often catalyze modern slavery. NGOs working to address poor labor conditions have also responded to the widespread allegations. The Marine Stewardship Council (MSC)—has responded to the recent revelations by committing to withdraw the chain of custody certifications for fishing companies implicated in forced labor practices within the previous 2 year period.
Opportunities for Companies

There is an increasing number of sector-specific initiatives and non-governmental organizations with which seafood companies can partner to begin addressing modern slavery in their own supply chains. The Sustainable Seafood Coalition, which envisions having all seafood sold in the UK sourced sustainably. This network of restaurants, suppliers, processors, industry representatives, and supermarkets promote sustainable consumption, diversification, responsible sourcing, transparency, data collection, and adherence to a code of conduct, in order to achieve real change in the sustainability of our global fish stocks.
Companies need more incentives to invest time and money into their CSR management systems, while consumers need more incentives to invest time and money in finding and consuming more socially-friendly products. Looking at the perspective of seafood retailers, this is a matter of promoting socially- and environmentally-friendly products, while still making a profit. Seafood companies want to reduce reputational risks associated with selling products that were procured through forced labor, while maintaining inventory. FishWise is an initiative that offers third-party consulting services for seafood retailers through assessment of traceability systems, risk assessments, and third-party audits in order to promote the health and recovery of ocean ecosystems as well as responsible business practices. Safeway and Target, among others, have established partnerships with FishWise to strengthen due diligence in their supply chains. When looking at the issue from a B-to-C perspective, purchasing decisions of products based on socially- and environmentally-friendly criteria are increasingly reactive. As a result responses must be timely and the offer must adjust.
How EcoVadis can Assist

Some companies are also taking this as an opportunity to differentiate themselves from other brands, by taking a leadership role in regards to fighting forced labor. For instance, companies are pursuing certain certifications that may require due diligence practices or monitoring or audits, or establishing partnerships or sector-specific endorsements through organizations that aim to uncover or improve forced labor problems.
The solution to supply chain slavery issues is multi-faceted, and will have to include interventions by government, businesses, non-governmental organizations, consumers, and also multi-disciplinary and multi-stakeholder partnerships. Businesses are beginning to realize that they have a pressing need to strengthen their supply chain due diligence to ensure that their company is one that leads the push for supply chain solutions, and not one that lags behind and feels the brunt of sanctions, lawsuits and damage to their brand reputation.

At EcoVadis, our goal is to incorporate all aspects of (CSR) in our assessments of supply chains, of which labor rights and human rights of the employees are an essential part. Our aim is to provide our clients a robust CSR assessment and rating system that increases transparency and visibility to these issues when making purchasing and supplier decisions. These insights, which are compiled in a CSR scorecard can enable subsequent actions such as ceasing of business relationships with under-performing suppliers, rewarding suppliers for high performance, and using the interactive platform tools along with multi-stakeholder engagement programs described above to implement corrective action plans to help suppliers build capacity for improvement.

This article was contributed by
Maureen Loman, Jonathan Sim and Michael Smith
CSR Analysts at EcoVadis

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