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Strengthening Consumer Loyalty Through Ethical Supply Chain Practices That Enforce Human Rights and Eliminate Child Labor

Consumer attitudes have shifted dramatically since the onset of the pandemic, bringing a striking increase in their desire for transparency in supply chain ethics. From the consumer level to the statutory level, there is a greater focus on ensuring these laws are enforced and embraced across the whole of the supply chain: from farm to fork.

In 2021, a global study found that 78 percent of consumers prioritize buying goods from companies that met their expectations for proven sustainable, ethical business practices. It doesn’t stop there—many then consistently and widely share these revelations through their social media channels and continued conversations with their communities, putting companies on blast if they aren’t prepared. What’s more, even unintentional involvement with these negligent and nefarious actors can open your business up to heavy fines, jail time, and the potential loss of a significant amount of your customer base.

In this article, we will discuss how child labor violations have become the forefront of the demand for increased due diligence and show how due diligence can mitigate the potential risk of inadvertently working with third parties who violate these laws.

Worldwide labor law violations increase demands for supply chain due diligence

In the last decade, the discovery of violations of child labor laws have been found in food industries, from the Thai Shrimp Trade to Cocoa Farming in West Africa. These industries have major holdings in American supply chains with food from these entities sold through giant companies such as Walmart and Godiva.

Recent revelations revealed a surge in US child labor, which many large corporations have primarily claimed was other people’s problem. According to the Labor Department, 2022 saw a 37 percent increase in child labor violations of the Fair Labor Standards Act. The number of children employed in violation of the act increased 140 percent in the last decade. “Too frequently, employers who contract for services are not vigilant about who is working in their facilities,” stated the Labor Department.

Companies are being held to the consequences of violating child labor laws

While in the past companies have evaded fines by passing the blame down the supply chain to the firms or facilities where the violations occurred, consumers and lawmakers are no longer accepting this lack of accountability.

For example: In Feb of 2023, a federal investigation by the federal Department of Labor discovered over 100 children across 8 states were employed illegally in high-risk jobs in the meat packing sector. The violations, with a maximum penalty of $15,138 per minor-aged employee, resulted in over $1.5 million in penalties and fines for the contractor of these firms.

Violations of these sorts have been found in the supply chains of huge companies, including giants like General Mills, Cheetos, Ben & Jerry’s and Whole Foods. There is a new economy of exploitation that places migrant children, who have legally come to the states, at the forefront of this issue in under-the table operations and global corporations, alike.

MORERound Up of Recent Fines for Alleged Compliance Failures

Demand for elimination of child labor drives creation of global human rights legislation and enforcement

With the recent revelation of child labor across major companies, governments are cracking down on their legislation and enforcement of child labor violations. These laws aren’t just relegated to one area as many companies operate across the globe. Here are a few examples of recent legislation and their implications for businesses.

UN National Global Compact Action Pledge

The United Nations Global Compact Action Pledge of 2021  works to engage and activate stakeholders in order to increase efforts to eradicate child and forced labor by 2025. The goal of the pact is to motivate companies to share effective practices that turn human rights awareness into real-time business implementation.

The UN Global Compact states, “Central to this is our call to companies to step up their due diligence on human rights and to identify, prevent, mitigate and account for all adverse human rights impacts in their operations and value chains, which will help tackle child labour and forced labour.”. Currently, they also believe too there is too great a gap between business aspirations and actions.

United States Department of Labor response

In late February 2023, the White House created an array of new investigations to address child labor violations among employers. The Department of Labor said it wouldn’t solely focus on the factories that violate these child labor laws, but also the big companies that illegally employ children anywhere in their supply chain.

They will further explore the use of a legal provision called “hot goods” that prohibits the interstate transport of any good from supply chains where child labor violations have been found.

Germany Supply Chain Due Diligence Act

Similarly, enforcement of Germany’s new Supply Chain Due Diligence Act went into effect on January 1st, 2023. The law applies to all companies with more than 3000 employees that have a physical office in Germany. It stipulates that all of said companies must have a process in place for supply chain due diligence relative to human rights. It makes it imperative that all current and future contractors and suppliers be screened to assess risks to child and forced labor, discrimination or unethical employment, unsafe working conditions and environmental impacts.

MORECosts of Compliance Failure

Do your due diligence to screen for ethical supply chain practices

While the practice of identifying, preventing and addressing child labor in supply chains can be daunting, due diligence acts as a driver for corporations to recognize emerging human rights regulation and violation risk.

That said, keeping track of the growing number of global rules and regulations is complicated and can take up more time than you have. So, many companies will decide to run the risk that they won’t be audited or caught. As we’ve seen, this can be a costly mistake.

We take a closer look at supply chain legislation and consequences for ignoring regulation in our new e-book "Supply Chain Transparency: Food and Beverage Standards and Regulations". Download your copy now to learn more about recent regulation, who that regulation impacts, and how you can stay on top of your compliance.

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