Cleaning Up Global Supply Chains

The UK’s Modern Slavery Act now requires companies to report efforts to prevent human trafficking and slavery in the making of every part and every process of production, from headquarters down to individual suppliers along production chains. In the United States, the Dodd Frank Act’s disclosure rules for conflict minerals hold mining and technology companies to similar standards. But surveys and reports show companies still fail to monitor their suppliers, let alone prevent abuses.

To comply with these laws, multinationals must investigate the origin of each chip, stitch, or mineral in its products, and workers’ treatment at each stage. Many do not for two reasons:

Supply chains have become more geographically dispersed. Today products are mostly made across countries rather than within them. A Ford Fusion sold in a U.S. dealer’s lot counts parts from 234 suppliers in 32 countries. An iPhone brings together minerals from Mongolia and pieces manufactured in Korea and Taiwan before assembly in China. To follow their intricate production chains, companies must inspect labor practices on each factory floor, farm, or mine in every country, from raw materials to manufactured parts to fabrication.

Subcontracting of subcontracting. Agreements between brands and suppliers can be just the start. After a factory signs a contract, they often subcontract to smaller firms that subcontract to even smaller ones. The demands of fast fashion in particular mean that suppliers routinely farm out large contracts to dozens of not just smaller factories, but also networks of sewers, finishers, and embroiderers working in their own homes. These workshops don’t have government permits and often lack basic sanitation, ventilation, and lighting. They demand long hours and deny paid maternity leave. One study of Bangladesh’s apparel industry found that out of 7,000 producers, about half are informal subcontractors.

These realities make it difficult for corporations to monitor working conditions. Even well-known multinationals struggle. After long hours and low pay drove desperate Chinese iPhone makers to suicide, Apple started publishing yearly reports on labor rights in its factories. Four years later, these reports show worker conditions are still unsafe, and hours often exceed two to three times the legal limit. Nestlé grapples with child labor in Ivory Coast cocoa suppliers, even after adopting measures to address the problem. Some of Nestlé’s suppliers in Thailand use slaves to catch fishmeal that ends up in the brand’s pet food, and it buys coffee beans from plantations in Brazil that may rely on slave labor.

Still, there are success stories. Intel now maps its entire electronics supply chain, tracing metals it buys in China and Russia to African smelters. Working with other electronics brands, Intel helps smelters in the Democratic Republic of Congo identify conflict-free sources, enabling them to support often poor tantalum miners without funding the nation’s violent militias.

And for corporations looking to improve their practices, help exists. Outside auditors can map supply chains, identifying risks and violations. Many non-governmental organizations (NGOs) partner with companies to spread awareness and educate local governments on what counts as abuse and how workers can report cases so that the company can respond. Others design and deploy technologies, including text messaging and social media analysis, to help companies pinpoint labor violations.

The UK and U.S. laws set important guidelines for today’s global factories, though the response so far shows these laws are just the first step. To be successful, legal norms need to proliferate, moving beyond industrialized nations to emerging economies where workers rights are often most tenuous. And they need to be internalized by companies, becoming a part of everyday practices and operations.