The Global Child Slavery Situation
There are millions of children trapped in modern slavery around the world. Many work within the supply chains of major multinational corporations that produce agriculture products, clothing, modern technology and other consumer items. The list of actual items is diverse, and as noted by a 2020 US Department of Labor report, it ranges from carpets, cotton, cocoa and coffee to electronics, fireworks, garments and gold.
These enslaved children endure deplorable conditions with staggering consequences. Child forced labor routinely results in extreme bodily and mental harm, often leading to sexual exploitation and even death. And in nearly every case, children are denied access to schooling and health care, restricting their fundamental rights and threatening their futures.
As long as companies prioritize their short-term financial gains over all other considerations, this important human rights issue will continue unabated. Corporations have largely failed to address the problem of child slavery, either by claiming it is too difficult to monitor their suppliers or through general disinterest. Despite numerous promises to the contrary, the voluntary nature of most of these corporate pledges have perpetuated the use of child forced labor in certain companies’ supply chains.
The rise of socially responsible investing and ESG
The growth of socially responsible investing (SRI) and ESG scoring metrics have changed the landscape surrounding this issue.
The major ESG rating agencies (MSCI, Sustainalytics, S&P Global, Refinitiv, Bloomberg, FTSE Russell, ISS, Moodys and others), all incorporate sustainability within their ESG scoring matrixes. Since eliminating forced child labor is one of the UN’s Sustainable Development Goals (SDG), a rating agency that gives a high score to a company that utilizes forced child labor anywhere within their supply chain risks becoming irrelevant.
Companies with good ESG scores are perceived to better anticipate future risks and opportunities, with superior long-term strategic thinking and value creation. Receiving a poor ESG score has a cascade of negative impacts upon a company’s financial health including exclusion from investment portfolios and falling stock price. Expenses increase as the costs of risk management rise and the negative effects upon their public image can reduce their market share and revenue.
With blockchain and distributed ledger technology, companies now have a safe and transparent tool to effectively evaluate and monitor their supply chains to assure ethical sourcing. And studies have documented that implementing a progressive child labor supply chain policy has an overall positive effect on revenue. There is no longer any excuse for forced child labor to be a part of any company’s supply chain. And the ESG rating services will penalize any company that permits that practice to continue.
It is clear that company’s can no longer afford to ignore the use of forced child labor within their supply chains. It is not only bad for the children. It’s also bad for business.