SUSTAINABLE INSIGHT

Modern Slavery and Labour Risk in Global Supply Chains

Thu 04 Feb, 2021 - 1:06 PM ET

Sectors such as agriculture, consumer goods manufacturing, and minerals and mining face risks in the sourcing of their goods related to modern slavery, Fitch Ratings says. New regulations targeting modern slavery require auditing and reporting for importers, and while enforcement has been limited, there are signs this could change in the coming years.The main risks to corporates related to forced labour are reputation- and compliance-related, as public sentiment and associated government responses are increasingly in favour of greater accountability. We expect that increased data disclosures will lead to greater transparency of supply chain labour practices and stronger responses to labour rights violations from stakeholders.Consumer Goods Supply Chains High-RiskModern slavery is primarily employed in labour-intensive production for high volume, low cost goods, but is also prevalent in the production of minerals used in electronics and lithium ion batteries. Companies with complex supply chains involving numerous components from multiple suppliers in different countries are less able to identify labour abuse problems along the chain.Asia and sub-Saharan Africa are the regions where modern slavery is most prevalent, and are important exporters of textiles, electronics, agricultural products, and minerals.Sustainability Factored into Supply ChainCustomers, financial institutions and governments have higher expectations regarding supplier transparency and product traceability. Failure to meet these expectations could lead to a loss of customers or constraints on accessing to financing, although there is yet to be an example

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