The 14 Red Flags › Scope › Red Flag 4
FLAG 04
Scope
Does Not Adequately Account for Vulnerable People
⚠ Reputational risk
⚠ Legal risk
What this means
Why investors should care
What to look for
Migrant workers, day laborers, seasonal employees, workers hired through labor intermediaries, who are often forced to pay recruitment fees, factory workers subject to production quotas or piece rate payments, and non-employees without written contracts – including “family labor,” where women or children work but only men are paid, are among the most vulnerable workers in supply chains. They are typically marginalized due to their migration or worker status and lack of financial security. In some cases, these workers travel long distances from their homes and live in employer-provided housing, leaving them isolated, without resources, and dependent on the employer or labor contractor. In some industries, it is common for workers to bring their children, increasing the risk of child exploitation as these children miss school to help their parents instead. The precarity these workers face means they may be more easily intimidated, prone to accept dangerous working conditions, and more likely to experience confiscation of identity documents, debt bondage, wage theft, or forced labor.
For land-based investments, indigenous peoples face the risks related to the denial of free, prior, and informed consent. A robust scheme should expect that adhering entities know and report on the percentage of vulnerable people in their workforce and affected by their operations at large, and institute auditing safeguards, such as holding interviews off the work site, recognizing that it could be more challenging to do so for a plantation or mine worksite than for a factory. Schemes should emphasize that entities use an intersectional approach to identifying those most at risk.
Auditing schemes that do not account for the most vulnerable workers cannot effectively reduce the presence of forced labor and leaving companies exposed to legal, financial, and reputational risks.
The risk of forced labor increases with subcontracting, a pervasive practice across industries.1 Subcontracting often takes place under the table and cannot be detected through usual audits, even when audits are conducted on site. Garment industry workers may do embroidery or other piecework at home or at an uncertified subcontracting facility. In construction, day laborers may be hired off site and on terms agreed to only verbally. In agriculture, a labor contractor or “crew boss” may recruit, hire, transport, and pay workers directly, putatively outside of the purview of the farm owner.
A 2023 investigation by Repórter Brasil found that 17 workers, including a 15-year-old girl and two boys ages 16 and 17, were rescued from modern slavery on coffee farms in the Minas Gerais state of Brazil, one of Starbucks’ largest suppliers. The farms held the Starbucks’ C.A.F.E. (Coffee and Farmer Equity) Practices and Rainforest Alliance initiatives.2 The rescued workers had come far from home to perform seasonal coffee harvesting and reported to a middleman who illegally recruited them and then withheld their wages among other abuses.3 In January 2024, the National Consumers League brought a lawsuit in the District of Columbia Circuit Court accusing Starbucks of misleading consumers with claims of “100% ethical” coffee and tea sourcing, citing weaknesses of the initiatives that Starbucks relies upon in protecting migrant laborers.4
Even when standards do account for vulnerable workers, a lack of specificity around how they should be implemented can result in a failure to mitigate risk and protect marginalized people. The Bonsucro Smallholder Production Standard introduced in 2018 specifically accounted for vulnerable farmworkers in one of its core indicators required of participating sugar processors at the time:
Bonsucro Smallholder Production Standard, Indicator 2.1.3Special care shall be taken on the treatment of vulnerable groups subject to discrimination such as female workers, migrant workers or contracted workers, underrepresented ethnic or social groups, union representatives, union members, or non-unionized workers (Indicator 2.1.3).5
It is positive that the standard focuses on farmworkers; many standards focus only on farmers. Nonetheless, a Bonsucro-commissioned study on the implementation in India found that some Bonsucro certified mills relied on contingent workers, including migrants6 and did not routinely conduct formal identification checks or provide written contracts and pay slips – protection essential for workers.7 In 2024, Bonsucro revised its Smallholder Production Standard to require all workers on the farm to have written contracts or a national working card.
→ Demonstrates: Reputational risk, legal risk
Footnotes
1 Geneviève LeBaron et al., Forced Labour Evidence Brief: Commercial Contracts and Sourcing (Re:Structure Lab, 2021), https://static1.squarespace.com/static/....
2 Repórter Brasil, Behind Starbucks Coffee (October 2023), 4, https://reporterbrasil.org.br/wp-content/uploads/2023/11/monitor_starbucks_coffee_slave_labor_ENG.pdf.
3 Ibid, 11–13. Starbucks and Rainforest Alliance responses to the reports are available on the Repórter Brasil website: https://reporterbrasil.org.br/....
4 National Consumers League v. Starbucks Corporation, Superior Court of the District of Columbia, case no. 2024-CAB-000196, (2024), https://www.courthousenews.com/wp-content/uploads/2024/01/starbucks-labor-rights-violations-suit.pdf.
5 The Impact of Bonsucro on Human Rights in the Sugarcane Sector: A Focus on India (Columbia University School of International and Public Affairs, 2019), 61, https://www.sipa.columbia.edu/sites/default/files/....
6 Ibid, 61.
7 Ibid, 7.
MSIs that claim to address risks in these settings need to audit to a standard that requires documentation of employment relationships, covers seasonal and contract workers and recruitment processes, includes commercial indicators that predictably lead to forced labor (such as sourcing below the production cost),1 mandates that employers cover the full cost of recruiting and supply proof of payment, and requires free prior and informed consent.2
Investors can ask how the scheme addresses vulnerable workers and communities in its standard and auditing practices and whether and how it verifies the steps the adhering entity takes to provide protections.
➔ GoodWeave International Generic Standard requires compliance at different levels of production: exporting, subcontracting, and home-based workers. To ensure the absence of child labor for home-based workers, the certifying body ensures workers understand the parameters for how children can contribute to their work. This includes protections for the child’s participation in school, physical and mental well-being, and parental supervision while the work is performed.3
➔ The Fair Food Program Code of Conduct requires that participating farms directly hire workers as employees and that workers complete registration and receive time cards before beginning work in the fields. In relation to migrant workers, the Program specifies the Mexican National Employment Service (SNE) as the sole recruitment channel for guestworkers on H-2A visas to the United States and verifies compliance with U.S. law on guestworker working conditions and pay.4
Footnotes
1 Geneviève LeBaron et al., Forced Labour Evidence Brief: Social Auditing and Ethical Certification (Re:Structure Lab, July 2022), 23–25, https://static1.squarespace.com/static/....
2 Declan Croucher, “Despite ‘No Fees to Workers’ Policies, Workers Are Still Paying,” Veríte, August 18, 2023, https://verite.org/despite-no-fees-to-workers-policies-workers-are-still-paying/.
3 GoodWeave, GoodWeave International Generic Standard (last revised May 1, 2021), https://goodweave.org/wp-content/uploads/2020/07/GoodWeave-International-Generic-Standard.pdf.
4 Fair Food Standards Council, Fair Food Program State of the Program Report (2021), 44, https://fairfoodprogram.org/results/.
Checklist for Red Flag 4
Does the scheme identify the most vulnerable workers and communities, or consumers in their operations and center prevention of harm to them in their standard and guidance?
Good practices include but are not limited to:
- Requiring member companies to report the percentage of vulnerable people in their workforce
- Requiring member companies to document all employment relationships, including seasonal, contract workers, day laborers, and migrants
- Including within the standard, indicators that predictably lead to forced labor, e.g., sourcing below the production cost
- Mandating that employers cover the full cost of recruiting and supply proof of payment
- Having in place adequate procedures and safeguards to ensure that workers, including contractors and temporary staff, and communities feel safe in speaking with auditors
Ready to assess an initiative?
GO TO THE CHECKLIST ↗
