The widespread use of migrant labor in Asia Pacific economies poses increasing business risks for the companies involved — especially those with critical links to global supply chains.
Amid growing demand in the West for higher levels of corporate governance, such businesses need to take urgent action to develop human rights policies and systems that meet internationally-accepted standards. Acting now will help to secure long-term access to Western markets; doing nothing could be costly.
Human rights risks remain high in emerging Asia Pacific economies, where activists have accused many international and regional brands of using forced labor and debt bondage in their factories and operations, particularly in Thailand, Malaysia, Bangladesh, Nepal, Myanmar, and Indonesia.
In a recent high-profile case, the Thomson Reuters Foundation claimed to have discovered forced labor, illegal overtime, poor conditions and debt bondage at Malaysian factories owned by Top Glove, an international surgical glove supplier.
The 2018 allegations led to investigations in the U.K., where the National Health Service is a major buyer, and promises of action from the Malaysian government. Top Glove denied the forced labor claims, but admitted that overtime had exceeded national regulations and said it had put in place measures to ensure compliance with Malaysian law.
Yet awareness in the region of the pivotal role that human rights can play in the success or failure of companies remains low, despite the introduction eight years ago of the benchmark-setting United Nations Guiding Principles of Business and Human Rights, which provide guidelines for countries and companies on how to prevent and remedy human rights abuses in business operations.
Even in the 10-country Association of Southeast Asian Nations, where many of the region’s migrant workers are based, most companies have been slow to respond to the threat. Just 18% of the top 250 listed companies in Thailand, Malaysia, Singapore, the Philippines and Indonesia publish human rights policies, according to an ASEAN report published in May.
The report also found that only a quarter of the companies surveyed provide information on monitoring or reporting of human rights. Overall the companies disclose less than 22% of the human rights data recommended by the U.N. guidelines.
Migrant labor experts will not be surprised by these results, which provide clear evidence that many companies in the region are lagging behind global counterparts. A few have taken action, often after comments from NGOs.
For example, Thai Union Group adopted progressive hiring policies toward Myanmar migrant workers employed in its seafood processing factories in Thailand to prevent cases of debt bondage, and boosted monitoring of its supply chain in the fishery sector to eradicate cases of forced labor.
Most companies in the region have not experienced the level of pressure faced by Western counterparts, in part because of the relatively low profile of independent activism in the region and the weakness of many enforcement agencies.
But this is changing as investigative and advocacy groups step up demands for compliance with international human rights and anti-trafficking standards, targeting both regional companies with high profile brands and international companies with regional supply chain links, especially in agribusiness and electronics.
Research shows that much of the abuse of migrant workers happens before their first day at work. Undisclosed recruitment fees charged by agents can plunge workers into heavy debt that they cannot repay during the lifetimes of their contracts.
Once at work they may be subject to poor conditions, high overtime requirements and confiscation of passports. Some are employed by agents and shunted from factory to factory, giving them even less control over their conditions of work.
The solution to this complex situation is for companies to take control of the risks they face, taking steps to protect their reputations, and planning and budgeting in ways that will deliver their business objectives responsibly. Thai Union substantially transformed its hiring practices, shouldering various fees that were previously passed on to workers, and communicated openly about the process.
Most companies have some sort of risk management process, but only a few seem to identify societal and human rights risks adequately. Yet employing migrant labor is a key risk, and companies need to understand how it can impact their businesses and what they need to do to manage it. Companies that simply hire agents to find workers are demonstrating that they do not understand the risk.
A reputation-centered issues management process directed by senior executives is the best way to achieve this. It should be separate from — but integrated with — the risk management process, which is sometimes cluttered by the surface noise of financial and contracting risk.
Management of migrant labor risk starts with recognition of human rights as a corporate value that needs to be delivered through clear, mandatory policies and standards. This also means raising awareness and improving training within the business, particularly at critical points in the organization, such as recruitment, where corruption can be a problem.
The reach of these standards and processes is critical. They need to be adopted throughout the supply chain. It is not acceptable any more for businesses to resort to the use of contractors with different values when it comes to recruiting labor and treating people respectfully.
Transparency and contract fidelity are key risks for companies operating across borders. Independent third-party audits should be an integral part of the monitoring of supply chains, agents and brokers for companies that want to remain part of existing global or regional supply chains.
The most advanced Asia Pacific companies are those that have been through the experience of being targeted by activists, such as the electronic goods manufacturers Panasonic and Samsung and Wilmar International, the Singapore agribusiness group. But maintaining oversight and standards deep in the supply chain remains challenging, even for the best.
Companies must be seen to be doing the right thing. That means transparency, and an open process of reporting standards and performance. Sharing problems externally demonstrates a commitment to improvement and helps boost the overall health of the industry concerned.
Most important, improving human rights performance should not be seen as a business cost. It is an urgent requirement, but for companies that get it right, the benefits will flow straight to the bottom line.
Nick Wood and Romain Caillaud specialize in risk and reputation management at FTI Consulting, and are respectively based in Singapore and Tokyo. This article reflects their personal views.