U.S. Companies Struggle with Slave Labor in Supply Chain
The repressive measures China has imposed on its Uigher population in the Xinjiang region has presented Western companies, including Adidas, Kraft, Nike and Coca Cola, with an unexpected dilemma regarding possible slave labor in their own supply chains. Companies long ago banned the use of slave labor as a part of their commitments to human rights, good labor practices, and better environmental performance. Policing a far-flung and changing supply chain has always been difficult.
It appears now that Chinese officials have incarcerated thousands of Muslim Uighurs to “re-educate” them, wiping out their native culture and religion in the process. The local officials have at times defended these camps as “job-training” programs. Now they may be loaning out, or selling the labor of these incarcerated individuals, to private companies, some of which produce goods for noted Western companies. Attempts to label this as anything other than slave labor are not credible.
As noted in our book ROTTEN: Why Corporate Misconduct Continues and What to Do About It, a company which encounters a “bad orchard” or an environment where it is likely to be drawn into unethical practices, has at least three strategies besides just “looking the other way.” These strategies are:
Avoidance: cancelling the contracts of any supplier who cooperates with a corrupt system, accepting the disruptions and higher supply chain costs which will result.
Engagement: giving the suppliers a short period of time to renegotiate contracts or find alternative sources of labor which do not involve slave labor.
Corporate responsibility: trying to change the nature of the work conditions; finding ways to improve the lot of the workers directly; or
Enlisting government: asking the US government or others to fight the local practices. In reality, when the bad behavior is state-sponsored, the environment is hard to change.
In this case, U.S. companies should immediately both determine if the slave labor charges are accurate, and give notice to the suppliers involved that this will result in immediate cancellation of contracts. If their concerns are not resolved immediately, then they have to cancel their supplier contracts and join efforts to protest the treatment of the Uighurs. This may be a tall order for some companies, as the Chinese government has retaliated against companies that publicly protest its policies. This may lead to a broader need to disown contracts, commercial relationships, or at the extreme their presence in China.
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