ASIA SITS ON FRONTLINE OF GLOBAL RISE IN MODERN SLAVERY

by Dr James Sinclair Director of Human Rights, Verisk Maplecroft

Asian countries are among those that have seen the biggest rises in modern slavery in recent years. Identifying where, why and how your business might be affected is a priority in the face of more stringent human rights legislation.

Forced labour, human trafficking and other constituent elements of modern slavery are continuing to rise at a global level. The latest version of our annual Modern Slavery Index (MSI) reveals that a quarter of countries have witnessed a significant increase in modern slavery risk since the dataset launched in 2016. With the issue steadily climbing up the regulatory agenda, understanding how, why and where it can arise has never been so important.

From a supply chain perspective, some of Asia’s manufacturing hotspots have witnessed significant increases in modern slavery risks. These include Vietnam, which is now the 22nd riskiest country in our index (up from 76th). Myanmar is 10th (up from 34th), Cambodia is 25th (up from 61st) and Bangladesh is 27th (up from 43rd).

Source: Verisk Maplecroft

The European Commission’s newly unveiled plan to ban products made with forced labour from entering the EU market is the latest in a growing list of human rights due diligence laws. When it comes into force, the ban will join the United States’ UFLPA in attempting to eradicate forced labour from global supply chains. Our findings show that doing so will be no easy task.

Regulators, investors, shareholders and consumers have started to become aware of modern slavery risks that have been evident to human rights experts for years. However, the problem is getting worse rather than better and organisations need to work harder to keep goods tainted by forced labour out of their supply chain.

Zooming in to the subnational level shows the extent of the issue. Our data reveals that two thirds of the world’s 3,316 states, provinces and other subregions are rated as high or extreme risk for modern slavery violations. These are home to 80% of the global population, some 6.25 billion people.

Chinese human rights abuses not limited to Xinjiang

China is by far the largest sourcing country rated extreme risk in the latest edition of the MSI. This should come as no surprise, given that reports of human rights violations in Xinjiang are widespread. Indeed, the UFLPA effectively bans the importation into the US of goods made wholly or in part within Xinjiang. However, China’s commanding position within several industries means eradicating its abuses from global supply chains is easier said than done. This includes renewable energy, where China controls around 80% of the solar photovoltaic manufacturing supply chain, with 45% of the world’s polysilicon capacity located in Xinjiang.

However, the focus on Xinjiang should not obscure the challenges in other Chinese regions. Yunnan, a production hub for tin and zinc, and Tibet are both rated extreme risk for modern slavery within our subnational data, and the rest of the country is rated high risk.

Source: Verisk Maplecroft

Diversifying production away from China might seem the obvious solution, but this is easier said than done commercially and alternative jurisdictions are far from risk free. For example, most of the countries prominent in solar and wind power supply chains are rated high or extreme risk on the MSI, highlighting the potential for modern slavery to taint ‘clean’ technologies.

Poverty and modern slavery linked, but developed countries not immune

Poverty has long been a key determinant in the prevalence of modern slavery. Poorer households are more likely to become dependent insecure and exploitative employment, which can give rise to further abuses.

This is reflected in the data: 17 of the 24 extreme risk countries on the latest edition of the MSI are low and lower-middle income economies. This group includes Myanmar and Pakistan, two leading exporters of goods including clothing, cotton fabric and rice.

But workers in developed economies aren’t immune to exploitation. The number of high and upper-middle income economies rated high or extreme risk on the MSI has risen to 44, up from 39 when the dataset launched in 2016.

Human rights due diligence key as negative headwinds grow

The factors driving the global uptick in modern slavery are set to worsen in the coming years. Rising inflation and a looming global recession indicate a period of prolonged economic instability. At the same time, even the most optimistic warming scenarios suggest that climate-driven migration will ramp up by mid-century. Combined, these issues will leave millions more people vulnerable to exploitation.

As the regulatory landscape governing forced labour rapidly expands, companies that have traditionally relied on low-cost foreign workers face a growing dilemma, as they increasingly need to walk the talk when it comes to tackling human rights violations. This could be a significant challenge for organisations with poor visibility over their supply chains. Those that take the time to identify risks and implement best-practice sourcing standards will be best placed to manage these growing threats.

About the company

As organisations strive to understand and adapt to a fast-moving world, Verisk Maplecroft empowers them to put the environment, human rights and political risk at the heart of their decision-making. We do this by providing unparalleled intelligence on sustainability, resilience and ESG – stitching together these disparate issues into an interconnected global view, built upon objective insight and data. By thinking ‘big picture’ we capture what matters most to our partners; making positive outcomes possible in a time of change; helping people, business and societies become stronger; creating value with values. Verisk Maplecroft is a Verisk business (NASDAQ:VRSK). Find out more at www. maplecroft.com