Jul 14, 2021

Forced labour in the Malaysian medical gloves supply chain

Ethicalprocurement
modernslavery
ESG
Supplychainriskmanagement
4 min
We take a look at the findings of the Modern Slavery PEC report, "Forced labour in the Malaysian medical gloves supply chain during the Covid-19 pandemic”

The  UK-based Modern Slavery and Human Rights Policy and Evidence Centre (the Modern Slavery PEC) have published a report, "Forced labour in the Malaysian medical gloves supply chain during the Covid-19 pandemic.” Research for the report was conducted between August 2020 and April 2021.

"Both before and during the pandemic, the US placed import bans on gloves produced by two major manufacturers in Malaysia due to findings of forced labour. The research sought to evidence the scale of forced labour in the Malaysian medical gloves supply chain during the pandemic and identify opportunities for positive change to prevent and remediate labour issues,”

The study took a supply chain approach, including a survey of 1,491 (mainly migrant) workers in Malaysia, 11 interviews with migrant workers and 14 interviews with manufacturers in Malaysia and with government officials, suppliers, and procurement managers in the UK. Surveyed workers and interviewees were asked about their experiences prior to and during the pandemic.

The report claims, "Issues associated with the indicators of restriction on movement, isolation, abusive working and living conditions, and excessive overtime, are also entrenched but were exacerbated by the pandemic, through the direct health and safety risks of Covid-19 and from pressures placed on production by increased global demand for gloves,” 

According to the July summary report, increased demand for medical gloves during the global pandemic led to a significant change in the operation of the supply chain for medical gloves from Malaysia to the UK’s NHS.

This caused a shift in power dynamics, which favoured manufacturers and put decisions about distribution, pricing, and payment terms more firmly in their court, increased pressure on existing workers and reduced opportunities for ethical procurement.

As evidenced by the ongoing presence of forced labour indicators, current legislative and policy measures do not effectively address labour exploitation, modern slavery, and poor working conditions in supply chains. Although based on International Labour Organization's (ILO) framework, four of the 11 indicators worsened amid increased demand for medical gloves caused by the COVID-19 pandemic, labour issues in the medical glove supply chain have been longstanding.

In addition, there was a significant risk of transmission of COVID-19 among workers within the glove factories.

Debt Bondage

According to the research summary, issues connected with one indicator on debt bondage have, however, improved during the pandemic. However, high recruitment fees and associated loans mean that workers are tied to employers at least until the debt is repaid. 

"Particularly in the first year of their employment, many workers in the medical gloves industry are at high risk of debt bondage. 

"There has been some improvement during the pandemic with movement in the sector towards reimbursing recruitment fees. US import bans in 2019 and 2020 on two Malaysian manufacturers on grounds of forced labour appear to have been influential in promoting wider commitment in the sector to reimbursement. 

"A quarter of surveyed workers reported receiving some reimbursement of fee from their employer,” the summary said.

The Path to More Ethical Supply Chains

"The shift in power to the manufacturers witnessed during the Covid-19 pandemic is unlikely to be permanent, and it is important for improvements in labour standards to be part of future supply chain resilience strategies. One area for further research is to evaluate how UK public procurement performs in relation to issues of social value and the remediation of modern slavery through revisions to UK procurement legislation following EU exit. 

"Evaluation of NHS Supply Chain’s evolving systems for labour standards assurance and the UK government’s training modules for ethical public procurement are other important research areas. We also recommend research into the labour recruitment chains operating between migrant workers’ countries of origin and their country of employment, and to logistics workers in supply chains.

"Manufacturers, the Malaysian government, and governments and recruitment agencies in migrant workers’ countries of origin should work together to monitor and improve labour recruitment processes, especially to eliminate fee payment and provide workers with accessible and accurate information about available jobs. Due diligence in procurement should include prevention, mitigation, and remediation of debt bondage connected to recruitment fees,” the summary said.

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Jul 24, 2021

A Watershed Moment for Sustainability Commitments

Vizibl
ESG
Sustainability
sustainableprocurement
Mark Perera, CEO, Vizibl
5 min
Mark Perera, CEO of Vizibl discusses the Royal Dutch Shell climate commitments and how the ruling has sent ripples through the oil, gas, and energy sector

Last month saw a landmark ruling where Royal Dutch Shell was instructed to significantly step up its 2030 climate commitments and slash absolute emissions by 45% compared to 2019 levels. This ruling represents a considerable advance on Shell’s stated aim to cut 45% of its emissions intensity compared to 2016 levels by 2035 – a target which provided leeway for increasing emissions as long as the relative carbon emitted per unit of energy produced fell. Now, this imposes a much larger climate obligation on Shell in calling for an urgent absolute reduction.

 

A ruling that sent ripples through the oil, gas, and energy sector

A watershed moment, this ruling is sure to cause significant alarm amongst fellow oil and gas giants who recognise – for perhaps the first time – that national courts can compel organisations to accelerate their reduction of harmful emissions under the Paris Agreement. Not only does it have "far-reaching" consequences for Shell itself and may even curb the potential growth of the company, but the decision is also likely to set a legal precedent for other energy companies and corporations. According to Thom Wetzer from Oxford University, who heads up the sustainable law programme: “all companies in the energy industry and all heavy emitters will be put on notice and have to accelerate their decarbonisation plans.”[1]

This court mandate applies to not only the Shell group’s own operations but notably also to all the suppliers and customers of the group – strongly implying that Shell is being asked to tackle its Scope 3 emissions. Consequently, it is clear that Shell cannot meet the ruling’s demands alone; to make an impact across all carbon emissions scopes, Shell and other large businesses must immediately look towards forging new, productive partnerships with supplier stakeholders. Failing to do this not only means missed targets and mounting legislative action but also the reputational damage that this will cause to its brand and the company.

 

Activist investor warns of existential business risk

Reports on the Shell ruling were almost immediately followed by news of a coup attempt in American oil and gas corporation Exxon Mobil. Due to concerns surrounding Exxon’s strategic direction, hedge fund Engine No. 1 ousted sitting board members, stating that the climate crisis poses an "existential threat to the business", which the board has been reluctant to confront.

This small hedge fund accused Exxon of "a failure to take even initial steps towards evolution" and of "obfuscating rather than addressing long-term business risk", partly due to a historical lack of energy industry experience in Exxon’s board. This signalled an imminent shift in the company’s sustainability strategy, which was well received by the market, with Exxon’s shares rising 1.2% the day after the event.

 

The drive to reduce Scope 3 emissions

And if that wasn’t enough of a shakeup, this was followed by American multinational energy corporation Chevron’s shareholders voting 61% in favour of a proposal to cut Scope 3 emissions at their AGM, signalling frustration with the company’s slack approach towards climate change. Chevron has thus far failed to match its competitors’ net-zero targets with any commitments of its own.

For those less familiar, corporate emissions fall into three categories: Scope 1, 2, and 3. Scope 1 covers emissions from sources that an organisation directly owns or controls. Scope 2 refers to emissions from purchased electricity, steam, heating, and cooling that the reporting company consumes over the course of its operations. And Scope 3 is everything else – all other indirect emissions that occur within an organisation’s value chain, both up and downstream.

Why is this significant? Until now, Scope 3’s heady combination of difficult-to-manage and thus far easy-to-ignore has led large companies to abdicate responsibility for their value chain and sweep its emissions under the carpet. However, the Shell ruling indicates that this approach is no longer viable for big business. With courts stepping in and dictating climate policy to corporations as well as governments, the pressure is mounting on all heavy emitters to tackle their true impact and reduce Scope 3 emissions.

As organisations like Shell, Chevron and Exxon are considered responsible for the actions of their entire ecosystems, sustainability performance becomes contingent on supplier behaviour. The clearest example of this lies in Scope 3 emissions which, for many organisations, considerably exceeds the CO2 they emit directly.

Therefore, the time for green-washing and lip service is now over as pressure mounts from all stakeholder groups for large corporates to take decisive action on sustainability in the supply chain. However, businesses cannot turn promises into concrete progress without actively collaborating with stakeholders across the value chain.

 

For every five weeks that pass, we lose 1% of the decade

2030, the deadline for achievement of UN SDG-related climate commitments, is fast looming, and with every five weeks that pass, we lose 1% of the decade. The imperative to take immediate action has never been clearer. It’s now down to procurement, wider business leaders, and their associated supplier ecosystems to put sustainability strategy into action by:

 

      Defining, aligning, and communicating their corporate sustainability goals to focus suppliers, partners and the wider stakeholder groups on how they can make an impact.

 

      Collaborating systematically through technology using transparent processes that develop trust with suppliers and partners.

 

      Harnessing the innovation and IP within the supplier ecosystem, turning ideas into projects that can be managed and reported on transparently, and adding clear value trackers to prove impact.

 

Working closely with stakeholders in the supply chain is an infamously complex process, but it can be made that much simpler using Supplier Collaboration & Innovation (SC&I) technology. This ensures strategic alignment between buyer and supplier and provides comprehensive relationship governance and real-time performance visibility. This allows companies and their suppliers to work on sustainability initiatives more cohesively and develop innovative ideas through collaboration.

 

Here at Vizibl – through our SC&I platform combined with our knowledge and expertise – we are helping large enterprise organisations in the energy sector better leverage their supplier relationships and move closer to meeting those lofty 2030 sustainability goals.

 

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