News / New laws on goods made using forced labour could split supply chains

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Stricter due diligence laws surrounding the import of products made using forced labour could shake up supply chains and cause “significant disruption to companies’ operations”. 

Global risk intelligence specialist Verisk Maplecroft told The Loadstar that over the past half-decade, global advancements in labour rights had stalled. 

Currently, most legislation only requires companies to file reports on any exposure to modern slavery abuses, rather than to act on it, which has had little impact on the ground. 

Fortunately though, tougher mandatory due diligence laws are being introduced to supply chains – the German Supply Chain Due Diligence Act and EU Corporate Sustainability Due Diligence Directive, for example. These laws will require companies to take any labour abuse discovered in their operations or supply chains much more seriously. 

But this could cause significant disruption to their operations and supply chains, predicted Verisk Maplecroft. 

The Uyghur forced labour prevention act in June 2022 banned companies from importing goods from the Uyghur region into the US, unless the importer could prove, “with clear and convincing evidence”, that no forced labour was used in any part of the production process. 

However, due diligence in the region is virtually  impossible because of China’s strict surveillance measures and widespread campaign to silence its population. Therefore, the only way to ensure supply chains are free of Uyghur forced labour is to cut ties with the Uyghur region entirely.   

Eloise Savill, private sector advisor at Anti-Slavery International, told The Loadstar: “US customs authorities work under the assumption that all products produced in the Uyghur region are made with forced labour.

“We call for a similar style of enforcement in the UK and EU.” 

The Uyghur region is the epicentre of state-sponsored forced labour in China and a hub for production and processing of goods and materials, such as cotton, and core components of solar panels. 

New restrictions regarding the region could be a contributing factor to the movement of manufacturing away from China. Vietnam and India have recently seen large traction for those operating a China-plus-one strategy.  

But companies engaging in any relatively low-cost manufacturing or other forms of outsourcing could be supporting labour exploitation without knowing. To ensure compliance with the incoming regulations, companies will need to invest in transparency in their supply chains and ensure they have due diligence procedures in place. 

WageIndicator board member and executive director of the Federation of Uganda Employers Douglas Opio told The Loadstar: “Strict due diligence and regular spot-checks are necessary throughout the supply/value chain. This will definitely create a major impact since it creates a barrier for companies involved in forced labour.” 

Of 750 senior procurement and supply chain leaders surveyed by risk management software Interos, 79% agreed that compliance required time, money and resources.

This leads to worries that, to cut costs, companies could create split supply chains, ie, a ‘clean’ supply chain for countries implementing the seizure of forced labour goods and a ‘tainted’ supply chain for the rest of the world. 

Ms Savill said: “The passing of the EU laws will have a tremendous impact, as it is the world’s largest trading bloc. We need such laws to be in every market, or risk one becoming a ‘dumping ground’ for another.”