In late 2020, the US government banned imports from two Malaysian palm oil producers after investigations found evidence of forced labour on their plantations. In early 2021, the UK government announced plans to fine medium-sized and large companies for insufficient checks on human rights abuses in their supply chains.
The problem of modern slavery has never been more pressing. According to the International Labour Organization, some 25 million people are in forced labour worldwide — more than ever before — and it is ubiquitous across the globe, as shown by recent arrests over sweatshop conditions in textile factories in Leicester, UK. More consumers want ethically sourced products while environmental, social and governance (ESG) investing hits the mainstream. In 2020, global investors representing $4.2tn issued a joint statement calling on governments to require businesses to conduct human rights due diligence on their operations and supply chains: in 2021, the EU plans to propose rules that do exactly that.
But traditional methods for detecting and preventing modern slavery in supply chains are not up to the task. Many firms take a tick-box approach based on suppliers’ declarations. Even the most sophisticated onboarding processes often fail to look at second- and third-tier suppliers. In 2018, Deloitte found that two-thirds of supply chain leaders admit zero visibility beyond direct suppliers, which is where risk is more opaque and more likely.
Connecting the dots
Tech and data firms have increasingly risen to the challenge in recent years, improving supply chain transparency to inform procurement and site-selection decisions. One of them is FRDM, launched by Justin Dillon in 2018. “I’d had a lot of exposure to chief executives wanting to do more and I’d spent a lot of time on-the-ground with charity organisations rescuing children in supply chains,” he says. “I saw how the dangerous labour of children, some as young as three, was connecting into global supply chains, but five years ago there was no way to trace and measure it.”
His response was to build a database of raw materials needed to manufacture the full spectrum of products available today. FRDM’s platform draws on this database, customers’ invoice data, shipping records, risk reports and media monitoring, and uses predictive analytics to create dynamic heatmaps that show risks at various tiers of customers’ supply chains. “Forced labour doesn’t sit still for you to catch it and thrives because of its invisibility,” Mr Dillon says. FRDM has maximised its impact through partnerships with business software leader SAP and digital payments platform Tradeshift, which give their users access to FRDM’s solution.
Commercial data providers are also becoming involved. Dun & Bradstreet, which tracks some 420 million enterprises spanning 243 countries, is creating more transparency around modern slavery via various partnerships. One is with Dow Jones, which compiles watchlists of sanctioned and high-risk individuals. “Blending that people data with Dun & Bradstreet’s business data is quite powerful. What we’ve learned is that there is overlap between those involved in money laundering and businesses found to be involved in modern slavery,” says Chris Laws, the firm’s head of UK product and strategy.
Another partnership is with software firm Quantexa, which uses entity resolution, network generation and data enrichment to identify the same entities across different platforms and create a single, dynamic view of suppliers. “This helps companies understand who their supplier is and surfaces information that highlights relationships from further down the supply chain,” says chief product officer Alexon Bell. Stitching together customer and Dun & Bradstreet data, among other sources, creates actionable information. “For example, when a business is sold, the company they supply might not be notified,” he says. “If we find that the acquirer is linked to modern slavery via other businesses, that will immediately be flagged as a risk for this supplier.”
Gap in the market
The growing ecosystem of players assembling data or providing technology to help businesses detect modern slavery and other ESG risks in supply chains is “a burgeoning industry”, according to Mr Bell. The pandemic could accelerate uptake. “One byproduct of Covid-19 is that businesses have had to rapidly onboard new suppliers,” says Mr Laws. “It’s forced them to become more efficient and that ultimately lends itself to a data-led approach.”
While companies have a growing number of tools at their disposal, investors have been somewhat neglected. This prompted the Modern Slavery Policy & Evidence Centre to commission a project between the Bingham Centre for the Rule of Law and the Alan Turing Institute to identify the data solutions available to investors today, and where additional investment is needed.
Preliminary findings suggest there is much room for improvement. Modern slavery statements are investors’ primary source of information, but Florian Ostmann, policy theme lead at the Alan Turing Institute, says their free text structure makes them cumbersome to analyse.
“One very promising tech application is to use natural language processing to partially automate the analysis,” he says. Investor tools could also harness worker voice programmes, which allow people deep in supply chains to anonymously report on working conditions.
For businesses, this project is making some reassuring discoveries. “It’s becoming increasingly clear that investors don’t expect companies’ supply chains to be completely free of modern slavery, especially when they are long and run into developing countries,” says Irene Pietropaoli, a research fellow at the Bingham Centre. “But they do expect companies to be transparent about how they are identifying and addressing these risks.”
More broadly, Mr Laws believes graph database technology, which power social media platforms Facebook and LinkedIn, is “an incredibly powerful tool for supply chain mapping”. There are various blockchain tools, but Mr Dillon believes firms must first invest in basic supply chain transparency before they can have any meaningful impact.
Data and technology have great potential in tackling modern slavery in supply chains. But for investor solutions there is a gap in the market which will only get bigger as their ESG focus grows. “Investors show growing interest in modern slavery risks, so I don’t see major obstacles to the uptake of tools being developed, as long as they are user-friendly and address their information needs,” says Mr Ostmann. “It’s just that they aren’t there yet.”
This article first appeared in the February/March print edition of fDi Intelligence. View a digital edition of the magazine here.