Global Supply Chains and Corporate Responsibility

By Elena Rosenblum

In June, a Guardian investigation revealed abysmal labor standards in supply chains of the world’s largest shrimp farmer and Thailand’s largest agribusiness firm, Charoen Pokphand (CP) Foods. The investigation found that CP sources fishmeal from some suppliers that own, operate or buy from fishing boats manned under forced labor conditions — mostly from Cambodia, Myanmar, and Lao PDR – and sells the prawn to international supermarkets, such as Wal-Mart and Costco.

The incident casts light on one of the United States’ largest sources of shrimp, and highlights the need for more transparent global value chains (GVCs) and certification standards across industries.

Thirty-two percent of total U.S. prawn imports originate from Thailand, the world’s largest shrimp exporter, and 10 percent of these imports are farmed by CP Foods. A number of major supermarkets, Whole Foods, Carrefour, and ICA, have stopped buying from CP Foods and others are leveraging their market influence to drive a more transparent, sustainable, and humane supply chain.

Thai Boats

Moreover, a number of supermarket and food-service firms including Morrisons, Tesco, and Costco US held a three-day meeting with CP Foods the week of July 28 to create a taskforce to tackle trafficking and forced labor in the shrimp feed industry.

For its part, CP Foods responded with an operations-wide audit and the introduction of frequent, regular, and independent audits of all suppliers. They also increased research efforts to develop alternative protein sources to end dependency on unethically sourced fishmeal.

However, CP Foods has refused to provide further details about the taskforce.

For years, Thailand has grappled with its human rights record. Prior to the Guardian investigation, the U.S. State Department downgraded Thailand to tier 3 in its Trafficking in Persons Report 2014  alongside North Korea, Iran, and Saudi Arabia in worker protection. The downgrade may cause the World Bank and the United States to introduce restrictions on foreign aid.  The United Kingdom, for its part, plans to raise the issue of forced labor with Thailand during the ongoing EU-Thailand free trade agreement negotiations and institute stricter penalties for abysmal labor conditions in new legislation.      

Today’s economy runs on GVCs meaning both large companies and SMEs have an unprecedented opportunity to participate in international trade. However, without proper regulation, GVCs are open to incidents of worker abuse, particularly as companies increasingly move manufacturing to states with weak or non-existent regulatory structure and labor laws.

The incident with CP Foods follows a series of high-profile international scandals related to poor supply chain management, labor standards, and worker safety. Most notably, the collapse in April 2013 of Rana Plaza in Bangladesh triggered calls for higher labor standards in the global textile industry. Over 170 international brands and retailers signed the Accord on Fire and Building Safety in Bangladesh and numerous North American apparel companies founded the Alliance for Bangladesh Worker Safety.

At the same time, the private sector has increasingly recognized the importance of corporate governance and social responsibility in preventing similar incidents.  For example, Rapanui – a clothing company – reported excellent profit margins, because of, not in spite of, complete transparency in its supply chains.  Rapanui’s website features an award-winning Traceability map that allows customers to follow production from “seed to shop.”

Other companies have also started investing in transparency and responsible supply lines.  Adidas fully discloses their global supplier lists, including separate listings for events associated with rapid demand increase, such as the recent 2014 FIFA World Cup.  In 2013, Coca-Cola announced sweeping social and environmental assessments across its supply chain with the results available publically. General Electric, a leader in corporate social responsibility, compiles the GRI Index, a yearly report assessing ongoing sustainability projects, long-term goals, and annual performance metrics.  Finally, Starbucks collaborated with Conservation International to develop measurable standards and buying guidelines to reach 100 percent ethically sourced coffee by 2015.

Consumers are also weighing in on transparent supply chains. A 2013 study by Nielsen, a market research firm, found that over half of the people surveyed were willing to pay a premium for socially-responsible products, an increase of 5 percent from 2011.

Despite these efforts, much work remains. Nearly 21 million people worldwide continue to work under very poor labor standards, with almost 19 million being exploited by private individuals or enterprises according to the International Labor Organization.  Corporations have the ability and responsibility to leverage financial clout to ensure the safety of their workers around the world, and, in so-doing, secure their bottom lines.

Elena Rosenblum is a researcher for the Project on U.S. Leadership in Development at CSIS

One thought on “Global Supply Chains and Corporate Responsibility

  1. Yes, nice piece. We were already suspect about many aquaculture practices that go outside sound practices. From overcrowded, to algae filled water, to using sewage sludge as feed…many times it is cheap for a reason. People would be willing to pay more for a healthier product, this should be highlighted in consumer education. Throw forced labor in the mix, and we are cool on anymore dubious seafood.

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