The war in Ukraine reminds us of the devastating consequences of war beyond the direct death toll, displacement of populations and disruption of livelihoods. Since the start of the Russian invasion on February 24, Ukraine has seen one of the fastest exoduses in recent history. To date, nearly 6.7 million refugees have been registered in Europe (source: UNHCR).
Although there is now evidence of Ukrainians returning to their country of origin, the extreme relocation triggered by the conflict necessitates the integration of significant numbers of refugees into European host populations.
Unfortunately, the headlines out of Ukraine are just the tip of an iceberg; the UN estimates that around 100 million people worldwide have been forcibly displaced from their homes, in most cases due to violence (source: UNHCR).
Modern slavery and human trafficking have been a consequence of 90% of modern wars (source: Contemporary slavery in armed conflicts). This is due to a mix of factors, including refugees being picked up by traffickers when crossing borders, or accepting offers of accommodation or work without validation of legitimacy and security.
The vulnerability of refugees is often compounded by demographic factors, with women and children being overrepresented among displaced populations.
Therefore, companies operating in regions hosting refugees should be aware of the risks of labor exploitation in their operations and supply chains.
Following the Syrian civil war in 2011, Turkey experienced an influx of refugees. Today, the country hosts the largest refugee population in the world, including 3.6 million Syrians. A significant proportion of these refugees have been integrated into the garment manufacturing industry – an important part of Turkey’s economy.
Even before the Syrian refugee crisis, the garment industry relied heavily on cheap and flexible labor consisting of migrant labor. Today there are reports of widespread labor exploitation of refugees, with evidence of over 60 hour weeks and the majority of Syrian workers earning below minimum wage (source: world Bank).
Specifically in Istanbul, it is believed that 85% of Syrians are informally employed. As a result, global apparel brands have come under scrutiny for their lack of adequate action, with only a few brands earning praise for their best practices (source: BHRRC).
As a wave of mandatory due diligence laws come into effect across Europe, attention and scrutiny of human rights abuses such as modern slavery are increasing. With tangible civil liability and monetary fines on the horizon, as well as basic commercial liability, the importance of reviewing and managing potential human rights risks has never been greater. , both for the management teams and for the investors in these companies.
How should investors engage on this issue?
In Schroders’ Engagement Blueprint, we set out our demand for companies to establish and implement a human rights policy consistent with the UNGPs, the International Labor Organization and other international frameworks, and to s to respect human rights. We also ask companies to put in place strong due diligence processes and effective remedies.
However, due to the heightened risk associated with human rights in and around conflict-affected areas, we expect companies to go above and beyond. This involves adapting existing policies to the specific needs of conflict-affected areas and exercising increased due diligence in these contexts. Such action includes:
- Assess actual and potential human rights impacts;
- Integrate and act on the results;
- Response tracking;
- Communicate how impacts are handled.
As a starting point, there are two simple questions investors wanting to engage on this issue should ask companies:
- How have your supply chains been impacted by the influx of migrant labor and how do you assess the risks associated with modern slavery?
- What enhanced due diligence processes are you undertaking given this increased risk?
Case study – Turkish clothing manufacturer:
Recognizing the heightened human rights risks in the country, particularly associated with an influx of migrants from Syria, in 2020 we began engaging with a Turkish clothing manufacturer about its human rights policies and practices.
The company was at a relatively early stage on this topic, so we started by encouraging them to increase disclosure and demonstrate their adherence to responsible sourcing practices, as well as participate in industry initiatives to improving standards and collaborating with NGOs and relevant stakeholder groups.
We are pleased that since our engagement, the company has set compliance and oversight targets for its supply chain and has begun reporting baseline audit data.
Case study – Taiwanese company:
In 2022, we engaged with a Taiwanese company with exposure in Myanmar. The company had begun to make progress in including human rights, among other ESG factors, in its supplier management practices. We sought to understand the actions the company will take to increase supplier adherence to the code of conduct. We also encouraged the company to strive to broaden the scope of its auditing practices.
We will continue to engage with the company on these matters in the years to come and may consider escalating our concerns if deemed necessary.
Case study – European recruitment companies:
We have recently, in mid-2022, initiated engagements with two companies operating in Europe that fall within the human resources and employment services sector.
We have identified this industry as higher risk, as employment and temp agencies are likely to interact with people who are looking to find work quickly, having been displaced from their homes and jobs. origin.
The engagement aims to understand how companies act to anticipate and manage these risks – ensuring that due diligence is undertaken on employee applicants and end employers.
Over the coming months, we will continue to monitor responses from these companies in accordance with our engagement process.