Combatting human trafficking

Shareholder advocacy |

Combatting human trafficking

Today, tens of millions of people are victims of modern day slavery, forced to work by coercion or threat. By some counts, there are more slaves worldwide now than when Abraham Lincoln signed the Emancipation Proclamation 150 years ago. These are sobering statistics.

You might wonder what you can do as an individual to help identify human trafficking and take action to end it. I would guess that many of us have not thought of investments as a way to combat human trafficking.

Everence, a financial services company and agency of Mennonite Church USA headquartered in Goshen, Indiana, addresses this issue through its investments. Over the years, Everence has gained knowledge about human trafficking, and we have learned how to leverage our role in the financial industry to become a part of the solution to this terrible problem.

One way we do this at Everence is by pursuing shareholder advocacy, which means using our rights and privileges as part owners in companies to press for positive change in corporate policy. We work on many environmental and human rights issues, including human trafficking (which we call modern slavery).

No company is perfect. We do our best to be responsible investors with the companies we own, and hold them accountable for their social impact. We do this by many means, such as writing letters, filing shareholder resolutions, having conversations with corporate management, and voting our shares at company meetings.

We are not alone in the work we do. There are a number of other investors in the socially responsible investment community who also practice shareholder advocacy. Everence is a member of the Interfaith Center on Corporate Responsibility, a network of faith-based and sustainability focused investors who collaborate to address major social issues through their investments. We work with other ICCR members to increase the breadth and depth of our corporate engagement work, as well as various non-profit and non-governmental organizations who have specific expertise in our issue areas.

Let’s take a look at four instances of modern slavery, and what investors are doing about them.

Human trafficking in the travel and tourism industry

Sex trafficking is a worldwide problem, with hotels especially serving as a common spot for the commercial sexual exploitation of women and children. In addition, trafficking victims are sometimes transported over international borders on airplane flights.

For many years, Everence has been active in corporate engagement within the travel and tourism industries – pursuing dialogues with major hotel chains and airlines for action on sex trafficking. We’re not chastising these companies, as much as inviting them to be part of the solution to the problem of sex trafficking.

One non-profit group Everence has collaborated with on this issue is ECPAT, which stands for End Child Prostitution, Pornography and Trafficking. ECPAT has developed what they call “The Code,” which is an industry driven initiative with the mission to provide awareness, tools and support to the tourism industry to prevent the sexual exploitation of children.

Everence was part of the shareholder team that persuaded Delta Airlines to become the first American airline to sign The Code. Through another dialogue, Wyndham Worldwide joined the growing number of major hotel chains to sign The Code. When a company signs The Code, it commits to training employees to recognize and help trafficking victims, among many other things.

Another example of our work in this area relates to major sporting events. While events like the Olympics, World Cup and Super Bowl are a festive and celebratory time for most, sex trafficking and prostitution are reported to peak during these events, and hotels are the prime venue. Shareholders have initiated multi-pronged campaigns to keep hotels trafficking-free during these events and beyond.

For many sex traffickers in the U.S., the Super Bowl represents the most profitable weekend of the year. In February 2012, the Super Bowl was played in Indianapolis – mere hours away from the Everence corporate headquarters and Goshen College in Goshen, Indiana. Everence helped coordinate investor initiatives, collaborating with local law enforcement and hotels to raise awareness of the risks of child sex trafficking.

Much of the groundwork was done by the Coalition for Corporate Responsibility for Indiana and Michigan, a group of Catholic investors. Two hundred and twenty hotels belonging to major chains within a 50-mile radius of Indianapolis were contacted.

These hotels were asked four questions:

  1. Did they provide training for their staff around the issue of human trafficking?
  2. Did they have programs in place for their staff, should they observe anything that might suggest a child in their hotel might be a victim of sexual exploitation or trafficking?
  3. Were they aware of local agencies and resources that are prepared to respond to incidents of trafficking?
  4. Would they be willing to make information about trafficking available to their staff and guests?

About 50 of these hotels conducted training sessions, and many more requested supplemental information to assist their efforts. Overall, there was very good response from hotels and coordination with city and state law enforcement.

At Everence, we have also used our role as investors to do this sort of organizing around many other sporting events, such as the World Cup South Africa in 2010, the London Olympics in 2012, and the World Cup Brazil in 2014.

Conflict minerals

Conflict minerals are tin, tantalum, tungsten and gold, mined in the Democratic Republic of Congo. These metals are not exclusively found in the Democratic Republic of Congo, but some of the world’s largest deposits are located there. Conflict minerals get their name because the Democratic Republic of Congo is the center of some of the worst violence in the world. Since the mid-1990s, over five million people have died in conflicts fueled by ethnic tensions, and funded by the trade in conflict minerals. Hundreds of thousands of people are forced to work in the mineral mines, and a large percentage of them are children. A portion of the money we spend on electronics may be funding this violence.

Conflict minerals are used in many industrial and consumer applications. Cell phones, tablets and laptop computers all may contain conflict minerals. For example, a cell phone has hundreds of component parts, and each of these parts has its own story. The phone might be designed in the U.S., Europe or Japan. The raw materials may come from Africa, South America or Australia. The refining of metals and the melting and molding of plastics may be done in Asia. The final assembly might be completed in Asia or North America. All told, there are hundreds or even thousands of workplaces involved in some way in making each cell phone. And most assuredly, modern slavery has touched that phone in some way.

For example, let’s take a look at one component common in the electronics we all use: tin. This conflict mineral story begins in the Democratic Republic of Congo. Militant groups control many mines. In these mines, many children are forced to work as slaves at gunpoint. The tin ore mined by children is transported and sold by the militant groups to trading houses, which in turn sell the ore to export companies. From there, they are sent to a transit country (such as Rwanda, Burundi or Uganda), then off to a refiner on another continent. There, the tin ore from the Democratic Republic of Congo is combined with ore from other places and smelted into useful tin. The tin is alloyed with other metals to make solder, which is then used on circuit boards found in cell phones.

At Everence, we approached the conflict mineral issue by engaging the four largest mobile provides in the United States. While these companies don’t manufacture their phones themselves – other companies do – they provide the design specifications and ultimately tell the manufacturer what to do, so they have the most power in the supply chain and, therefore, the most power to effect change.

We asked the mobile providers to determine if they have exposure to conflict minerals, by deeply analyzing their supply chain. They found this information to be untraceable. Then, we requested their support for the establishment of certified conflict-free mines and smelters. In this way, artisanal miners in the Democratic Republic of Congo can benefit from the minerals trade, but not armed groups.

We also launched a consumer-oriented campaign, which let people use our website to contact their cell provider to request conflict-free phones. This helped demonstrate the level of consumer interest in this issue, and helped us make a more compelling case to the companies. Some have come a long way toward greater transparency, and have supported industry initiatives to develop conflict-free phones.

Child labor in the cocoa industry

About 70 percent of the world’s cocoa supply comes from West Africa – primarily Ghana and the Ivory Coast – where hundreds of thousands of cocoa farms exist. In addition, it is estimated that tens of thousands of children are being used in the worst forms of child labor. These children are often trafficked in from poorer neighboring countries, like Mali and Burkina Faso. They may have been kidnapped or sold by relatives to help make ends meet.

These children caught in the worst forms of child labor are unpaid, don’t attend school, can’t leave the farm, are physically punished, and perform dangerous work such as handling pesticides and herbicides without safety equipment.

To address this issue, Everence pursued dialogue with major chocolate companies. The chocolate companies don’t own the farms themselves – there are several supply chain layers between them. The cocoa beans might travel from the farm to the town co-op, to a regional co-op, to a commodity broker, and then on to the chocolate company. While they don’t own the farms, the chocolate companies are the most influential in the supply chain.

Everence worked with these companies to address the issue of child labor in the cocoa industry in many ways, including:

  • Financial support for government anti-trafficking enforcement,
  • Farmer education on child labor,
  • Poverty reduction programs,
  • Improved agricultural methods to help framers increase yield and income, and
  • Programs that helped set farmers up to become certified growers.

One particular success story is with Hershey. Due, in part, to our years-long dialogue, Hershey committed to sourcing 100 percent certified cocoa for its Bliss line of chocolate, then followed up on that by committing to source 100 percent certified cocoa for all its chocolate by 2020.

Certified cocoa meets comprehensive sustainability standards to protect the environment, employees and communities. It uses independent, third party certification systems to ensure the cocoa is grown sustainably and without the use of forced and child labor.

While some smaller chocolate manufacturers use certified cocoa, the vast majority of chocolate on the market does not meet these standards. In fact, certified cocoa currently accounts for less than 10 percent of the world’s cocoa supply. A commitment to source certified cocoa from a company like Hershey will lead to increased global capacity for certified cocoa.

Labor recruitment fees

Millions of workers worldwide are exploited and enslaved by labor brokers who charge exorbitant recruitment fees, do not provide written contracts or change the contract terms, and impose unreasonable deductions from promised wages.

Imagine that this winter, a job recruiter tells you about a great opportunity for next summer. You’re offered $20 per hour and work for three months, if you sign up to work on a tomato farm across the border in Ontario, Canada. Your travel, room and board will be covered. This is sounding pretty good, so you do some thinking and estimate that you could earn $10,000 over the course of the summer – which would be very helpful toward future college expenses.

After agreeing to a three-month contract, the recruiter tells you that you need to pay a $2,000 fee to get the job. You’re confused and a bit upset, but after the fee, you should still be able to make $8,000. Since you don’t have the money to pay the fee up front, the recruiter says it will be deducted from your wages.

Fast forward to summer, and upon your arrival in Canada, the recruiter takes your passport and other official documents “for safekeeping.” The work on the farm is grueling, and when you get your first paycheck, you notice that your pay is only $8 an hour. Not only that, but deductions have been taken out to pay the loan for your recruitment fee (and at a 100 percent interest rate), as well as your room and board, which you thought were supposed to be free. Your first paycheck is $20 for two weeks of work.

You want to leave, but aren’t granted access to your passport – so you no longer have freedom of movement out of the country. And you hear from your fellow workers that if you try to run away, the Canadian police will apprehend you and send you back to the farm. As time goes on, your work hours increase, and you see additional deductions on your paycheck for various reasons. Instead of making money, you’re losing it and going into debt. You’ve also been informed that your contract is now indefinite – not three months. You’re trapped, and a victim of human trafficking and modern slavery.

This is clearly a fictional scenario used to illustrate the concept. But enslavement to labor recruiters is the reality for millions of workers. Imagine living in Cambodia with a family to support, and going deep into debt to pay the recruitment fee to get a job on a fishing boat or in a factory in Thailand. It’s not a hopeful situation for too many people.

As investors, Everence is just beginning to address this issue with companies through an initiative called the No Fees Project. It begins with raising corporate awareness. Many companies are ignorant of labor recruitment fees. These practices might not happen directly in their own operations, but in their supply chains. What’s out of sight is out of mind. Once awareness is raised, we urge companies to adopt policies to eliminate these unjust practices. We ask that:

  • The company and its supplies ensure that no fees are charged to job seekers and workers for services related to recruitment for job placement.
  • Workers receive a written contract in their language, stating in a truthful, clear manner their rights and responsibilities.
  • Employers not subject workers to the withholding of wages, identification cards, passports or other travel documents, or other personal belongings.

At Everence, we hope to make substantial progress in the coming months and years related to this work.

Human trafficking and modern slavery are all around us. Sex trafficking exists virtually everywhere and mars our favorite sporting events. Most of the products we buy are made possible through a complex global supply chain, and are tainted in one way or another through some kind of forced labor.

Ending slavery can feel like an impossible task. It may be tempting to try to shut it out of our minds, ignore it, not dwell on it. But we need all hands on deck to make timely progress. Addressing modern slavery begins with awareness. You can take action. You have – or will have – a choice of where you place your investments. There are a number of socially responsible investment firms in the market that provide a social return, in addition to a financial one. You can buy products that aren’t made with forced labor or, if unavailable, at least let companies know that you want to purchase such products. You might decide to work on fighting modern slavery as a career.

If we become socially aware and concerned people, consumers and investors, we really do have the power to change things. And when progress is made, it can be pretty sweet. Try some Bliss chocolate, and you can feel good that the cocoa was not grown or harvested using forced child labor.

This speech was given by Chris Meyer at the Rotary International District 6540 World Affairs Conference, at Goshen (Indiana) College on Nov. 13, 2014. Meyer is the Stewardship Investing Specialist at Everence and a 2005 Goshen College graduate.