2020 Trafficking in Persons Report

The U.S. State Department today (June 25th) released the latest edition of the Trafficking in Persons Report (TIP Report). (We wrote about the 2019 edition here and 2018 here.)

We are particularly pleased that the 2020 edition recognizes the efforts of ICCR:

The Interfaith Center on Corporate Responsibility (ICCR)
based in the United States uses a multi-faith approach from a
different angle. A coalition of more than 300 global institutional
investors with more than $500 billion in managed assets, it
uses the power of shareholder advocacy to engage companies
to identify, mitigate, and address social and environmental
risks associated with corporate operations, including human
trafficking. ICCR members call on companies they hold to
adopt policies banning human trafficking as a key part of
their core business polices, and to train their personnel and
suppliers to safeguard against these risks throughout their
supply chains. ICCR’s Statement of Principles & Recommended
Practices for Confronting Human Trafficking & Modern Slavery
provides guidance to companies to protect their supply chains
from sex and labor trafficking.

2020 Trafficking in Persons Report (p. 25)

SGI members prioritize this work, and this recognition from the State Department’s Office to Monitor and Combat Trafficking in Persons confirms the efficacy of our efforts with corporations.

David Schilling, ICCR’s senior program director for human rights, said, “Whether it is workers trafficked into forced labor in a factory in Bangladesh or on a plantation in Indonesia; whether it is women trafficked for sex in the US or children exploited on-line, the Interfaith Center on Corporate Responsibility’s members utilize their role as shareholders in a range of companies to promote policies and practices to end modern slavery. The framework we use is the UN Guiding Principles on Business and Human Rights which defines what it means for a company to respect human rights, especially for persons made vulnerable by economic systems that marginalize and exploit.”

Pat Zerega, of Mercy Investment Services and chair of the Human Trafficking- Worker Rights leadership team, said:

For several decades, ICCR has been a leader on supply chain issues, and advocacy work on trafficking brought a new aspect to corporate dialogues. Mercy Investment Services’ involvement since the start of this effort includes working domestically with the travel, transportation and tourism industries around corporations training staff to spot trafficking. Resources such as the Celebration without Exploitation toolkit provided the groundwork for investors.

ICCR expanded its focus to labor trafficking, including the development of a Principles for Confronting Human Trafficking and investor tools for issues of ethical recruitment and, more recently, the Investor Alliance for Human Rights resources. These tools enhance the ability of all shareholders to understand the issues and address corporations.

Ranking governments based on their perceived efforts to acknowledge and combat human trafficking, each year’s TIP report includes tiers of troubled countries. The report assigns countries into three tiers. Tier 1 consists of “countries whose governments fully meet the Trafficking Victims Protection Act’s (TVPA) minimum standards.” Below Tier 1, Tier 2 contains countries that may not meet the TPVA standards, “but are making significant efforts to bring themselves into compliance with those standards.” A “Tier 2 Watch List” consists of countries that are similar to Tier 2, but have other issues, such as an increasing number of trafficking cases or a lack of improvement on previously-implemented anti-trafficking efforts. Tier 3 countries are those “whose governments do not fully meet the minimum standards and are not making significant efforts to do so.”

The 2020 report underscores longstanding concern about China, especially in the Xinjiang Uighur Autonomous Region. The report also identified U.S. agricultural workers as particularly vulnerable. As well, the report acknowledges that its compilation was hindered by COVID-19, even as COVID-19 makes more people vulnerable to trafficking. A recent webinar put it well: “In many places, human traffickers, sadly, are the first responders to the pandemic.” While grateful for the recognition from the State Department, no doubt, we ICCR members must renew and redouble our efforts.

Webinar: Human Rights Due Diligence

On Friday, April 17th, SGI’s quarterly webinar addressed due diligence in human rights required of companies. The traditional audit and codes of conduct, while necessary, are no longer sufficient. We were fortunate that ICCR’s Anita Dorett, Camille Le Pors, the lead for the Corporate Human Rights Benchmark, and Patricia Jurewicz of the Responsible Sourcing Network, joined us for this webinar. Again, we are very grateful for the presence of Anita, Camille, and Patricia  in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.

Don’t miss these two webinars!

Each year, ICCR and Ceres offer webinars that highlight resolutions filed by members. These webinars provide excellent guidance to institutional investors and individual investors concerning shareholder proposals in the coming proxy season. We cannot recommend highly enough your participation in both webinars.

  • ICCR’s 2020 Proxy Resolutions & Voting Guide Overview. ICCR member resolutions reflect some of the most hotly-debated themes in the national discourse, from the failure of energy companies to meaningfully respond to the climate crisis threatening our planet, to the role of corporations in perpetuating civil and human rights abuses through technology products, and the unrelenting rise in the cost of U.S. healthcare. Register here. (Thu, Feb 27, 10:30 a.m. – 11:30 a.m. Central) (UPDATE: 2020 Proxy Guide is here. Slides and recording are here. )
  • Business Case to Vote For 2020 Climate-Related Shareholder Proposals. An annual webinar presenting key climate-related shareholder proposals for the 2020 proxy season, and reasons why you should vote for them. Hosted by the Ceres Investor Network on Climate Risk and Sustainability. Register here. (Thu, Mar 12, 11:00 a.m. – 12:30 p.m. Central) 

Even if you cannot attend live, registration means that you will be sent a link to the slides and recording of the webinar. In other words, even in the event that you have a schedule conflict, it can be valuable to register and watch the webinar at another time. Please, register for these webinars!

The Ag Sector: The Nexus of Migration and Human Trafficking

Agricultural workers are some of the most vulnerable workers on the planet. In the U.S., we carve out laws that treat agricultural workers differently from all other U.S. workers. Further, it is a sector populated largely with foreign-born workers. All too often, these circumstances generate situations of horrific human exploitation.

On Friday, February 14, we were joined in our quarterly webinar by a leader in efforts to uncover human trafficking and modern slavery: Laura Germino of the Coalition of Immokalee Workers (CIW). Laura, a founding member of CIW, helped to establish the CIW’s Anti-Slavery Campaign. In 2010, she was honored by the U.S. State Department as a TIP (Trafficking in Persons) Hero. In 2015, the anti-slavery campaign received the Presidential Award for Extraordinary Efforts in Combating Modern Day Slavery. CIW has pioneered a worker-based social responsibility model, the Fair Food Program, to include workers in addressing exploitation and abuse and to eradicate modern slavery in Florida’s tomato fields. We also discussed how these lessons can be applied to our corporate engagements.

We highly recommend sharing this video with your investment committee and other essential people involved in your investment strategy.

We are very grateful for Laura’s presence in this webinar, for her long-standing commitment to eradicate modern slavery in the ag sector, and her generosity in sharing her wisdom and experience with us.

As always, we welcome your feedback via a confidential evaluation found here. Slides are available here

Diversity in the Board Room

Goldman Sachs CEO David Solomon garnered media coverage from CNBC and the New York Times for his new plan that requires I.P.O. (initial public offering) clients to have at least one “diverse” board member, if they wish to have his firm’s services. “We’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women,” Mr. Solomon told CNBC at the World Economic Forum in Davos.

I guess that my first response is it’s about time. Diverse boards are good for business. While hardly the first, Wharton told us that in 2017, Forbes drew the same conclusion in January 2018, and Harvard Business Review in March 2019. The Wall Street Journal article last week asked the question “why, when women earn the majority of college degrees and make up roughly half the workforce, do so few occupy the chief executive job?” Their analysis shows that the number of women CEOs of the country’s top 3,000 companies has more than doubled over the past decade, but it’s still under 6%.

SGI members have participated in the Midwest Diversity Initiative (MIDI), a coalition of institutional investors dedicated to increasing racial, ethnic, and gender diversity on corporate boards of companies headquartered in Midwestern states. The Coalition helps companies to:

  • Adopt a policy for the search and inclusion of minority and female board candidates
  • Require minority and female candidates to interview for every open board seat
  • Instruct third party search firms to include such candidates in the initial pool
  • Expand the candidate pool to include candidates from non-traditional sources

These efforts have seen some success: 24 Midwest companies engaged by MIDI have adopted the Rooney Rule, and 10 companies have appointed 12 diverse board members (see the press release). Nationally, we have a long way to go. On the Harvard Law School Forum on Corporate Governance website, Deloitte published a report that, as of 2018, just 34% of all Fortune 500 board seats are held by women and minorities.

On a related front, Melinda Gates found that in 2017 women founders received only 2% of venture capital funding. For lack female founders, the results are even more grim, only .0006% of venture capital has gone to them since 2009. In response, Gates invested in venture capital for women.

Women and people of color have a lot to contribute to the management and boards of successful companies. Personally, I’m glad to see that big business is slowly beginning to recognize it.

Frank Sherman, new chair of ICCR Board

We just received word from Josh Zinner, executive director of the Interfaith Center on Corporate Responsibility that yesterday the Governing Board of ICCR elected its new Executive Committee. Our own Frank Sherman was elected as the new chair of ICCR. The new officers for ICCR are:

To learn more about ICCR’s Governing Board, click here

The outgoing officers are Fr. Seamus Finn, O.M.I. (who was the keynote for our annual event), Kathryn McCloskey (United Church Funds), Tim Brennan (Unitarian Universalist Association), and Anita Green (formerly of Wespath, who also assisted us in webinars).

Dan Tretow, chair of the SGI board, said, “I congratulate Frank on his election as Chair of the ICCR Board of Directors.  His commitment to ESG issues and dedication to social justice is admirable.  We value his leadership at SGI and know he will be appreciated as Chair of the Board at ICCR.”

We at SGI are grateful for Frank’s generous service to our organization and to ICCR.

Climate Refugees: Rising Waters and Rising Concern

A new report from the Othering & Belonging Institute at the University of California – Berkeley sheds light on an emerging problem. The new report, “Climate Refugees: The Climate Crisis and Rights Denied,” by Elsadig Elsheikh and Hossein Ayazi, makes a compelling case to the international community for the adoption of a legally-binding convention that protects climate refugees.

In a chapter that I wrote concerning resilience and refugees, I raised similar concerns as those which underlie this report. When referring to those born in another land, definitions and distinctions abound, be they legal definitions, social science terminology, or one’s self-description. At home and abroad, the political and legal framework continues to evolve. Attempts to reform U.S. immigration processes have occasioned increasingly sharp political conflict over the past 20 years. Some politicians capitalize on this polarization. Domestically, racial tension and anti-immigrant sentiment have both grown. Internationally, the member states of the UN finalized a Global Compact on Refugees in 2018, augmenting the 1951 Refugee Convention. None the less, legal vacuums exist. The international standards do not provide for “climate refugees.” While the July 2018 Global Compact for Safe, Orderly and Regular Migration recognized climate change as a growing factor, the December 2018 Global Compact on Refugees eschewed the subject, using the term “climate” only twice, and, in one instance, in the context of a “business climate.” The World Bank estimates there will be as many as 143 million climate refugees, with a minimum of 92 million, by 2050. It is a growing crisis for which the world remains woefully unprepared.

This new report from UC – Berkeley profiles 10 countries that are among those most vulnerable under the climate crisis. For instance, Bangladesh, projected to lose 17 percent of its total land to sea level rise by 2050, would see displaced an estimated 20 million people, and the Maldives could lose all 1,200 of its islands to sea level rise. The release date of the report coincided with the U.N.’s annual Human Rights Day observance on December 10th.

The report also details specific vulnerabilities suffered by these refugees in U.S. and international law. The report argues that a new understanding of “persecution,” a longstanding requirement for receiving refugee status, could be broadened to include “petro-persecution.” In that event, a new agreement for climate refugees is made necessary, and such a framework should be undertaken as a revision to the 1951 Refugee Convention, or the establishment of a wholly new international convention.

A Step Towards Tax Transparency

News reports occasionally detail how large corporations, like Amazon and FedEx, manage to avoid paying any federal taxes. Adding to my personal dismay, the Institute on Taxation and Economic Policy (ITEP) report that, in fact, 60 Fortune 500 companies avoided all federal income tax in 2018, including: Chevron, Delta Airlines, Eli Lilly, General Motors, Gannett, Goodyear Tire and Rubber, Halliburton, IBM, Jetblue Airways, Netflix, Principal Financial, Salesforce.com, US Steel, and Whirlpool. The full list of those that did not pay a dime is available here. We also know of companies that relocate to tax havens or companies that undergo a “corporate inversion” so that the foreign subsidiary becomes the parent company. At the end of the day, one asks: how do we better understand and compare the tax practices of different companies?

At the conclusion of the ICCR Fall conference (November 1), I went to Bloomberg for an event on Tax Transparency organized by AFSCME, the Fact Coalition, Global Financial Integrity, Oxfam America, and the Patriotic Millionaires. Yesterday (December 5), these same organizations announced the launch of a new global standard for tax transparency. The new global standard includes:

  • Reporting within the context of corporate sustainability;
  • Disclosures on tax strategy, governance, and risk management;
  • Public country-by-country reporting of business activities, revenues, profit, and tax;
  • And disclosure of the reasons for difference between corporate income tax accrued and the tax due.

A few of the remarks from the launch event have been shared with me, and I pass them on to you:

Why is tax transparency important?

Like most voluntary disclosures, companies that are doing the right thing disclose because the market rewards this behavior. Companies that are not doing the right thing are less likely to disclose, reflecting the potential for a financial risk and/or reputational risk.  Efforts like the new standard issued by the Global Reporting Initiative aim to allow for apples to apples comparisons.

A well-grounded tax strategy must be sustainable. These tax disclosures are valuable for investors because, for instance, a company with a very low tax rate raises questions about the sustainability of the rate and, consequently, a risk to earnings down the road. For investors, knowing the tax rate paid by a company discloses something about the risk tolerance of management and board. Bad practices have a habit of catching up with companies. A company may be exposed to penalties, fines, and clawbacks. The leaking of the Panama Papers resulted in recovery of $1.2 billion in taxes and penalties to date.

More importantly, taxes finance important undertakings like roads, schools, and government, things that companies and investors rely upon. A bedrock principle is that one should pay taxes where value is created. The Tax Standard clarifies how much companies contribute in taxes to the countries where they operate and, thereby, allows us to better see the impact of tax avoidance on the ability of a government to fund critical services and to encourage sustainable development. As the late Oliver Wendell Holmes, Jr., U.S. Supreme Court Justice, put it: “Taxes are what we pay for civilized society.”

We at SGI believe that this new standard is an important step forward and encourage companies to disclose according to this standard.

For more information:

Highest Youth Tobacco Use since 2000, says CDC

This morning, the Center for Disease Control released its latest National Youth Tobacco Survey (NYTS), and the results can only be described as alarming.

The report concludes:

Findings from NYTS indicate that in 2019, approximately half of high school students (53.3%) and one in four middle school students (24.3%) had ever used a tobacco product. Furthermore, approximately three in 10 high school students (31.2%) and approximately one in eight middle school students (12.5%) had used a tobacco product during the past 30 days

National Youth Tobacco Survey, p. 10

According to reporting by Axios, this is the highest youth tobacco use report since 2000.

Alongside this news, please, remember that the NYTS follows Wednesday’s update (Dec. 4) that identifies 2,291 cases of hospitalized e-cigarette, or vaping, product use associated lung injury (EVALI) reported to CDC from all 50 states, the District of Columbia, and 2 U.S. territories (Puerto Rico and U.S. Virgin Islands). Further, another forty-eight deaths have been confirmed in 25 states and the District of Columbia.

Each day that administration debates its course forward amid concerns for public health and election and jobs impact, more young people risk getting hooked on tobacco products. Both of these CDC reports, the weekly update on EVALI and the NYTS, underscore the critical need for public health policy and action at local, state, and federal levels.

Shareholders, too have a critical role to play. Recently, we have written about SGI’s commitment to continue this work that originated decades ago with Fr. Mike Crosby, O.F.M., Cap. For instance, today is the filing deadline for two resolutions at Altria Group, Inc. One resolution concerns greater transparency regarding Altria’s lobbying efforts, and the other calls upon Altria to review corporate adherence to Altria’s principles and policies aimed at discouraging the use of their nicotine delivery products to young people and to report to shareholders. Both of these resolutions deserve broad support from shareholders.

Raise the Alarm for Xinjiang

Over the last few years, casual readers of newspapers likely had vague awareness that China had imprisoned more than a million ethnic Uighur Muslims and other minorities in camps in the country’s far-west Xinjiang province. While the Chinese government claims that the prisoners are volunteers who receive job training, human rights organizations allege that the ethnic minorities endure mass incarceration in “re-education camps” designed to indoctrinate those ethnic minorities.

In the last six months, a barrage of new events and evidence clarified the situation with striking details. In June, the Worker Rights Consortium (WRC) published a detailed, 34-page report on a factory owned by the Hetian Taida Apparel Company that supplied university logo clothing to Badger Sportswear. The WRC found:

. . . the investigation Badger commissioned of Hetian Taida, in response to allegations of forced labor, was fatally compromised by the company’s rush to exonerate itself and its supplier; the company announced findings, supposedly based on worker interviews, before [emphasis added] interviewing any workers. [p. 2]

The U.S. State Department placed China on Tier Three (the lowest category) in its annual Trafficking in Persons Report, dedicating considerable attention to Xinjiang. In early October, Time magazine reported that the U.S. Blocks Imports From 5 Countries Over Allegations of Forced Labor, when U.S. Customs and Border Protection (CBP) intervened on a Costco shipment from Hetian Taida. Days later, the WRC issued an Update on Forced Labor and Hetian Taida Apparel. Badger Sportswear only cut ties after CBP intervened on the shipment for Costco.  The American Apparel and Footwear Association, a trade group for brands and retailers, issued a disappointing and underwhelming statement in response to this report that they were “deeply concerned” and called on the Chinese government to act. Also, Georgetown University’s Center for Strategic and International Studies issued a critical report entitled Connecting the Dots in Xinjiang: Forced Labor, Forced Assimilation, and Western Supply Chains offering specific guidance for companies and investors. A rare event these days, a bipartisan letter came from members of both the U.S. House and Senate calling on the CBP to investigate and block goods coming from the Xinjiang province.  

Last week, classified documents from the Chinese government were leaked by the International Consortium of Investigative Journalists, providing policies and procedures inside the re-education camps.   The camps reportedly have watch towers, double-locked doors, and video surveillance “to prevent escapes.” The Chinese government apparently uses the camps to train its artificial intelligence programs for use in mass surveillance. The documents demonstrate that forced labor is an integral part of the Chinese government’s strategy for ideological conversion through industrialization. This is the largest incarceration of people based on an ethnic or religious identity since 1945.

A Toxic Combination for Apparel Companies and Consumers

China is the source of about 40% of all clothing sold in the U.S. The Xinjiang province grows 80% of China’s cotton, and, increasingly, the cotton is ginned there. Companies are erecting new factories in Xinjiang for additional steps in the garment-making process. Further, fabric from China is exported to Bangladesh, Cambodia, and Vietnam—all significant sources of apparel sold in the U.S

Corporations have a responsibility to respect human rights within company-owned operations and through business relationships. This obligation is delineated in the United Nations Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. Every brand and retailer that sources from China is exposed to the risks for forced labor in their supply chains: the harvesting and ginning of cotton, the spinning of the yarn, and the business relationships with corporations collaborating with the Chinese government to build and staff these new factories. The issue is not “simply” a violation of a retailer’s code of conduct or a reputational risk; companies risk a violation of U.S. law concerning importation of garments made with forced labor.

As public scrutiny of these issues increases, it will become increasingly clear that companies’ due diligence mechanisms (audits and codes of conduct) are insufficient. We at SGI would argue that, even in the best of circumstances, audits and codes of conduct, while necessary, are insufficient to protect human rights. In the circumstance of the Xinjiang province, such efforts are rendered ineffective.

We urge companies to take this risk seriously. It is not enough to lay low and wait; companies must engage proactively. We also urge the U.S. government to take meaningful action against the Chinese government in this matter. Even our faith communities have a responsibility to act. Events in support of “religious freedom” ring hollow if it does not also include action to respect the religious freedom of ethnic minorities in Xinjiang. Finally, as consumers, we are called to solidarity with those who endure forced labor. NPR’s Scott Simon put it well: “What does it have to do with us? Look down at our shoes, our phones and our toys.”

To learn more: