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IMPROVED MARKET OPPORTUNITIES FOR BUSINESS IN VIET NAM: SUSTAINABLE SOURCING AND ETHICAL LABOUR PRACTICES IN SUPPLY CHAINS

HO CHI MINH CITY, 20 MARCH 2018

WORKSHOP REPORT

SUPPORTED BY

The panel and workshop would not have been possible without the hard work and support of the co-host, the British Embassy Hanoi, as well of key partners from the Swedish Embassy, the Vietnam Chamber of Commerce and Industry (VCCI) and the HCMC Department of Labour, Invalids and Social Affairs.

I would like to thank all the panellists and speakers who gave of their time to participate in the event, namely: H.E. Giles Lever, Victoria Rhodin Sandström, Tran Ngoc Liem, Ian Pascoe, Tim Galvin, George Williams, Alexander Christopher Falter, Bill Watson, Kanwarpreet Singh, Florian Beranek and Mimi Vu. Sincere thanks are due to Christina Ameln who moderated all the panels.

Furthermore, the support of the British Business Group Vietnam (BBGV) and the European Chamber of Commerce in Vietnam (EuroCham Vietnam) who contributed to the success of the event:

Finally, acknowledgement is due to the Regional Development Cooperation Section at the Embassy of Sweden in Thailand and the IOM Development Fund who support the regional CREST programme.

David Knight, IOM Chief of Mission Viet Nam and Regional Coordinator for Viet Nam, Cambodia and Lao PDR

TABLE OF CONTENTS ACKNOWLEDGEMENTS

ACKNOWLEDGEMENTS ........................................................................................................... iiBACKGROUND ...............................................................................................................................1INTRODUCTION TO THE WORKSHOP AND PANEL ...........................................2

Improved Market Opportunities for Business in Viet Nam: Sustainable Sourcing and Ethical Labour Practices in Supply Chains .....................2

OPENING SESSION .......................................................................................................................3KEY NOTE SPEECH .......................................................................................................................5

Social Sustainability and Responsible Labour as Key Factors for Increasing market access opportunities .......................................................................5

Panel Discussion 1: Understanding the Modern Slavery Act and the Importance of Private Sector Partnerships .......................................................................6

Panel Discussion 2: Company testimonials - Challenges and Opportunities in Working Towards Attaining Ethical Labour Practices ..............8

WORKSHOP ................................................................................................................................. 11

Modern Slavery Legislation and Global Partnerships: Why is there a Modern Slavery Act, How to Work With it and Move Beyond Compliance . 11

CONCLUSION ............................................................................................................................ 14RECOMMENDATIONS ON THE WAY FORWARD ................................................. 15

Agenda ............................................................................................................................................. 19

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Modern slavery remains a major challenge for businesses around the world and across multiple sectors. Large global industries source products and services from Asia that often employ international and internal migrant workers. Critically, over 60 per cent of the world’s 40 million victims of modern slavery are found in the Asia-Pacific region (2017), the highest prevalence of forced labour worldwide. Globally, 16 million people are victims of forced labour in the private sector (2017). Debt bondage affects over 70 per cent for adults who are forced to work in agriculture, domestic work, or manufacturing (2017). Many of these victims are migrant workers who are employed in companies’ global supply chains. Companies can inadvertently be exposed to risks through reliance on labour intensive business models and limited transparency of the recruitment and migration processes and the debt incurred by migrant workers to secure employment. Lack of awareness on labour standards, ethical recruitment practices, and supplier capacity of implementing appropriate corporate policies and management systems can further exacerbate workers’ vulnerability.

Recognizing the potential of the private sector as a driver of change, IOM, the UN Migration Agency, has increasingly engaged with businesses that employ migrant workers within their supply chains.

IOM’s Corporate Responsibility in Eliminating Slavery and Trafficking (CREST) is a regional initiative that aims to realize the potential of the private sector to uphold human and labour rights of migrant workers in their operations and supply chains.

BACKGROUND

The Sustainable Development Goals (SDGs) recognise the private sector as a critical actor in contributing to global social and economic upgrading. Businesses can exercise significant positive influence in addressing labour exploitation within their supply chains and are increasingly recognized as having social and legal obligations to do so.

Global due diligence trends and reporting requirements under the UK Modern Slavery Act, the California Transparency in Supply Chains Act, the French Corporate Duty of Vigilance Law and the Dutch Child Labour Due Diligence Law, with further similar legislation planned to be introduced in countries such as Australia, have spurred companies to identify key geographic and sectoral risk factors, as well as understand how migration-related factors can also increase risk.

The Vietnamese economy is one of the fastest growing economies in the region. Growth has been driven by investment in transport links and the attraction of foreign direct investment, with a focus on manufacturing. However, the expansion of transnational production networks of multinational companies has also increased the competition for Vietnamese companies looking to enter global supply chains. The new regulatory and reporting environment, both mandatory and voluntary, and increased pressure from consumers and investors, as well as procurement and contracting requirements of trade and investment agreements such as European Union Free Trade Agreements (EUFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) offers significant business opportunities for Vietnamese companies to be proactive regarding business ethics and social responsibility.

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The event aimed to:

• Provide a platform for forging a better understanding on the modern slavery landscape and global due diligence trends and reporting requirements, as well as procurement and contracting requirements of trade agreements

• Provide an opportunity to discuss socially responsible business practices as a key driver for market opportunities in Viet Nam and beyond.

• Highlight best practices and opportunities in working towards attaining ethical labour practices by showcasing different corporate sustainability approaches

• Spotlight the importance of partnerships and practical solutions for social compliance and best practice

This workshop report captures the main points discussions and key themes during the event including best practice and successful approaches, and provides recommendations and resources for the way forward.

IMPROVED MARKET OPPORTUNITIES FOR BUSINESS IN VIET NAM: SUSTAINABLE SOURCING AND ETHICAL LABOUR PRACTICES IN SUPPLY CHAINS

The British Embassy jointly with the IOM, with support of the Swedish Embassy and the Vietnam Chamber of Commerce and Industry (VCCI), co-organized a one-day panel and workshop on ‘Improved Market Opportunities for Business in Viet Nam: Sustainable Sourcing and Ethical Labour Practices’ on 20 March 2018 as part of the regional CREST programme funded by the Regional Development Cooperation Section at the Embassy of Sweden in Thailand.

The event brought together over 60 representatives from members of the business community, government officials and NGOs, including Coats, ECCO, IKEA, and Hogan Lovells, the Vietnam Textile and Apparel Association, LIN Center for Community Development, the Vietnam Chamber of Commerce and Industry, the British Business Group Vietnam, Pacific Links, UNIDO, ILO Better Work Viet Nam, as well as numerous local businesses from the Dong Nai and Binh Duong industrial zones to discuss the relevance of international supply chain regulations for business in Viet Nam and present good practices in the regional and national context.

INTRODUCTION TO THE WORKSHOP AND PANEL

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OPENING SESSION

• H.E. Giles Lever

British Ambassador

Embassy of the United Kingdom to Viet Nam

• Victoria Rhodin Sandström

First Secretary, Political Affairs,

Embassy of Sweden to Viet Nam

• Tran Ngoc Liem

Deputy General Director VCCI-HCM

• David Knight

Chief of Mission Viet Nam and Regional Coordinator for Viet Nam, Cambodia and Lao PDR

International Organization of Migration (IOM)

MODERN SLAVERY LEGISLATION AS AN IMPORTANT ELEMENT IN THE FIGHT AGAINST HUMAN TRAFFICKING AND FORCED LABOUR IN SUPPLY CHAINS

Giles Lever, British Ambassador in Viet Nam opened the event by outlining the global prevalence of modern slavery, and the rise of a new regulatory environment, with and additional obligations for companies to show that the goods and services are not tainted by modern slavery. With the Modern Slavery Act, the UK is at the forefront of tackling modern slavery around the world

As Viet Nam becomes more integrated into global supply chains, and more special economic zones (SEZs) are developed, recruitment and employment practices which respect and protect human dignity are no longer an optional exercise but a critical component for any brand that aspires to global integration. The British Embassy works closely with a wide range of partners to tackle human trafficking, and is working increasingly closely with the Vietnamese government and the business community to reduce the potential for exploitation that can take place in Viet Nam. Ultimately, businesses which comply will benefit from a competitive advantage, particularly in light of the rise of the ethical consumer, as well as the CPTPP and other free trade agreements.

AN INTEGRATED APPROACH TO HUMAN RIGHTS, GENDER EQUALITY AND CLIMATE CHANGE IN THE ASIA AND THE PACIFIC

Victoria Rhodin Sandström, First Secretary Political Affairs at the Embassy of Sweden to Viet Nam, touched upon the necessity of addressing human rights, gender equality and climate change in the Asia-Pacific region in an integrated way. Whereas rapid growth in the region has had a positive impact, she pointed to the necessity to address

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adverse impacts on labour rights and the environment. For instance, migration often leads to positive outcomes for migrant workers, but many of these workers are subject to unethical recruitment and labour practices. Collaboration and engagement with the private sector will be key to find sustainable solutions with a clear focus on human rights and gender equality. She pointed to the fact that responsible and sustainable business is no longer to be considered coming at an incremental cost, but proactive policies will substantially contribute to growth and competitive advantage.

CREATING A SUSTAINABLE ECONOMIC MODEL THROUGH ETHICAL RECRUITMENT AND LABOUR PRACTICES

Tran Ngoc Liem, Deputy General Director VCCI-HCM, stressed the importance of sustainable business in accordance with international labour standards for the Vietnamese business community and foreign investment. For a country that has experienced rapid growth and an economy increasingly integrated into global trade, the main driver for economic growth being export, integration into global supply chains is of foremost importance for Viet Nam. He pointed to Viet Nam’s ratification of ILO’s Forced Labour Convention (C29) and Viet Nam’s proactive implementation of the 2030 agenda for SDGs. The introduction of best practices for businesses in Viet Nam and the building of strong relations with all actors in the supply chain will be critical determinants for successful integration into GSCs, notably given the importance of the European and United States market for Vietnamese exports.

THE IMPORTANCE OF PARTNERSHIPS FOR ENDING SLAVERY AND TRAFFICKING

David Knight, IOM Chief of Mission Viet Nam and Regional Coordinator for Viet Nam, Cambodia and Lao PDR, pointed to the importance of taking a closer look at how companies can respond.

While IOM as an intergovernmental organization has worked predominantly with governments to combat trafficking in persons, IOM increasingly engages with business to

sustainably and effectively address modern slavery. Lead firms are driven by the emerging legislation, and a greater awareness of modern slavery and good labour and recruitment practices are requirements for most tier one suppliers. In engaging with businesses, IOM recognizes that many partners are seeking to address risks but have limited capacity, given that prevention requires a better understanding of workers’ circumstances and risks of trafficking, which often emanate from vulnerabilities and factors outside of the workplace, starting at the recruitment stage. Migrant workers moving to urban centres within Viet Nam or across borders for work are opportunity seekers with specific vulnerabilities and need additional attention and action from the business community.

As labour mobility continues to grow, IOM seeks to support business in their efforts to ensure ethical recruitment and equal treatment of migrant workers. When acting responsibly, business is a strong partner to end and remedy situations of modern slavery, but more importantly prevent it in the first place. Partnerships for capacity building, practical tools and building transparency in the supply chain are crucial to address those risks, and take advantage of the business opportunities created through regulatory and consumer pressure. IOM is part of a growing alliance of like-minded actors seeking to promote the understanding that doing good for workers and their families is also good for business.

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SOCIAL SUSTAINABILITY AND RESPONSIBLE LABOUR AS KEY FACTORS FOR INCREASING MARKET ACCESS OPPORTUNITIES

Ian Pascoe, Managing Partner, Grant Thornton (Thailand), gave a key note speech on social sustainability and responsible labour practices as key factors for increasing market opportunities. Risks of unethical sourcing and recruitment are manifold, and relate to legal risks, company reputation, trade-related risks, threats to finance and investment as well as sustainability. He highlighted the following risks:

• Legal risks: The complexity arising from legal requirements through the case of the lawsuit against Thai Union, a global producer of seafood-based food products, which only sources around 3 per cent of its supplies in Thailand, while the company sources significant volume from Viet Nam. Thai Union Group and its United States subsidiaries are currently facing a USD 2 billion lawsuit in California, as they are accused of selling products to consumers from a supply chain that contains forced labour.

• Reputation risks: Branding is one of the most powerful marketing aspects for companies, and reputational damage can lead to stock price drops.

• Trade risks: Given the numerous laws and legislation that prohibit engaging in trade unless companies can demonstrate compliance, unethical practices can pose a risk to trade.

• Access to finance: Unethical sourcing practices also threaten access to finance and investment. Access to finance is critically important for companies and due diligence

KEY NOTE SPEECH

is carried out to ensure that the investment will not negatively affect the investors.

• Productivity challenges: Labour shortages as well as skill shortages and mismatches have created fierce competition for workers and talent. A content and engaged workforce is a crucial element for growth, which is driven by increasing the workforce or through productivity improvements.

Given the importance of labour migration, Grant Thornton entered into memorandum of understanding with IOM to leverage their skillsets in helping businesses harness the positive impact of conforming to internationally recognised standards on migrant labour and ensuring that no worker has to pay for securing employment and ultimately enters debt-bondage. Under the Grant Thornton-IOM partnership, both organizations assist companies in establishing the foundation for integrity practices against slavery and trafficking, assessing risk and satisfying stakeholder expectations. Ian Pascoe highlighted that the growing regulatory environment should be an opportunity. Proactive Vietnamese companies who put the necessary policies and processes in place will increase their market opportunities.

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PANEL DISCUSSION 1: UNDERSTANDING THE MODERN SLAVERY ACT AND THE IMPORTANCE OF PRIVATE SECTOR PARTNERSHIPS

• George Williams

Associate, Hogan Lovells, Ho Chi Minh City Office

• Tim Galvin

Migration & Immigration Liaison Manager, British Embassy, Hanoi

• Maximilian Pottler

CREST Project Manager, IOM

THE UK MODERN SLAVERY ACT: LEGAL IMPLICATIONS FOR GLOBAL BUSINESS

George Williams, Associate at the international law firm Hogan Lovells, provided an overview of the UK’s Modern Slavery Act. The purpose of the Modern Slavery Act 2015 is to ensure that supply chains for large businesses are slavery free and covers "slavery and human trafficking", defined collectively as 'slavery, servitude and forced or compulsory labour' and 'human trafficking'. The Modern Slavery Act applies to commercial organizations that a) carry on a business or part of a business in the UK, and b) have an annual turnover of at least £36 million, and a slavery and human trafficking statement must be prepared for each financial year that takes into account the turnover of subsidiaries not just the company’s turnover in the UK. Each statement must be approved by the board of directors of the organization and published on the website or made available on request if the company has no website. Therefore, it is a wide piece of legislation even if there is only tangential relationship with the UK. 1

1 Companies can refer to guidance issued in October 2015 by the UK Home Office that clarifies, among other things, the coverage of the Modern Slavery Act's transparency provisions to assist companies with tackling modern-day slavery and human trafficking in their supply chains.

Organizational structure, business and supply chains

Due diligence processes undertaken

Internal policies relating to slavery and human trafficking

Training available to staff

The effectiveness of measures taken to prevent slavery and human trafficking

Particular areas of risk and the steps taken to minimise this

Fig 1. Information that could be included in an annual statement

Companies are afforded flexibility by the Modern Slavery Act with regard to the format and exact content of the statement, but the MSA does outline the type of information that might be included. The statement should set out accurately and in sufficient detail the steps that have been taken to ensure modern day slavery does not exist in the business or supply chains. According to section 54 (5), an organization’s slavery and human trafficking statement may include information about:

Pressures will increasingly be exerted by Vietnamese customers, which will be rolling out their due diligence processes. Consequently, companies will be working very closely with Vietnamese suppliers that they see as having rigorous supply chain and due diligence processes, which ensure compliance with the reporting requirements and prevention of reputational risks.

TRADE, EMERGING LEGISLATION AND THE REGULATORY ENVIRONMENT

Tim Galvin, Migration & Immigration Liaison Manager, British Embassy, Hanoi pointed to the fact that slavery is anything but vestiges of the past. Modern slavery is a lucrative business: it generates around US 150 billion per year. It is second only to drug trafficking in illegal trades.

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Supply chain legislation, such as the Modern Slavery Act, the California Transparency in Supply Chains Act of 2010 and the establishment of an Australian Modern Slavery Act, are a game-changer in fostering greater transparency.

The Modern Slavery Act focuses on victim protection, carries life-sentences for convicted traffickers, targets offenders by prevention and risk orders to restrict the movements of potential perpetrators, gives UK Courts more powers, and established the role of the Independent Anti-Slavery Commissioner.

Importantly, by requiring businesses to put out board-signed statements every year, the Modern Slavery Act has brought the issue into boardroom conversations. Especially given public scrutiny by ethical consumers and NGOs, companies can benefit from compliance with the act in multiple ways, ranging from enhanced reputation, innovative and stable supply chains to improved investor confidence and an increased customer base as increasingly consumers seek higher ethical standards and assurance that the products they purchase are exploitation and slavery-free. Even for companies that are not bound by the legislation, they are likely to be affected by it as many companies will seek to work with suppliers and partners who adhere to ethical and compliance standards. Currently, half of the affected organizations have published a statement, with many more organizations worldwide that comply voluntarily. The shift to from apathy to a race to the top is a clear indicator of structural business change to the issue written statements.

THE IMPORTANCE OF PARTNERSHIPS FOR CORPORATE RESPONSIBILITY IN ELIMINATING SLAVERY AND TRAFFICKING (CREST)

According to Maximilian Pottler, IOM CREST Project Manager, migration plays a key role in the prevalence of trafficking and forced labour in global supply chains. Whereas labour migration can have positive effects for both migrant workers and employers in countries of origin and destination, the number of victims of trafficking employed by businesses is going up, especially in the Asia-Pacific region.

Indeed, whereas the Asia-Pacific is an economically dynamic region experiencing rapid growth, poverty reduction and improvement of living conditions, vulnerability of migrant workers is strikingly high. According to the ILO Global estimate of forced labour (2012), whereas migrants (internal and international) only make up 4.4 per cent of the global workforce, they account for 44 per cent of all victims of forced labour.2 Migrant worker vulnerability begins in the recruitment stage. Importantly, when workers are charged recruitment fees, they become vulnerable to a variety of abuses, including debt bondage. IOM works with business to mainstream migration aspects in corporate policies and procedures, and to include recruitment of migrant workers into due diligence and audits.

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IOM ‘s CREST project partners with business who are looking to maximize benefits of migrant labour in their operations and reduce risks of abuse and exploitation. For instance, IOM works with partner companies, such as IKEA, to map the recruitment process from workplaces back to the workers’ countries of origin. IOM also works with partner companies on training and supports companies with their remediation efforts.

The partnerships help guide corporate policies to further support the ethical recruitment of migrant workers and prevent exploitation. Eventually, these collaborative efforts are a powerful example of multi-stakeholder collaboration between governments, business and civil society to further collaboration for sustainable solutions.

PANEL DISCUSSION 2: COMPANY TESTIMONIALS - CHALLENGES AND OPPORTUNITIES IN WORKING TOWARDS ATTAINING ETHICAL LABOUR PRACTICES

Participants

• Alexander Christopher Falter

General Director

ECCO Vietnam

• Bill Watson

Managing Director, Vietnam Cambodia and Republic of Korea

Coats Phong Phu Co. Ltd

• Kanwarpreet Singh

Sustainability Compliance Manager, SEA

Inter IKEA Group

In order to explore different approaches and best corporate practices three company representatives shared their experiences on working towards ethical labour supply chains.

VERTICAL SUPPLY CHAIN INTEGRATION AND IMPLICATIONS FOR TRANSPARENCY AND MONITORING The collapse of the Rana Plaza apparel factory in Bangladesh killed more than 1,000 people was an important turning point for many brands, who recognised a strong need for supply chain transparency, according to Alexander Falter, General Director of ECCO, a Danish footwear manufacturer and retailer. ECCO relies on a vertically integrated value chain: ECCO designs the shoes, owns and operates the leather tanneries

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and factories, and markets and sells its own products. Beyond integrating sustainability aspects into corporate culture and decision-making, according to Alexander Falter, for an own-brand it is of utmost importance to ensure transparency and capacity to monitor its compliance to international labour standards and human rights. Although the majority of ECCO’s tanning and shoe production is done in-house, ECCO does rely on suppliers to provide the company with services and materials. ECCO’s Code of Conduct comprises of 10 principles and applies to ECCO employees and external suppliers and business partners. To ensure implementation of its policy, ECCO provides training and conducts regular internal and external audits.

WORKING ALONGSIDE SUPPLIERS TO MANAGE WIDER SOCIAL AND ENVIRONMENTAL ISSUES

The importance of audits and supplier engagement was also outlined by Bill Watson, Managing Director of Coats Phong Phu, Viet Nam and responsible for the Viet Nam, Cambodia and Republic of Korea businesses for Coats Group plc, the world's leading industrial thread and consumer textile crafts business. Coats has zero tolerance of exploitative employment practices, which includes child labour and human trafficking. Beyond compliance obligations stemming from being subject to regulations such as the California Transparency in Supply Chains Act (2010) and the UK Modern Slavery Act (2015), Coats, views high ethical standards as critical for competitive advantage, strong partnerships with customers, high productivity and worker retention.

The commitment is cascaded through Coats’ supply chain, comprising both outsourcing and in-house production, through its Supplier Code. In the roll-out of its code of conduct and audit procedures, Coats puts an emphasis on supplier engagement and capacity building programmes.

For Coats, Viet Nam qualifies as a ‘high-risk country’, given its exposure to risks of human trafficking, forced labour and debt bondage in the industries like food production, garments and technology. In Viet Nam, according to Bill Watson, the main impediment to the Code’s implementation is the low level of awareness and knowledge on labour requirements and the limited capacity of management systems.

Through its Supplier Code Programme, Coats aims to build sustainable supplier partnerships. The first step for the roll-out of the Supplier code programme gives suppliers an opportunity to study the requirements of the Code, allows them to conduct a self-assessment where Coats notes areas of improvement, and open communication channels for further questions and support after the initial interaction. Subsequently, the suppliers will be visited by Coats and a third-party auditor 9-12 months later for supplier seminars, based on the assessments and the size of the suppliers. The initial follow-up meeting aims to explore suppliers’ understandings of the Code rather than an investigative audit. This is followed by audits and follow-up, with support to suppliers becoming a regular part of the supplier performance review process with a focus on improvement.

DRIVING LASTING CHANGE IN THE RECRUITMENT INDUSTRY FOR RESPONSIBLE LABOUR SUPPLY CHAINS

IKEA is guided by their vision to ‘create a better everyday life for the many people’, which includes co-workers, customers, suppliers and their local communities in areas such as environmental impact, human rights and governance and ethics, according to Kanwarpreet Singh, Sustainability Compliance Manager at IKEA Vietnam. IKEA’s sustainability commitments, guided by the UN’s Sustainable Development Goals and the UN Guiding Principles on Business and Human Rights, are very much the business

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Source: The Global Slavery Index 2016 (translated by Coats)

case for the world’s largest furniture retail company, as building sustainable and positive supplier relationships and customer trust goes hand-in-hand with the company's long-term financial success.

Migrant workers and refugees in forced labour, lack of transparency in working conditions in the supply chain and inadequate supervision of subcontractors are among the most significant social responsibility risks companies are facing. IKEA recognises migrant workers as one of the most vulnerable groups in IKEA’s supply chain. To address these risks, the company set clear standards for the recruitment and employment of workers through IWAY, IKEA’s supplier code of conduct.

IKEA is partnering with fellow companies to drive positive change in the way that migrant workers are recruited and supported the creation of the Leadership Group for Responsible Recruitment (LGRR). LGRR advocates for the ‘Employer Pays Principle’ that calls for all recruitment fees to be paid by the employer, not the worker, with the intention to eradicate the charging of recruitment fees to workers within a decade.

To support their suppliers in dealing with the challenges of responsible recruitment, in 2016 IKEA partnered with IOM to map labour supply chains from workers’ countries

of origin (Nepal and Bangladesh) to IKEA suppliers in Malaysia to fully understand the recruitment process including the types of actors involved as well as to understand the process from migrant workers’ perspective. One of the main factors of the recruitment process that puts workers at risk is the complexity of the process itself.

In cooperation with suppliers, IKEA developed an approach to repay recruitment fees as well as guidance for the IWAY sustainability compliance auditors to better highlight potential issues during audits and visits to their suppliers.

During 2017 IKEA expanded activities with IOM to include more migration corridors in Asia and to highlight good examples and solutions for suppliers. This included assessments at the suppliers and at recruitment agencies in both the countries of origin of migrant workers and countries of destination. It provided a clearer picture of migrant workers’ journeys from their homes to IKEA suppliers in selected corridors, and highlighted the risks associated with cross-border recruitment. Based on learnings from this project, the IKEA Guidelines on Responsible Recruitment have been developed. They aim to build the understanding and ability of suppliers to responsibly manage the recruitment of migrant workers. The focus is on cross-border migration through recruitment agencies or intermediaries, but the general principles apply to all types of recruitment.

2 http://www.ilo.org/global/topics/forced-labour/publications/WCMS_182004/lang--en/index.htm

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MODERN SLAVERY LEGISLATION AND GLOBAL PARTNERSHIPS: WHY IS THERE A MODERN SLAVERY ACT, HOW TO WORK WITH IT AND MOVE BEYOND COMPLIANCE

While the panel discussion was dedicated to forging a better understanding of modern slavery legislation, the role of businesses and the importance of partnerships in eliminating exploitation and upgrading industry practices, the workshop session was focused on an interactive exchange on different models and approaches to ethical labour practices.

Concretely, the workshop aimed to:

• Highlight the sustainability considerations within the wider development agenda

• Provide concrete guidance on how to work with the Modern Slavery Act to be compliant and to move beyond compliance towards best practice (linking to the company testimonials in the morning)

• Present different aspects for partnerships for improved due diligence and ethical labour practices

WORKSHOP

Participants

• Florian Beranek

Lead Expert Societal Responsibility & Responsible Business Conduct (RBC), United Nations Industrial Development Organisation (UNIDO)

• George Williams

Associate, Hogan Lovells

• Mimi Vu

Director of Advocacy & Strategic Partnerships - Pacific Links

• Alexander Christopher Falter

General Director of ECCO shoes Vietnam

• Maximilian Pottler

CREST Project Manager, IOM

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SUSTAINABLE DEVELOPMENT GOALS: MAKE IT YOUR BUSINESS

The workshop aimed to provide an interactive framework to have an in-depth discussion on modern slavery legislation and the wider development agenda, but also concrete guidance on how to work with the Modern Slavery Act to ensure compliance, but most importantly, to move beyond compliance towards best practice.

The UN SDGs are a set of global goals that governments are expected to achieve, business is expected to contribute to the achievement of the goals. Sustainability and contribution to the SDGs should be central to a company’s core business, argued Florian Beranek, Lead Expert Societal Responsibility & Responsible Business Conduct (RBC) at the United Nations Industrial Development Organisation (UNIDO).

The 2030 Agenda for Sustainable Development is centred on the five critical developmental dimensions, also known as the 5 Ps - People, Planet, Prosperity, Peace and Partnership. According to Florian Beranek, it is critical for business to reach out to stakeholders, including governments. Similarly, partnerships, such as formal or informal business associations, public-private partnerships or cooperation with civil society and international organizations can create a multiplier effect all the way to the community level, where limited visibility and accountability exposes vulnerable populations to high risks of exploitation, who ultimately form part of the supply chains in the global economy. Human trafficking in Viet Nam: Engagement at factory level

Human trafficking remains a major issue for Viet Nam; one of the top source countries of cross-border human trafficking victims in Asia and Europe, according to Mimi Vu, Director of Advocacy & Strategic Partnerships at Pacific Links. Industrial zones are one of the main recruiting grounds for victims, who are mostly low-skilled and originate from other provinces. Human traffickers often pose as labour recruiters.

Internal migrant workers commonly support more than one household, and generally have a low financial literacy. The concentration of large numbers of workers in a small geographic area in industrial zones make it particularly easy for traffickers to lure workers away with the false promises of better jobs. Pacific Links’ Factory Awareness to Counter

Trafficking (FACT) initiative and works on the individual and factory level to ensure that both workers and the factory managers have the right set of tools and knowledge to reduce risks and protect themselves.

MODERN SLAVERY ACT LEGAL REQUIREMENTS AND IMPACT ON VIETNAMESE BUSINESSES

Despite its non-mandatory nature regarding the content, the Modern Slavery Act has created the space for statements and policies to be highlighted, according to George Williams, Associate at Hogan Lovells, statements should cover the scope of who is affected, the details of their policies and their internal policy statements, and what concrete measures are being taken to reduce risks of exploitation and modern slavery in their supply chain. Despite the limitation to exercise jurisdiction over crimes in the UK, the Modern Slavery Act remains sufficiently vague to allow far-reaching investigations in case of suspicion of human trafficking. Given this potential criminal liability, companies ought to be cautious and proactive in their supplier engagement to avoid inadvertently contributing to modern slavery in their supply chain, as companies are expected to have mechanisms in place to detect criminal offences in supply chains.

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TRANSLATING ETHICS INTO BUSINESS CONDUCT

The selection of suppliers to be integrated into a company’s production network is often based on encounters and partnership building through word-of-mouth referrals, trade shows and fairs and via the internet, while the ultimate selection will depend on the due diligence process, said Alexander Christopher Falter, General Director of ECCO shoes Vietnam.

An important question relates to how business ethics can concretely translate into practice. This necessitates “connecting the dots” of responsible supply chain management as part of the company’s day-to-day operations, by involving different company departments, management and staff, employees that work with environmental issues, health and safety, product development, HR, procurement, sourcing, as well as sustainability and CSR teams. It also involves effective situational assessments and engagement with workers, with companies empowering their employees to speak out, and ensuring that workers can engage in constructive dialogue with management.

ROOT CAUSES AND RECRUITMENT DYNAMICS: MIGRATION RELATED FACTORS OF MODERN SLAVERY

Sustainable and effective solutions are found by companies who have a clear understanding of the risks they are facing, which is the basis for effective due diligence and risk management, according to Maximilian Pottler, IOM CREST Project Manager. Traditionally, Viet Nam experiences strong internal economic migration dynamics in Viet Nam which contribute substantially to the socio-economic development, notably through rural-urban migration and labour migration to industrial zones. Most internal migrants

are women, who are disproportionately affected by modern slavery and exploitation. To address these challenges, it is important to have an in-depth understanding of the situation of migrant workers, including on push and pull factors, the migration cycle and all entities involved. In the context of IOM’s partnership with IKEA, this undertaking generated a consolidated and holistic assessment on which to base better policies.

Participants in the workshop stressed the high worker turnover faced by manufacturers who in turn often rely on informal labour brokers to help recruit workers, a practice which increases risks for workers and the companies that employ them.

The dynamic economic situation also leads to the quick emergence of new SEZs, which further contributes to increased internal labour mobility. In the border areas, informal mobility exists with neighbouring countries such as Cambodia, with Viet Nam becoming a destination country for certain migrant groups.

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CONCLUSION

Bringing together representatives from over 60 companies from both multinational and local businesses, the Ho Chi Minh City workshop examined legal frameworks and practical solutions to promote responsible business principles and ethical labour practices. A variety of perspectives were communicated throughout the day, with a key message being that modern slavery legislation is the first step in bringing about change and undoubtedly encourages businesses to be proactive. While legislation is a key driver of change, the incorporation of social responsibility considerations into core corporate decision-making and investment strategies by suppliers and multinationals is key for driving sustainable change towards eradicating exploitation in global supply chains.

IOM believes that structural change happens when brands, suppliers, recruitment agencies and government work together to drive progress. Modern slavery legislation is an opportunity for Vietnamese businesses to be proactive in the context of a growing body of international regulations on supply chains, and especially considering the growing cross-industry momentum for responsible supply chain management and ethical recruitment led by the business community. Attuned to issues of labour exploitation, customers, companies and investors’ decision-making is increasingly based on records on social responsibility, environmental stewardship and corporate ethics. Proactive businesses that are compliant with international labour standards are likely to enjoy a comparative advantage in entering global supply chains and contribute to the sustainable business development in Viet Nam.

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RECOMMENDATIONS ON THE WAY FORWARD

With the endorsement of the Sustainable Development Goals (SDGs), increased demand for assessment and accountability is driving real change across the business community. Sustainability is continually moving from the side lines to the core of corporate decision-making.

The business case is clear: both legal reporting requirements as well as initiatives promoting sustainable and responsible corporate citizenship, such as the UN Global Compact, the Global Reporting Initiative, the Principles for Responsible Investment (PRI), and global benchmarking of corporate disclosures aim to incentivise corporate action.

It is recognised that modern slavery cannot be addressed without the private sector. Critically, the modern slavery legislation ensures boardroom attention and aims for a ‘race to the top’, encouraging companies to assume leadership in the fight against modern slavery. Legislation is thus a key driver for increased transparency, as a first step towards sustainable change through incorporation of environmental, social and governance (ESG) factors into operational and investment decisions.

While companies are under increasing pressure from different stakeholder groups, such as consumers, civil society, investors and governments for more transparency regarding corporate environmental, economic and social impacts, the last decade was characterised by a vast growth in the responsible investment market. Regulatory change is thus also indirectly driving ESG data disclosure among a growing number of companies as investors are recognizing benefits of sustainable, long-term investments of companies with strong ESG performance. Companies are thus increasingly required to publish sustainability reports.

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MIGRATION: THE VIETNAMESE CONTEXT

• In 2015 nearly 14 per cent of the population of Viet Nam were migrants. Currently, more than 100,000 Vietnamese migrant workers are deployed abroad each year.

• Almost 20 per cent of the urban population are migrants, and Southeast region has the highest proportion of migrants at 29.3 per cent.

• Vietnamese internal migrants are more likely to be working in the industrial and construction sector than non-migrants.

• Foreign companies and businesses in the private sector are one of the main sources of employment for migrants: the proportion of migrants employed in the foreign direct investment sector is nearly three times as high as that of non-migrants, while the proportion of migrants in the private sector is nearly 9 per cent higher than that of non-migrants .

• Migrants, compared to non-migrants, have greater employment vulnerability due to structural, situational and individual/household factors.

MIGRATION, EMPLOYMENT AND WORKING CONDITIONS IN VIET NAM

In three decades of reform, Viet Nam has made great strides economically and in international integration. Internal and international migration are commonly seen as integral aspects of a country’s social and economic development. Viet Nam has experienced an exponential increase in the movement of people both within and outside its borders over the past 20 years.

MAKE IT YOUR BUSINESS

Legislative reporting requirements mean that preventing unethical recruitment and labour practices is no longer an optional corporate social responsibility action. It is increasingly an essential requirement for all global brands.

Legislative reporting requirements mean that preventing unethical recruitment and labour practices is no longer an optional corporate social responsibility action. It is increasingly an essential requirement for all global brands.

Code of conduct serve as a tool for risk assessment, compliance and verification and eventually capacity building, ultimately to ensure companies only work with suppliers and businesses that share their values and standards.

3/4 UNFPA, The 2015 National Internal Migration Survey.

The opportunity for the Vietnamese business community to act and show leadership is great. Today, conforming to international labour standards and ethical business practices is critical. These practices will in turn have a positive business impact on companies as return on investment is realised through greater integration into global production networks.

COMPANIES SOURCING FROM VIET NAM ARE INCREASINGLY LOOKING TO WORK WITH VIETNAMESE SUPPLIERS THAT ALREADY ADHERE TO NATIONAL AND INTERNATIONAL STANDARDS TO ENSURE THEIR OWN COMPLIANCE WITH LEGAL REPORTING REQUIREMENTS AND PREVENT REPUTATIONAL RISKS.

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WHERE TO START AND CRITICAL ASPECTS NECESSARY TO BUILD MOMENTUM

To promote sustainable change, improvements at company level should be based on long-term vision of company success that supports a business culture which promotes ethical business practices. Social compliance considerations should be viewed as driven by market needs that are supported by appropriate regulation.

As migrant workers, internal and international, represent a vulnerable group that is disproportionately affected by exploitation and slavery, migration aspects will have to mainstreamed into corporate policies and processes that relate to companies’ labour supply chain.

GOOD PRACTICES:

Engagement with suppliers and workers

The engagement is an opportunity to establish a sustainability dialogue with suppliers, clarify expectations and provide guidance and support in establishing appropriate policies, supply chain management and due diligence processes.

• Apple developed facility-specific capability building programmes for its low- and medium-performing suppliers with over 150 Apple-developed technical tools.

• Through its Supplier Employee Training Programme, Apple claims that since 2008 14.7 million people in its supply chain have received training on rights as employees, local labour law requirements, the protections outlined in the Supplier Code of Conduct, and grievance channels.

• As part of its Modern Slavery Outreach Programme, Adidas provided modern slavery capacity building workshops for all key Tier 2 suppliers from high-risk countries, and plans to expand the training coverage to other high-risk countries in its Tier 2 supply chain. It also plans to launch a due-diligence programme focusing on labour brokers and recruitment agencies in relevant high-risk countries.

• The Dutch global semiconductor manufacturer NXP Semiconductors was the winner in the ‘Policy and Implementation’ category of the 2016 Award, identifies vulnerable worker populations and conducts training for its suppliers in order to make informed purchasing decisions and ensure working conditions are safe and healthy.

• Fluctuating market demand and production can lead to excessive overtime and contribute to risks of forced labour by increased use of temporary and informal labour, notably migrant labour, and unauthorised sub-contracting. The engagement with workers through worker empowerment and grievance mechanisms can help companies and their suppliers to identify risks within their own policies and purchasing practices to improve worker wages and working conditions. For instance, companies such as Microsoft, Asos (Turkey) and Burberry (China) have put in place anonymous worker grievance hotlines.

Supply chain transparency

Mapping supply chains provides visibility that allows companies to better mitigate risk and helps to cascade due diligence throughout the entire supply chains.

• Dating back to 2008, HPE disclosed their supplier list, and published their supply chain smelter list in 2013.

• In February 2017, Unilever as the first consumers goods company publicly disclosed its entire palm oil supply chain including over 300 direct suppliers and more than 1,400 processing mills in order achieving a fully traceable supply chain to address deforestation and human rights abuses.

• Currently, a strong trend for supply chain transparency is driving increased disclosure. For instance, Primark published their garment supplier list in February 2018, including over 1,000 factories in 31 countries. Primark follows H&M, C&A, Adidas, Esprit and Gap which have all disclosed lists of their first tier of global suppliers.

Collective engagement with other stakeholders

Partnerships with businesses, government and civil society that promote collaboration to enhance supply chain transparency can build the capacity of all actors to adhere to international social and labour standards.

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• Adidas was the overall winner of the second Thomson Reuters Foundation Stop Slavery Award for its transparent audits, strong responsible sourcing guidelines, and robust tools to trace higher-risk supply chains. Adidas closely collaborates with institutions seeking to end modern slavery, such as the Bali Process Government and Business Forum on Human Trafficking, The Mekong Club, the Fair Labour Association, and the International Organization for Migration (IOM).

• Apple developed the Risk Readiness Assessment (RRA) in 2016, an assessment tool for prospective and current suppliers to understand their exposure and track key risks in their operations, and encourages collective action across many industries through open sourcing it through the Responsible Business Alliance (RBA). Apple also works with with Pact, a nonprofit organization and launched an extensive awareness campaign in 2017 that outlines mining risks and brings them to the attention of DRC communities.

• Following Oxfam’s identification of the gaps between Unilever's policies and the reality on the ground for workers in Viet Nam, including low wages and excessive working hours, Unilever has engaged better sourcing policies, increased trust between workers and management, including improvement of the effectiveness of grievance mechanisms, and more direct employment in its manufacturing operations.

• Hewlett Packard Enterprise was the winner in the ‘Transparency and Response to Challenge’ category of the Stop Slavery Award in 2016 for long-standing commitment to seeking external expert input on risks it had identified in its supply chain. HPE also collaborated with its suppliers, labour agencies, leading companies and expert organizations to promote ethical recruitment and combat the exploitation of migrant workers in global supply chains in South East Asia.

Ethical recruitment

Gaining a greater understanding of labour supply chains is important for mitigating the greater risks of modern slavery in labour migration.

• The Coca-Cola Company, HP Inc., Hewlett Packard Enterprise, IKEA and Unilever launched the Leadership Group for Responsible Recruitment (LGRR), a collaboration between leading companies and expert organisations. Facilitated by the Institute for Human Rights and Business, the group includes the Interfaith Centre on Corporate Responsibility, International Organization for Migration, Verité and other large multinational companies, focused on promoting ethical recruitment and combating the exploitation of migrant workers in global supply chains across industries. The group was subsequently joined by M&S, Walmart, GE, Mars Inc., Tesco, and Vinci. Members have committed to the ‘Employer Pays Principle’, which states that no worker should pay for a job - the costs of recruitment should be borne not by the worker but by the employer.

• HPE developed an industry-first first HPE supply chain foreign migrant worker standard in 2014, which addresses the potential exploitation of this vulnerable labour group, as well as associated capability building, and foresees the elimination of worker-paid recruitment fees.

• Since 2015, Apple is implementing a zero fee policy in its fight against bonded labour. Apple reports that over US$30 million has been repaid to more than 35,000 foreign contract workers in its supply chain since 2008.

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Timing Session Chair / Facilitator

8:30 - 9:00 Registration of delegates

9:00 - 9:25 Welcome and Introductions

Facilitated by Christina Ameln, Management Consultant on CSR/Sustainability, Core Values, Employee Engagement & Change Management

• H.E. Giles Lever, British Ambassador to Viet Nam

• Victoria Rhodin Sandström, First Secretary, Political Affairs, Embassy of Sweden to Viet Nam

• Tran Ngoc Liem, Deputy General Director VCCI HCMC

• David Knight, IOM Chief of Mission Viet Nam and Regional Coordinator for Viet Nam, Cambodia and Lao PDR

9:25 - 9:40 Social sustainability and responsible labour as key factors for increasing market access opportunities

Ian Pascoe, Managing Partner, Grant Thornton (Thailand)

9:40 - 10:00 Group Photo/ Tea/ Coffee Break / Networking

10:00 - 10:45 Panel Discussion 1:

Understanding the Modern Slavery Act and the importance of private sector partnerships

Facilitated by Christina Ameln, Management Consultant on CSR/Sustainability, Core Values, Employee Engagement & Change Management

• George Williams, Associate, Hogan Lovells - The UK Modern Slavery Act: Legal implications for global business

• Tim Galvin, British Embassy Viet Nam - Trade, emerging legislation and the regulatory environment

• Maximilian Pottler, CREST Programme Manager, IOM - The importance of private sector partnerships: Corporate: Responsibility in Eliminating Slavery and Trafficking (CREST)

Q&A

AGENDA

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10:50 - 11:40 Panel Discussion 2:

Company testimonials: Challenges and opportunities in working towards attaining ethical labour practices

Facilitated by Christina Ameln, Management Consultant on CSR/Sustainability, Core Values, Employee Engagement & Change Management

• Alexander Christopher Falter, General Director ECCO Vietnam

• Bill Watson, Managing Director Coats Phong Phu Co. Ltd. – Vietnam, Cambodia & Korea

• Kanwarpreet Singh, Inter IKEA Group, Sustainability Compliance Manager for South East Asia

Q&A

11:45 - 12:00 Morning Wrap-Up David Knight, Chief of Mission Viet Nam and Regional Coordinator for Viet Nam, Cambodia and Lao PDR, IOM

12:00 -13:00 Lunch

13:00 -14:15 Workshop: Modern Slavery Legislation and Global Partnerships

Why is there a modern slavery act, how to work with it and move beyond compliance

Facilitator by Christina Ameln, Management Consultant on CSR/Sustainability, Core Values, Employee Engagement & Change ManagementSpeakers

• Florian Beranek, Lead Expert Societal Responsibility & Responsible Business Conduct (RBC), United Nations Industrial Development Organisation (UNIDO)

• George Williams, Associate, Hogan Lovells

• Mimi Vu, Director of Advocacy & Strategic Partnerships - Pacific Links

• Alexander Christopher Falter, General Director of ECCO shoes Vietnam

• Maximilian Pottler, CREST Programme Manager, IOM

14:15 -14:30 Closing remarks

• IOM & British Embassy

• Certificate of Attendance

14:30 -15:00 Tea & Coffee / Networking

Supported by

HO CHI MINH CITY20 MARCH 2018