2015 Corporate Social Responsibility Risk Index

Over the last quarter BSI has recorded and analyzed

various global corporate social responsibility (CSR),

and brand protection risks, threats, and trends.

This Risk Index Report will shed light on some

major areas of concern and evolving trends that

have developed over the few months.

2BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index

CHINA: Wage and benefit withholdings by employers have increased as the country’s economy slows, issues such as

forced overtime and poor living conditions persist, and the country remains among the worst for air and water pollution.

INDIA: Forced labor and debt bondage remain serious problems in many parts of India, while proposed changes to the

country’s child labor laws may make it easier for businesses structured as ‘family enterprises’ to employ underage workers.

BANGLADESH: Despite some improvements in fire and building safety following the Rana Plaza collapse in 2013, large

numbers of garment sector employees continue to work in factories with inadequate and health and safety protections.

VIETNAM: Poor building construction in Ho Chi Minh City, where most garment and footwear manufacturing takes

places, poses a risk to the health and safety of workers. Use of hastily-constructed buildings may grow as exports from

these industries continues to increase.

MYANMAR: The country has recently emerged as a potential supplier for a number of industries, but concerns about

severely outdated health and safety laws and potential inability to enforce a new minimum wage indicates that human

rights will continue to be an issue.

INDIACHINA

Wage Withholding

Child Labor

BANGLADESH

Health & Safety

MYANMAR

Top 5 Countries for CSR Human Rights Risks

VIETNAM

Health & Safety

Health & Safety

3 BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index

Jammu & Kashmir

Bihar

Himachal Pradesh

Punjab

Haryana

Rajasthan

Gujarat

Uttarakhand

Uttar Pradesh

Madhya Pradesh

Maharashtra

Goa

Karnataka

Andhra Pradesh

KeralaTamil Nadu

Chhattisgarh

Odisha

Jharkhand WestBengal

Sikkim

Assam

Arunachal Pradesh

Nagaland

Tripura

Manipur

Mizoram

Delhi

© Copyright BSI 2014

Poverty is widespread in northeastern India, making children more vulnerable to exploitation. Children of tea pickers in Assam and West Bengal are commonly targeted by human traffickers.

Girls attempting to earn a dowry via the Sumangali scheme make Tamil Nadu both a source and destination state for child laborers. Girls can often be found working in the state’s garment industry.

Primary Source States for Trafficked Child Laborers

Primary Destination States for Trafficked Child Laborers

Based on Historical Data and Qualitative Analysis

New Law Likely to Increase the Risk of Child Labor in India

In the second quarter of 2015, the Indian government suggested changes to the country’s labor laws that BSI believes

will increase the risk of child labor in the country. The laws are designed to remove the red tape that often hinders

businesses in India, but loopholes in the law allow children to work in family-run businesses and the sports industry.

This could lead to a proliferation of businesses structured as ‘family enterprises’ to avoid scrutiny from regulators.

The pro-business tilt of President Narendra Modi’s administration, combined with the new child labor regulations, could

lead to apathy amongst India’s already overstretched labor inspectorate.

Child labor is already a serious problem in India, as widespread poverty in the northeastern states Assam, Bihar, and

West Bengal drives trafficking of children for work in Delhi, Haryana, Uttar Pradesh, Punjab, Maharashtra, and Tami

Nadu. Carpets, cotton, textiles, footwear, and garments, all of which are major exports for India, are among the goods

most often made with child labor.

EU Toughens Its Conflict Minerals Proposal

The European Union’s Parliament approved a new conflict minerals draft law in May 2015 that would make it

mandatory for companies to report on the presence of conflict minerals in their supply chains. Compliance was

voluntary in previous versions of the draft law. The draft law also covers tin, tantalum, tungsten and gold from conflict

areas worldwide; a similar conflict minerals provision in the United States’ Dodd-Frank Act only covered the Democratic

Republic of the Congo and the countries it borders. The European Commission, the executive body of the EU, must still

approve the draft law.

Source and Destination States for Child Labor in India

4BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index

New U.S. Legislation Aimed at Eliminating Child, Forced Labor

In other regulatory news, United States House Representative Juan Vargas introduced

a bill that would require corporations with revenue over $1 billion to undertake

independent audits of their supply chain for forced and child labor. The companies

would report these results to the Securities and Exchange Commission and report

the results on a company website. The bill has been referred for consideration to

the House Subcommittee on Commerce, Manufacturing, and Trade. Should the

bill become law, it would likely place a sinificant burden on companies in certain

industries. For instance, approximately 63 percent of all apparel imported into the

United States in 2014 came from countries that BSI deems high-risk for child labor,

while 33 percent of all coffee imported into the US came from similarly high-risk countries.

Increase in Strikes Over Wage Arrears in China Indicates Factory Owners Are Responding to Tougher Economy by Withholding Pay from Workers

Labor strikes in China over employer wage withholdings increased to 139 in the second quarter of 2015 from 50 in the

same period last year, indicating that wage arrears have become a serious problem in Chinese factories as economic

growth in the once-booming country declines. Wage arrears and withholding of benefits are a major corporate social

responsibility concern in China, with workers sometimes going unpaid for months. Wage withholdings have become a

particularly acute problem for furniture factories, with several incidents of nonpayment of wages reported at Dongguan

furniture manufacturers in the second quarter of 2015. Guangdong province saw the largest number of wage

arrear-related strikes in the second quarter, followed by Zhejiang.

Strikes Over Wages

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MAR2013

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SEP2014

NOV2014

JAN2014

MAR2014

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Poor Working Conditions Continue to Plague Argentina

Poor working conditions continue to plague the country’s textile and agriculture industries due to poor enforcement of

labor laws, and lack of political will to prosecute offenders. The buildings in which these employees work often contain

unsanitary working conditions that can lead to the contraction of diseases, such as tuberculosis. The absence of safety

equipment in the agriculture section and the uncontrolled use of pesticides has led to high rates of health problems.

Major international companies have been found guilty of contracting from these sweatshops.

Locations of Textile Sweatshops in Buenos Aires

To learn more about BSI Supply Chain Solutions supply chain intelligence and risk indexes, please call +44 0845 080 9000, email supplychain.emea@bsigroup.com or visit our website for more information, www.BSI-supplychainsolutions.com.

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