Then, on Nov. 24, Nestle said forced labor
taints Thailand's seafood industry, part of the company's supply
chain for whole prawns. Consumer lawyers said it's also a source of
ingredients for Nestlé's cat food brand Fancy Feast.
Nestlé Executive Vice President Magdi Batato said at the
time that the Swiss company is "committed to eliminating forced
labor in our seafood supply."
The announcement by the world's largest foodmaker, and its pledge
to stamp out abuses, shifted the debate. Companies have said it's
impossible to prove their products are tainted by forced labor,
given how many suppliers and middlemen make up modern supply
chains. Now one of the biggest was conceding it was a distinct
"We need business to own up to the abuses in their supply chains
and then work collectively to eradicate them," said Steve Trent,
executive director of Environmental Justice Foundation, which
tracks slavery in the Thai fishing industry. He hailed Nestle's
statement as a huge step forward. Chris Bayer, a researcher at the
Germany-based nonprofit Development International, advises
companies on compliance issues. He agreed with Trent, and not just
for moral reasons.
"Companies that have such policies and systems in place are far
less vulnerable to reputational risk," Mr. Bayer said. "It would
behoove any reputable company that qualifies to make sure it's at
least legally compliant."
Transparency initiatives don't include giving in to the lawsuits,
however. Edie Burge, a spokeswoman for Nestlé's U.S. unit,
echoed other defendants when she said there's no legal
justification for requiring warnings on company products.
Under California's supply chain transparency law, the first of
its kind, companies with more than $100 million in revenue must
publicly disclose their efforts to fight slave labor. It doesn't
require them to have a policy -- but if they do, they have to say
what it is.
"This was a very simple approach to an important problem," said
Darrell Steinberg, the former state senator who sponsored it. "If
large companies trace their supply chains and publish the results
on their websites, by definition that will be a major
Some of the lawsuits use Mr. Steinberg's bill as a starting
point: They claim companies like Nestlé and Costco violated
California law by not also stating publicly that slave labor
probably had a part in making their products.
Right to sue
The proposed class actions envision an individual right to sue,
arguing that shoppers are being illegally deceived because some
wouldn't buy a product potentially tainted by slave labor. In
ruling for Nestlé, U.S. District Judge Cormac Carney said
state legislators had the chance to require slave labor warnings,
Steve Berman, whose firm Hagens Berman Sobol Shapiro LLP is
behind most of the cases, said suing on behalf of consumers instead
of victims of forced labor avoided questions over jurisdiction. He
said the judge was wrong and that he'd appeal.
For their part, the companies Mr. Berman sued reject that they
can be held responsible for the actions of "sub-suppliers." In
court filings, they say corporate declarations to fight slave labor
aren't guarantees it won't exist somewhere in the supply chain.
They also caution that the litigation could have unintended
consequences, driving companies from countries where their presence
allows them to push labor reforms.
Seafood export is a multibillion-dollar industry in Thailand,
providing not only food for human consumption around the globe but
ingredients for a wide spectrum of products. Costco, based in
Issaquah, Washington, was sued because it sells Thai farmed shrimp
bred on fishmeal -- ground-up pieces of "trash fish." It's that
shrimp food which consumer lawyers say is caught by forced labor,
on fishing boats operating far offshore.
"Allegations concerning issues in the Thai seafood industry have
been well publicized," said Richard Galanti, a spokesman for
Costco. The company says it performs surprise third-party audits
and requires suppliers agree to a ban on forced labor. But even
with those policies, transparency is a daunting, if not impossible
task, say two lawyers who advise companies on such issues but
aren't involved in the lawsuits.
"Everything you see that's made with mass or substance at some
point in its supply chain comes from farming, hunting or a
harvesting operation that's family owned," said Sarah Rathke, a
lawyer with Squire Patton Boggs. "It's nearly impossible for
companies to trace material to that level, because it's usually
collected from the farm and combined with the output of others from
Amy Pierce, of the Pillsbury law firm, said local officials are
better positioned to regulate labor practices. A European
Parliament report said that reality also provides corporations with
a level of plausible deniability.
"Slave-made commodities are knowingly blended with those from
legitimate sources," the 2013 report states. "Willful ignorance
means that records are kept only in general and innocuous ways in
order to conceal the origin of goods."
In lawsuits against chocolate makers, the problem isn't trash fish,
but cocoa from Ivory Coast, the industry's biggest supplier. The
U.S. has said thousands of children as young as 10 are forced to
work there in dangerous conditions.
Boys from "Ghana, Mali, Burkina Faso, Benin and Togo, are found
in Cote d'Ivoire in forced agricultural labor," according to a
government report. A self-imposed deadline by chocolate makers to
end child slavery among suppliers has been repeatedly extended,
most recently until 2020, according to the lawsuits.
Nestlé says it has set up pilot monitoring programs on
some Ivory Coast farms, with plans to extend to all suppliers by
the end of 2016. Hershey and Mars made similar statements, saying
that while the lawsuits are without merit, they're spending
hundreds of millions of dollars to eradicate the practice from
their supply chains. Mars spokesman Jonathan Mudd didn't return
calls or e-mails seeking comment.
Poverty is a "fundamental issue" in the cocoa growing region of
West Africa, said Jeff Beckman, a spokesman for Hershey. Companies
across the cocoa supply chain have been involved in initiatives to
improve economic, social and labor conditions, he said.
"The pace of change, however, is slower than we would like to
see because the underlying issues are complex and have deep
economic, social and political roots," Beckman said.
-- Bloomberg News