Forced Labour in Construction Hidden from Investors
CCLA highlights high and persistent systemic risks of forced labour across the sector in an engagement initiative.
The construction sector is failing to sufficiently address its exposures to forced labour and modern slavery, industry experts have determined, with greater leadership and collaboration with stakeholders needed to tackle rising risks.
An ongoing lack of awareness and disclosure around forced labour-related risks in the sector’s business operations and supply chains was exposed in an account released this week of discussions attended by the UK’s largest construction companies.
“Modern slavery is a hidden issue, [but] the construction sector is a long way behind other sectors – like fashion and food – when it comes to addressing this,” said Dr Martin Buttle, Better Work Lead at CCLA Investment Management, which has extended its engagements in the sector on account of its high exposures.
The construction companies attending the roundtable scored lower than average in CCLA’s 2023 Modern Slavery Benchmark, which ranks the UK’s largest listed companies according to progress eliminating modern slavery in their business operations and supply chains. It was hosted by the UK’s Cabinet Office, and also attended by LGT Wealth Management and the Supply Chain Sustainability School.
The number of potential forced labour victims calling UK charity Unseen’s modern slavery helpline in relation to construction sites increased by 269% last year, up from 32 calls in 2022 to 118 in 2023, the summary report noted.
Collective understanding
Buttle said CCLA’s decision to discuss human rights abuses with construction sector leaders en masse stremmed from existing engagement activities.
“We had been engaging company-by-company, but recognised that the construction sector needed to take a step back and collectively understand systemic risks – so we brought senior management from these construction companies together,” Buttle added.
Roundtable attendees acknowledged there are significant and increasing social risks in the sector, with a pressing need for action. It was determined that more leadership and collaboration with civil society and regulators is necessary, as well as more preparation for identifying modern slavery.
“In the same way they interrogate investee companies’ business models for financial risks and opportunities, investors have a responsibility to conduct human rights due diligence on models and practices that can contribute to human and labour rights violations,” said Áine Clarke, Head of KnowTheChain and Investor Strategy at the Business and Human Rights Resource Centre (BHRRC).
“Considering the endemic nature of forced labour risks across the construction sector, a lack of action by investors could inadvertently link their financing to business practices that cause, contribute to, or are themselves directly linked to human rights abuses,” she said.
All along the chain
The BHRRC told ESG Investor that it has recorded 59 cases of migrant worker abuse in construction so far this year.
Most of these cases occurred in India (ten), following by Malaysia (five), Saudi Arabia (five) and France (five). Occupational health and safety violations were the most common form of abuse reported (30), followed by wage theft (17) and recruitment fee charging (14).
Although modern slavery is most often found in emerging markets (EMs), Buttle pointed to risks in developed economies. “There’s a very high risk in the UK, for example – particularly post-Brexit, with an increase of migrant labourers coming to work on construction sites across the country,” he said.
Businesses and investors should also evaluate forced labour-related risks across the materials supply chain – including bricks, steel, concrete and solar panels. “Most raw materials have been produced with some element of forced labour,” Buttle warned.
A 2018 report by the Chartered Institute of Building (CIOB) found that construction ranked second only to the sex industry as a sector most prone to exploitation of workers.
Forced labour can take different forms, with debt bondage viewed as a growing risk to investors and construction.
“Construction projects are often large and sprawling, involving numerous sub-contractors [who] often rely on labour recruiters to supply workers who often have to pay exorbitant recruitment fees for the job,” said Chavi Keeney Nana, Director of Equitable Global Supply Chains at the Interfaith Center on Corporate Responsibility (ICCR). “When workers arrive, they are often not paid for long periods of time – because sub-contractors often don’t pay until they are paid by prime contractors – which leaves many in a situation of debt bondage.”
This effectively means that they are expected to work to ‘pay off’ the money owed. Migrant workers, which have fewer rights than domestic labourers, are at particular risk from this form of modern slavery.
Taking action
While many investors are engaging with construction companies on climate-related issues, campaigners argue human rights risks could also be a persistent and long-term issue.
“Investors should care about this issue because of the human cost associated with conditions of forced labour in the construction industry,” Keeney Nana insisted. “This risk is not likely to diminish soon, with the ever-increasing shift to urban environments and the need for construction.”
The CCLA report on the roundtable encouraged attendees to align their business operations with the UN Guiding Principles on Business and Human Rights, commit publicly to respect workers’ rights, and establish clear management-level responsibilities and accountability for the implementation of responsible labour and recruitment practices, including in their supply chains.
Participants also discussed the merits of establishing an intelligence network, through which companies could more easily share and identify potential exposures to forced labour.
Construction companies should also undertake comprehensive human rights and environmental due diligence, based on a robust risk assessment, Keeney Nana added. “This will enable the companies to see their supply chain and sub-contracting relationships and prioritise their highest risks,” she said.
CCLA launched the modern slavery-focused ‘Find it, Fix it, Prevent it’ initiative in 2019 to drive corporate and public policy engagement to improve data availability for investors. The initiative is currently backed by 65 investors collectively managing £15 trillion (US$19.5 trillion) in assets.
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