Canadian Investors Addressing Child Labour in Cotton Supply-Chains

By August 14, 2009News

In SHARE’s news briefing for July, we introduced the issue of state-directed child labour in Uzbekistan’s cotton industry, where reportedly children as young as nine are being forced to harvest cotton.  This article reports on the actions SHARE has taken on behalf of Meritas Mutual Funds to address the Uzbek cotton issue, and reviews Canadian progress to date.

INTERNATIONAL INVESTOR COALITION

The use of child labour in company supply chains constitutes a serious reputational risk for major brands and retailers, and the increasing profile of child labour in the Uzbek cotton industry is landing on their doorsteps.  SHARE has joined an international coalition of institutional investors and retailers to request that the Uzbek government enforce its own labour laws, which prohibit child labour.  The coalition, which includes members of the international investment community, retailers, trade associations and non-governmental organizations, is asking companies to trace the source of cotton in their supply chains, to instruct suppliers not to source cotton from Uzbekistan until forced child labour has been eliminated, and to make public statements expressing awareness of the Uzbek cotton issue and the steps they have taken to address it.

The coalition has received considerable support from national and international governmental institutions.  Notably, coalition members have met with representatives of the U.S. State Department and the Department of Labor, the Ambassador of Uzbekistan to the United States, and representatives of the United Nations International Labour Organization (ILO).  The coalition is urging the Uzbek government to invite the ILO to assess and monitor the approaching cotton harvest.

In both the U.S. and U.K., the national government has openly expressed concern about forced child labour in the Uzbek cotton industry, and there is strong backing by trade associations and retailers.  A coalition of four U.S. trade associations, together comprising 90 percent of U.S. purchases of cotton-based merchandise, has written to the Canadian Apparel Federation, the Retail Council of Canada and others, asking them to analyze and address the issue.  Their efforts are being supplemented by major retailers such as Wal-Mart, Levi-Strauss, GAP, and Target, who have agreed to boycott Uzbek cotton until forced child labour has been eliminated.

PROGRESS MADE IN CANADA

Unlike in the U.S. and some EU countries, few Canadian retailers, retail associations, or government agencies have taken a public position on the Uzbek cotton issue.

Against this background, SHARE, in collaboration with Meritas Mutual Funds, is working with a number of Canadian companies to mitigate reputational risks and protect their brands from the stains of forced child labour.  Earlier this year, Canadian Tire, Sears Canada and the Forzani Group (which owns Sport Check, Coast Mountain Sports and other major brands) were each contacted on behalf of Meritas regarding the actions they have taken toward removing Uzbek cotton from their supply chains.  The American organization As You Sow is also engaging Gildan on the issue.

So far, Gildan and Canadian Tire are leading the way.  Both companies have instructed their suppliers not to source cotton from Uzbekistan and Canadian Tire has raised the issue with Retail Council of Canada’s Responsible Trade Committee.  Sears Canada is considering ways its purchasing department might address the issue.  Forzani Group has not responded with information on its intentions or strategies regarding the Uzbek cotton issue.

ADDRESSING INVESTOR RISKS FROM UZBEK COTTON

Child labour is widely recognized by the retail industry as a hot button issue for consumers.  As international awareness and support for a ban on Uzbek cotton grows, Canadian brands will come under increasing scrutiny by consumers and advocacy groups.  With the cotton harvest beginning in September, increased analysis and engagement is likely.  Therefore, companies taking proactive steps to ensure that their supply chains are free of products tainted by forced child labour will be better positioned to respond to company concerns.

By engaging with Canadian Tire, Forzani and Sears Canada, SHARE and Meritas are encouraging the companies in their portfolios to examine best practices in cotton sourcing and supply-chain traceability.  In addition to mitigating reputational risks, attention to cotton supply-chains is increasing demand for ‘responsible cotton’—especially organic cotton, which consumers identify as being both environmentally and labour-friendly.  Proactive steps by Canadian companies and shareholders are helping curtail forced child-labour in Uzbekistan and bringing Canadian investors and organizations in line with their U.S. and European counterparts.

 

By Kelsey Seymour, Research Assistant