2015 Corporate Social Responsibility Risk Index

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1 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.

2 Top 5 Countries for CSR Human Rights Risks 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, 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The country has recently emerged as a potential supplier for a number of industries, but concerns about severely outdated health and safety laws and potential inability to enforce a new minimum wage indicates that human rights will continue to be an issue. CHINA INDIA BANGLADESH Wage Withholding Child Labor VIETNAM MYANMAR BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index 2

3 Source and Destination States for Child Labor in India Gujarat Jammu & Kashmir Punjab Haryana Rajasthan Himachal Pradesh Uttarakhand Uttar Pradesh Bihar Jharkhand Madhya Pradesh West Chhattisgarh Bengal Maharashtra Delhi Odisha 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. Sikkim Tripura Assam Arunachal Pradesh Nagaland Manipur Mizoram Primary Destination States for Trafficked Child Laborers Primary Source States for Trafficked Child Laborers Goa Karnataka Kerala Andhra Pradesh Tamil Nadu 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. Copyright BSI 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. 3 BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index

4 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 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 Guangdong province saw the largest number of wage arrear-related strikes in the second quarter, followed by Zhejiang. Strikes Over Wages JUL SEP NOV JAN MAR JUL SEP NOV JAN MAR BSI Supply Chain Solutions 2015 Corporate Social Responsibility Risk Index 4

5 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 9 Villa Urquiza Colegiales *As identified by local NGO La Alameda Palermo Villa Del Parque Villa Crespo Caballito Balvanera Monserrat 7 Floresta Autopista Perito Moreno Flores Autopista 25 de Mayo Parque Patricios 1 Liniers Barracas Autopista Luis Dellepiane Avellaneda 1 To learn more about BSI Supply Chain Solutions supply chain intelligence and risk indexes, please call , or visit our website for more information, For more information, please contact: BSI Professional Services Inc. EMEA Kitemark Court, Davy Avenue Knowlhill Milton Keynes, United Kingdom MK5 8PP Tel: BSI America Professional Services Inc Drinkwater Boulevard, Ste 210 Scottsdale, AZ Tel: BSI Professional Services Inc. APAC 23rd Floor, Cambridge House, Taikoo Place, 979 King s Road, Island East, Hong Kong Tel: Copyright 2015 The British Standards Institution. All Rights Reserved.

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