Corporate Accountability

Introduction

Forced labor is embedded in global supply chains. The products on store shelves, electronics, clothing, food, cosmetics, construction materials, are frequently produced through labor exploitation that meets the legal definition of trafficking. The International Labour Organization estimates that forced labor in the private sector generates $236 billion in illegal profits annually. Despite growing legislative pressure for supply chain transparency, corporate accountability for forced labor remains weak, enforcement is minimal, and the gap between legal requirements and actual practice is vast.

This chapter examines the legal frameworks designed to hold corporations accountable for trafficking in their supply chains, the failures of corporate auditing, landmark litigation, and what genuine corporate responsibility looks like in practice.

California Transparency in Supply Chains Act (2010)

The California Transparency in Supply Chains Act (SB 657), which took effect on January 1, 2012, was the first legislation in the United States requiring corporations to disclose their efforts to eradicate slavery and human trafficking from their supply chains. The law applies to retail sellers and manufacturers doing business in California with annual worldwide gross receipts exceeding $100 million.

Covered companies must disclose, at a minimum, the extent to which they:

• Engage in verification of product supply chains to evaluate and address risks of trafficking and slavery
• Conduct audits of suppliers to evaluate compliance with company standards regarding trafficking and slavery
• Require direct suppliers to certify that materials incorporated into their products comply with applicable slavery and trafficking laws
• Maintain internal accountability standards and procedures for employees or contractors who fail to meet company standards
• Provide training on trafficking and slavery to employees and management with direct responsibility for supply chain management

The California Act’s primary weakness is that it requires only disclosure, not action. A company can comply by stating that it does nothing to address forced labor in its supply chain. The law creates no obligation to audit, verify, or remediate; only to report whether the company engages in these activities. Studies have found that the majority of covered companies publish boilerplate disclosures with minimal substantive content.

UK Modern Slavery Act (2015)

The United Kingdom’s Modern Slavery Act 2015, Section 54, requires commercial organizations that supply goods or services with an annual turnover of £36 million or more to publish an annual “slavery and human trafficking statement.” The statement must describe the steps the organization has taken during the financial year to ensure that slavery and human trafficking are not occurring in its business or supply chains; or state that it has taken no such steps.

The UK Act was more ambitious than its California predecessor but shares similar weaknesses. Compliance rates have been poor: a 2020 study by the Business & Human Rights Resource Centre found that only 36% of required companies had published statements that met the minimum requirements of the Act. Many statements were vague, generic, and failed to identify specific risks or remediation efforts. The Act lacks meaningful penalties for non-compliance; enforcement has been limited to public naming and shaming.

The UK government has since strengthened the framework through amendments and established a Modern Slavery Statement Registry, making corporate disclosures publicly searchable. However, critics maintain that disclosure requirements without mandatory due diligence obligations are fundamentally inadequate.

EU Corporate Sustainability Due Diligence Directive

The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024, represents the most ambitious corporate accountability framework enacted to date. Unlike the California and UK disclosure-only models, the CSDDD imposes mandatory human rights and environmental due diligence obligations on large companies operating in the EU.

Key provisions include:

• Mandatory due diligence: Companies must identify, prevent, mitigate, and account for adverse human rights impacts in their operations and supply chains.
• Scope: Applies to EU companies with over 1,000 employees and €450 million in net worldwide turnover, and non-EU companies with €450 million in turnover generated in the EU.
• Enforcement: National supervisory authorities can impose fines of up to 5% of worldwide net turnover for non-compliance.
• Civil liability: Companies can be held civilly liable for failures to prevent adverse human rights impacts that they should have identified and addressed through proper due diligence.
• Stakeholder engagement: Companies must engage meaningfully with affected stakeholders, including workers and communities, as part of their due diligence processes.

The CSDDD is expected to have global impact, as companies with EU market exposure must comply regardless of where they are headquartered. This extraterritorial reach means that major American, Asian, and other multinational corporations will be subject to EU due diligence requirements for the first time.

Uyghur Forced Labor Prevention Act (2021)

The Uyghur Forced Labor Prevention Act (UFLPA), signed into law on December 23, 2021, established a rebuttable presumption that all goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region of China are made with forced labor and are therefore prohibited from importation into the United States under Section 307 of the Tariff Act of 1930.

The UFLPA responded to extensive documentation of forced labor in Xinjiang, where the Chinese government has detained an estimated one million or more Uyghurs and other Turkic Muslims in internment camps and subjected camp detainees and other Xinjiang residents to forced labor in agriculture (particularly cotton), manufacturing, and raw material extraction (particularly polysilicon, a key component of solar panels).

Corporate Audit Failures

Social auditing, the practice of hiring third-party firms to inspect supplier factories and farms for labor violations, is the dominant mechanism through which corporations claim to monitor their supply chains. It is also, by broad consensus among researchers, deeply flawed.

Systemic Problems with Social Auditing

Announced audits: The majority of social audits are announced in advance, giving suppliers time to hide violations, coach workers, and present a sanitized workplace. Workers are often instructed on how to answer auditor questions and threatened with termination if they report problems.

Auditor incentives: Auditing firms are paid by the companies they audit, creating a structural conflict of interest. Auditors who identify too many violations risk losing clients. The competitive pressure to keep costs low and turnaround times fast further degrades audit quality.

Shallow scope: Standard social audits typically involve a single day at a facility, with a focus on easily observable conditions (fire exits, posted wage records, protective equipment). They are poorly designed to detect forced labor, debt bondage, document confiscation, or other coercive practices that are deliberately hidden.

Sub-supplier blindness: Most audits cover only first-tier (direct) suppliers. Forced labor is most prevalent deeper in supply chains; at raw material extraction sites, sub-component manufacturers, and informal workshops that audits never reach.

Litigation: Nestlé USA v. Doe

The U.S. Supreme Court’s 2021 decision in Nestlé USA, Inc. v. Doe (593 U.S. 1) was a significant setback for corporate accountability in trafficking cases. The case was brought by former child slaves who had been trafficked from Mali to cocoa farms in Côte d’Ivoire. The plaintiffs alleged that Nestlé and Cargill aided and abetted child slavery by providing financial and technical support to cocoa farms that used child slave labor, while knowing that such labor was being used.

The Supreme Court ruled 8–1 that the plaintiffs’ claims could not proceed under the Alien Tort Statute (ATS) because the alleged conduct had occurred almost entirely overseas. The Court held that the ATS does not apply extraterritorially, and that general corporate activity in the U.S. (making operational decisions, providing financial support) was insufficient to establish domestic application of the statute. The decision effectively closed the primary legal pathway for victims of overseas forced labor to seek accountability from U.S.-based corporations.

Other Significant Litigation

Doe v. Apple (2019): Families of children killed or maimed in cobalt mines in the Democratic Republic of Congo filed a lawsuit against Apple, Google, Dell, Microsoft, and Tesla, alleging that these companies knowingly benefited from child labor in their cobalt supply chains. The case was dismissed in 2021 on causation grounds; the court ruled that the plaintiffs could not establish a sufficient connection between the specific defendants and the specific mines where the children worked.

Ratha v. Phatthana Seafood (2018): A trafficking case involving Burmese workers on Thai fishing vessels, which supplied shrimp to major U.S. retailers. The case highlighted the extreme difficulty of establishing supply chain liability even when the trafficking is well-documented and the supply chain connection is clear.

Tech Platform Responsibility

Technology companies occupy a unique position in the trafficking landscape. Social media platforms serve as recruitment tools for traffickers. E-commerce platforms sell goods produced by forced labor. Gig economy platforms can facilitate exploitation. The question of what responsibility these companies bear, and what obligations they should face, remains intensely debated.

The Department of Labor maintains the List of Goods Produced by Child Labor or Forced Labor (ILAB List), which as of 2024 identifies 159 goods from 78 countries. Despite this public documentation, goods from the ILAB List are routinely available for purchase on major e-commerce platforms. Cotton from Turkmenistan, fish from Thailand, cocoa from West Africa, and electronics components from regions associated with forced labor continue to flow through global commerce with minimal friction.

What Good Corporate Practice Looks Like

While the overall picture of corporate accountability is poor, some companies have demonstrated that meaningful supply chain due diligence is possible. Best practices include:

• Mapping supply chains beyond the first tier: Companies like Patagonia have invested in mapping their supply chains down to raw material sources, publishing the results publicly.
• Worker-driven social responsibility (WSR): The Fair Food Program, developed by the Coalition of Immokalee Workers in partnership with major food buyers, uses legally binding agreements between brands and worker organizations to enforce labor standards. The program has been credited with virtually eliminating forced labor in participating Florida tomato farms.
• Unannounced audits with worker interviews: Companies that conduct unannounced audits, with independent off-site interviews with workers, detect significantly more violations than standard announced audits.
• Responsible recruitment: The Employer Pays Principle, adopted by companies including HP, Apple, and Hewlett Packard Enterprise, requires that workers should not pay for their jobs. Companies reimburse recruitment fees that workers have been charged by labor brokers.
• Remedy and remediation: When forced labor is identified, responsible companies take corrective action rather than simply terminating the supplier relationship; which can push exploitation further underground. This includes working with suppliers to remediate conditions, providing back pay to affected workers, and supporting affected workers’ access to justice.