In 2000, the United Nations Global Compact was founded, and in 2007, it became the main force behind the Geneva Declaration on corporate responsibility. The idea was that companies would, voluntarily and collaboratively, work together to respect human, labor, and environmental rights in their businesses, including along complex supply chains.

The Global Compact was one of many similar initiatives, often spurred by campaigns or investigative journalism reports, that sought to end abuses in supply chains and improve sustainability. The World Benchmarking Alliance setup a corporate human rights benchmark, while the Consumer Goods Forum (CGF) launched a Human Rights Coalition. Companies including Cargill, Google, Airbus, and Coca Cola released human rights guidelines that, on paper, looked quite strict, stating clearly. For example, Microsoft declared that “suppliers must comply fully with all employment laws, share its commitment to respect all human rights… and take effective measures to remedy any adverse human rights impacts.”

Yet, more than 20 years later, the impact of these efforts are less than clear. While some companies have made progress, and shown commitment to better sourcing and monitoring of human rights along their supply chains, many have not.

“With voluntary guidelines, the key issue is the gap between commitment and real life implementation,” said Johannes Blankenbach, a researcher with the non-profit Business and Human Rights Resource Center (BHRRC), to The Diplomat.

The BHRRC and other watchdogs like Human Rights Watch, Somo, The Breakthrough Institute, and Walk Free, have found that most companies aren’t meeting their commitments. Across the Global South, especially in Asia, where most goods are manufactured, labor rights continue to be violated by those supplying global brands.

But things are changing. There’s a growing call for mandatory regulations in key importing markets like the United States, Canada, and Europe. This year, new forced labor laws are being passed in places like Vietnam and India, partly due to tariff threats from the United States. While still not universal, they are signs we may be heading to a new paradigm where supply chains are monitored not by nonprofits and the media, but but strict laws and real financial repercussions. 

While this will most directly impact countries like China, where state-mandated forced labor of Uyghurs has been well-documented, the entire Asia-Pacific region needs to pay attention or face similar restrictions on foreign market access. 

Why Voluntary Commitments Often Fail

There are numerous reasons why voluntary efforts have mostly failed to have the impact that was once hoped for. To Blankenbach, a key issue is accountability.

“In the voluntary system, there is no central or reliable oversight. Some was done by NGOs, but due to limited resources, that was not comprehensive, and there was no way to sanction companies that weren’t complying,” said Blankenbach.

In general, organizations like CGF or the U.N. rarely monitored members of their voluntary groupings. It was often non-profits like the BHRRC, or the media, that exposed the failures of companies to meet their commitments. And even then, the punishment was often little more than public shaming.

“For things like the Global Compact, strongest enforcement would be, maybe, an exclusion of a member,” said Blankenbach.

Another issue is that competitors aren’t always held to the same standards, especially if they’re based outside the United States, Europe, or a few other markets where consumers demand sustainability, like Japan. An American shoe company could invest heavily into making its supply chains ethical, only to see a Chinese or Vietnamese competitor undercut it on costs, and face far less pressure.

There is also the cost issue. It can be expensive to properly manage one’s supply chain, and that can put a company at a disadvantage. In a world where investors are focused on quarterly returns, that can be challenging.

“Under current market conditions, it may be a short-term economic or financial disadvantage to invest in due diligence,” said Blankenbach.

By contrast, mandatory human rights due diligence law would put legal requirements on companies to ensure that forced labor, coercion, social abuses, and more, don’t exist at all within a supply chain. And if violations are found, a company can face legal or financial repercussions. It’s a market shift from the voluntary model, and puts governments in the center of enforcement. 

The benefit of a mandatory law is that it can even the playing field, putting the same requirement on all companies, or at least all companies of a similar size. In fact, some companies support mandatory due diligence for this very reasons. 

The best example of a strong due diligence law is the United States’ 2022 Uyghur Forced Labor Prevention Act (UFLPA). It was focused on one region – Xinjiang in China, the homeland of the Uyghur people. Since at least 2018, Uyghurs have been subjected to various crimes against humanity, including the largest system of concentration camps since World War II, housing at its height perhaps as many as 3 million Uyghurs and other Turkic Muslim minorities. Alongside this is ongoing cultural genocide, as mosques, cemeteries, shrines, and historic Uyghur neighborhoods have all been destroyed. 

“The Uyghur people are facing a humanitarian crisis, and countries around the world must treat it with the urgency it deserves,” Elfidar Iltebir, a Uyghur American and president of the Uyghur American Association, told The Diplomat.

But, for businesses, the big news was the increasingly irrefutable evidence that mass-scale, state-sanctioned forced labor of Uyghurs is being used in farms and factories throughout the region. Goods made with Uyghurs’ forced labor are flowing into global supply chains, with cotton, tomatoes and solar panels just a few of the sectors implicated.

There are two things that made what is happening in Xinjiang unique when compared to the many instances of forced labor that exist along supply chains around the world. The first is the fact that the state is playing a direct role in coercing Uyghurs and others into forced labor situations. The second is that the surveillance state is so overwhelming that independent audits or analysis aren’t possible.

“The only due diligence you can conduct in this context is to determine if your supply chain is linked to a region where state-imposed forced labor is occurring or to a company that relies upon state-imposed forced labor,” said Dean Pinkert, a special advisor at the Corporate Accountability Lab, to The Diplomat. “Companies should simply extricate themselves from these kinds of situations.”

Why Cooperative and Coordination Matters

The UFLPA was passed three years ago, and has been remarkably effective, preventing at least $1.3 billion worth of goods linked to Xinjiang from entering the United States in just its first year of enforcement. But it presented another problem – those goods were just going to other markets that lacked similar legislation, such as Europe, Mexico, Canada, and Southeast Asia.

In fact, there is evidence that Chinese companies who are linked to Uyghur forced labor are not cutting ties with suppliers in Xinjiang, or pressuring the government to end human rights abuses, but merely bifurcating their supply chains. 

“Companies may decide we can’t sent certain goods to the U.S. market, so we’ll send those to the third countries, and send goods not connected to labor abuses to the U.S.,” said Pinkert. “They’re not actually cleaning up the supply chain, they are reorganizing it.”

The fast fashion giant Shein was recently accused of doing just this – sending goods not linked to forced labor from the Uyghur regions to the United States, but sending tainted goods to other countries. Those allegations were detailed in a report recently released by the non-profit China Labor Watch. 

“Open-source evidence indicates Shein has partnered with industrial parks linked to Xinjiang textile firms, including companies sanctioned under the UFLPA,” wrote Qiang Li, China Labor Watch’s founder. “While Shein denies sourcing from Xinjiang for U.S. markets, it has made no such commitment for the U.K. or global markets.”

Shein has consistently denied any links to human rights violations in Xinjiang, including forced labor.

The solution is to expand acts like the UFLPA in other countries, but these laws should also address forced labor in other markets and industries too. That would put the burden on companies to ensure their supply chains are free of human or labor rights violations. 

And here there is good news – Europe is considering a massive Corporate Sustainability Due Diligence Directive (CSDD), which would put stringent requirements on companies. Similar policies are being considered in South Korea, Colombia, and elsewhere.

“Over the last couple of years, there is a trend towards mandatory rules, which is positive and necessary,” said Blankenbach. “I hope this trend is here to stay, and continue in other parts of the world.”