A Reality Hidden in Plain Sight: Child Labour Practices in Disintegrated Supply Chains

June 12th every year marks the World Against Child Labour Day. In a stark irony and disturbing development a week later, 58 children with burn injuries were rescued from a liquor factory owned by Som Distilleries & Breweries (SDBL) in Bhopal.

The incident came to light on 19th June and marks the first known instance of child labour in a publicly listed company in India. This incident underscores the complex and perplexing nature of supply chains that can inadvertently become breeding grounds for child labour practices.

SDBL, a company with a market capitalization of around INR 2,400 crore, announced that the issue involved an associate private limited company where labour was supplied by a contractor who may not have verified the ages of the workers.

The rescue operation at the SDBL plant, assisted by an NGO – Bachpan Bachao Andolan, highlights the hidden perils within the supply chains of even large, organized companies. This trend can be noticed even more in underdeveloped and developing countries. According to the NGO, this is the first time such an instance of child labour in a big, organized setup has come to light.

While listed companies seldom engage directly in child labour, their extensive and often disjointed supply chains can obscure unethical practices. Sectors like textiles, carpets, mining, firecrackers, and agriculture, characterized by complex and fragmented supply chains, are notoriously difficult to monitor and regulate.

Bino Paul, a Tata Institute of Social Sciences professor, explains the difficulty in monitoring these practices: “A big contractor will outsource more work with pruned margins. A factory inspector cannot supervise such a disintegrated supply chain where work can also be done in an indoor or home setting involving children. Disintegrated operations with an objective to reduce costs and protect the margins lead to such scenarios.”

The disintegration of supply chains has resulted in a lack of accountability, making it challenging to ensure compliance with child labour laws. The need for cost reduction often leads to outsourcing work to smaller entities, which may not adhere to ethical labour practices. This creates loopholes where child labour can thrive unnoticed.

SDBL, in its FY23 annual report, claimed compliance with the Child Labour (Prohibition & Regulation) Act, 1986, and reported that 100% of its plants and offices were assessed regarding child labour.

“Most children are forced to work due to poverty. And unless the problem of poverty is addressed, it is difficult to eliminate child labour,” said a sustainability head of a large business group. It becomes evident and imperative that companies conduct thorough supply chain audits and take responsibility for rehabilitating any children found working in their supply chains.

Child labour is globally recognized as one of the worst forms of violence against children. One of the targets of the United Nations’ Sustainable Development Goals is to eliminate child labour in all its forms. However, as the incident at SDBL illustrates, achieving this goal requires a concerted effort to address the root causes of child labour and enforce stringent compliance across all levels of supply chains.

According to the Kailash Satyarthi Children’s Foundation, child labour in India is projected to affect around 7.43 million children aged 5-14 by 2025. This stark reality calls for immediate and sustained action to ensure that supply chains are transparent and ethical, safeguarding the rights and futures of vulnerable children.

The issue of child labour should be of the greatest importance for businesses and decision-makers even in the countries in which it is not detected in the supply chain. Governments should play a major role in addressing child labour by imposing mandatory human rights due diligence and modern slavery disclosure laws.

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