The financial sector has played a key role in the fight against contemporary slave labour and trafficking in persons in Brazil since the Federal Government began to provide quality information about the issue, making it possible to conduct risk management procedures with clients and partners. This has contributed to implementing compliance and due diligence policies and consequently to improving workers’ quality of life.
The seminar “The financial sector’s role in the fight against slave labour and human trafficking” – the first of its kind in Brazil – gathered representatives from the banking and financial sectors, companies, and government agencies working to regulate that industry and to fight slave labour, and from the organized civil society, as well as from the United Nations. It discussed how the financial sector is fighting slave labour in Brazil and worldwide, and the challenges and perspectives for developing corporate policies and regulatory frameworks in this area. The event took place on March 15, in São Paulo.
The seminar was organized by Brazil’s Labour Public Prosecutor’s Office and NGO Repórter Brasil, and it was co-sponsored by the United Nations University and the Liechtenstein Initiative – Global Financial Sector Commission on Modern Slavery and Trafficking in Human Beings. The event also seeks to works with the Liechtenstein Initiative to create a global recommendation for financial institutions and investors to combat that crime.
Brazil was one of the first countries to recognize the persistence of modern slavery before the United Nations. It was the first country to create an effective national public policy focused on freeing workers in 1995 and to launch an integrated plan to combat that crime in 2003, when it also started publishing a periodical list of offenders. It created the first cross-sector business pact against modern slavery in 2005 and implemented pioneering repression and prevention measures that have become benchmarks worldwide.
Nevertheless, in 2017 it also became the first country to be convicted of omission by the Inter-American Court of Human Rights in a case of slave labour – an example of the challenges faced by government, businesses and civil society to eradicate that crime from its territory and improve the quality of the national production. Therefore, we believe that it is necessary to improve communication among these sectors and to seek new tools and strategies to combat slave labour and human trafficking.
The main debates during the three panels of the event are described below:
Panel 1 – Despite of existing public and corporate policies, it will be difficult to eradicate slave labour by 2030
Meeting the target of the 2030 Agenda will require improved mapping of production chains as well as companies and governments being more engaged than they have been so far
The challenge to eradicate slave labour in the world by the end of the next decade – in order to meet one of the targets of the United Nations 2030 Agenda for Sustainable Development – is a hard one. It will require increased mapping of supply chains as well as more action by both businesses and governments, in addition to regulation and enforcement that encourage the business sector to adopt better standards.
These were some of the opinions provided by experts present at both the opening section and the first panel of the seminar “The financial sector’s role in the fight against slave labour and human trafficking” – the first of its kind in Brazil. It was organized by Brazil’s Labour Public Prosecutor’s Office and NGO Repórter Brasil, and co-sponsored by the United Nations University and the Liechtenstein Initiative – Global Financial Sector Commission on Modern Slavery and Trafficking in Human Beings. The event took place on Friday, March 15, in the city of São Paulo. The first panel was mediated by Caio Magri, president of the Ethos Institute of Business and Social Responsibility.
According to the International Labour Organization, about 40 million people work in conditions analogous to slavery. Zeroing that number by 2030 is equivalent to eliminating about nine thousand forced jobs a day for 11 years. The Brazilian context can exemplify the magnitude of the challenge. From 1995 until the beginning of 2019, Brazil freed 53,607 people from slave labour, according to Chief Labour Public Prosecutor Ronaldo Fleury. “That’s official data, but the figures could be higher, and budget issues may have an impact [on that number in the future]”, he said. Brazil’s fiscal crisis has tightened ministries’ budgets – which may have an impact the number of labour inspections and consequently the number of people freed from conditions analogous to slavery.
According to James Cockayne, director of the Centre for Policy Research of the United Nations University and head of Secretariat for the Liechtenstein Initiative, “Brazil, which has broken records in terms of workers freed, has done [the equivalent of] ten days of what the world will have to do until 2030 to eliminate forced labour, which shows the size of the challenge ahead of us”. Brazil faces both challenges and opportunities.
The investment cycle expected in the country, which includes concessions and privatizations of infrastructure and sales of shares in state-run companies, may cause foreign investors to begin looking into the socio-environmental risks when they conduct business analysis. The Federal and state governments are discussing concessions of roads, ports, airports, railroads, which may attract over 50 billion reais in investments. In early March, in an auction of 12 airports, two international groups acquired positions in Brazil. This movement occurs amid approval of international legislation in which procedures of social risk analysis gain ground in corporate agendas for negotiating with suppliers or customers. “France and Germany already have laws that require human risk analysis”, said Cockayne. Canada and Norway are discussing similar legislation.
According to Flávia Scabin, head of the Research Group on Business and Human Rights of the Getúlio Vargas Foundation (FGV-SP), these international regulatory movements are in contrast with what is seen in Brazil.
Last November, Decree 9571 set national guidelines for businesses and human rights. The legislation establishes that companies are voluntarily responsible for implementing them. “In other countries, legislation has been pushing the issue forward. According to a study currently under way in Brazil, conducted in partnership with the International Labour Organization, the country is moving against the trend. And the changes in the Ministry may also have an impact”, Scabin said.
The current government extinguished the Ministry of Labour, which used to supervise labour conditions and punish companies that broke the law. Its functions were transferred to and divided among the ministries of Economy, Citizenship and Justice. Scabin also pointed out that analyses of sustainability reports of large Brazilian corporations indicate that few of them address the human rights issues in their discussions and their businesses within value chains – “Child labour in the chains is hardly discussed, for instance.”
The challenges include increasing the engagement of the whole value chain in the debate and increasing the dissemination of transparent information on the issue, said Denise Hills, chief sustainability advisor at Itaú and Global Compact Network Brazil president. Today Brazilian banks cannot operate with companies included in the ‘dirty list’ – the registry of employers caught using slave labour, which was created by the Ministry of Labour in 2003 and is now maintained by the Ministry of Economy. She also recounted that during trips abroad, issues of human rights and working conditions are increasingly raised by clients.
More accurate information is essential to minimize the problem. “If we evolved from a list to a system, the information would spread further and gain complexity”, she said. In the value chain, the challenge is also to scale up adoption of mechanism to assess and monitor companies. “This is more difficult in smaller companies because it requires independent assessment, which has its costs. Statistics show that corporations have 154 of the world’s top 200 highest GDPs, so this pressure for regulation and self-regulation tends to grow.”
Banks have been looking for more information on the issue, even when it is not publicly available. An example is the ‘dirty list’, whose publication was suspended by the Brazilian Supreme Court (STF) between 2014 and 2016 at the request of an association of real estate developers which questioned the list’s constitutionality. During that time, large financial institutions followed the initiative of Repórter Brasil, Ethos Institute and the Institute for the National Pact to Eradicate Slave Labour (InPacto). They used the Right to Information Act to know the names of employers caught by the government using slave labour and who had their sanctions confirmed by two administrative jurisdictions.
“Banks realized that the list was useful for risk management and have adopted measures that impact on credit”, said Repórter Brasil’s director Leonardo Sakamoto, who is also a board member of the United Nations Fund for Contemporary Forms of Slavery and a Commissioner to the Liechtenstein Initiative. Sakamoto also points out that the inclusion of companies in the ‘dirty list’ has caused the values of their shares at B3 – formerly known as the São Paulo Stock Exchange – to drop. He showed data describing how this happened with companies from the sugar-alcohol and construction industries, for example.
Panel 2 – The financial sector in Brazil and the world still has much to evolve in the fight against slave labour
The sector’s discourse of concern for social issues has not fully translated into practice, experts say
As funders of companies from various industries, banks and financial institutions still have much to evolve in order to contribute to reduce slave labour in Brazil and the world. An example of the challenges can be seen in the Corporate Sustainability Index of B3 – formerly known as the São Paulo Stock Exchange –, which includes publicly traded companies with recognized sustainability practices.
The most recent B3 CSI portfolio was announced on November 29, 2018 and is valid from January 7, 2019 to January 3, 2020. It comprises 34 shares of 29 companies, four of which are financial institutions: Banco do Brasil, Bradesco, Itaú and Santander. Brazilian mining company Vale was excluded from the current index in February, following the environmental disaster in Brumadinho, Minas Gerais.
The basis for the indicator is self-declaration, that is, companies voluntarily respond to a questionnaire presented by experts. In the questionnaires, the four banks said they considered the issue of forced labour in their decisions, but that percentage dropped to 80% when dealing with acquisitions and mergers and to 20% when assessing investments.
“This points to a weakness: the discourse has not yet become practice”, said Aron Belinky, a researcher and consultant who participates in the development and application of instruments such as the B3 CSI, Exame magazine’s Sustainability Guide, and ISO 26000. Workshops will be held on March 27-29 as part of the process of periodic review of the B3 CSI questionnaire sent to companies that want to be included in the Index. This process aims to improve and legitimize with companies and society the criteria and indicators used in the methodology of the Corporate Sustainability Index. Proposals for adjusting changes in the questionnaire will be presented and discussed during the workshops. These proposals will also be available for public consultation on the B3 CSI website.
“This opens up the opportunity for everyone to help improve these questionnaires and it is important to stress that they are available on the website for anyone to consult them and see what companies declare in their human rights policies. This interaction allows raising the bar”, said Belinky.
The gap between discourse and practice was also pointed out by Rafael de Araújo Gomes, a Labour Public Prosecutor and coordinator of the Working Group on Economic Instruments and Governance of the Labour Public Prosecutor’s Office. He said that negotiations between the Office and the banks to suspend loans to companies using forced labour show the difficulties that still remain to make progress on the issue.
“We discussed it for a year; the counterproposals pointed out that the banks were focusing on suspending credit in rural and BNDES’s [The Brazilian Development Bank] credit operations – that is, low-interest money. They took the issue of slave labour into account when granting credit, but this still does not mean automatic suspension of loans”, said Araújo Gomes. Clauses suspending credit for involvement with slave labour are still a minority in loan contracts.
The prosecutor said that civil public lawsuits have increased the debate on the issue in the Judiciary and that is when one realizes that few institutions include clauses interfering with loans when social issues are found. “Top management involvement in these matters is essential and still rare.”
Araújo Gomes was one of the experts present in the second panel of the seminar “The financial sector’s role in the fight against slave labour and human trafficking” – the first of its kind in the country – organized by the Labour Public Prosecutor’s Office and NGO Repórter Brasil, and co-sponsored by the United Nations University and the Liechtenstein Initiative – Global Financial Sector Commission on Modern Slavery and Trafficking in Human Beings. The event took place on Friday, March 15, in São Paulo.
According to Labour Public Prosecutor Luís Fabiano de Assis, head of the Smart Lab Initiative on Decent Work and a Human Rights and International Justice Research Fellow at Stanford University, it is essential to have more involvement by the financial and other business sectors as well as more data on the subject. He was the mediator of the second panel.
“Dissemination of data contributes to empowerment and to spreading metrics”, he said.
For Anita Ramasastry, director of the Sustainable International Development Graduate Program at the University of Washington’s School of Law, another challenge for companies is to think about how to structure programs for those rescued from forced labour so that these workers can survive in a new situation and support themselves and their families.
Banks can make an important contribution here. “They have financial information and provide credit; they can help structure solutions for these workers to be able to support themselves after they have been freed”, said Ramasastry, who is also a member of the UN Working Group on Business and Human Rights and a commissioner of the Liechtenstein Initiative for the Financial Sector. Creating these conditions is essential, since an estimated 40 million people work under conditions analogous to slavery in the world nowadays, which requires scaled-up measures to support those who are freed.
In addition to the role of preventing the proliferation of slave labour, Ramasastry points out that banks can still act at the foundation of the problem, helping with their data to identify what has contributed to companies hiring labour under these terms.
Panel 3 – Global initiatives and agreements have contributed to the debate about the financial sector’s joint responsibility in the fight against slavery
There is a tendency in Brazil’s and the world’s Judiciary to discuss social and environmental accounting and the participation of value chains
The environmental disaster in Brumadinho, MG, in January this year, may help to foster discussions about the joint responsibility of value chains and financial institutions in Brazil. This occurs in the face of a tendency in the country’s and the world’s Judiciary to discuss environmental accounting, that is, the adoption of a holistic view on accidents, reflecting on future generations, multiple ecosystems, various communities, involvement of value chains, and creation of funds for recovering degraded areas in the medium and long terms.
The European Union is discussing a directive to appraise environmental assets in the GDPs of its member countries. In the Judiciary, in turn, the discussion on joint responsibility is strengthened, with concepts such as that of indirect polluters. This has increased interest in the issue in various links along the chain such as financial institutions and investors.
“Financial institutions play a major role with great capillarity; they could be asked to be more transparent with their data because they have a multitude of information and this can contribute to measuring the impact of actions and establishing metrics”, observed Caio Borges, head of Conectas’s Business and Human Rights Program, noting that banks can be often seen as having joint responsibility, since most projects are based on loans rather than businesses’ own capital.
Resolution 4327 of Brazil’s National Monetary Council sets guidelines for financial institutions to establish their socio-environmental responsibility policies. “The financial system sees itself as a major social agent, and soundness is an important value, so it has sought ways to avoid social and environmental risks”, said Rodrigo Porto, head of division at the Financial System Regulation Department of the Central Bank of Brazil.
This debate was part of the third panel of the seminar “The financial sector’s role in the fight against slave labour and human trafficking”, the first of its kind in the country, organized by the Brazilian Labour Public Prosecutor’s Office and NGO Repórter Brasil, and co-sponsored by the United Nations University and the Liechtenstein Initiative – Global Financial Sector Commission on Modern Slavery and Trafficking in Human Beings. The event took place on Friday, March 15, in São Paulo. The panel was mediated by Repórter Brasil’s Natália Suzuki, who is a member of the State and Municipal Commissions for the Eradication of Slave Labour in São Paulo.
According to Borges, it is necessary to think about the next step after the publication of Resolution 4327, which celebrates its fifth anniversary in April this year. “The requirements could be intensified, it will depend on the regulators”, he said. The international arena has raised new issues. In the Netherlands, an agreement has been recently signed between the government, trade unions, NGOs and human rights bodies to establish concrete actions. “That’s how we should set deadlines and build governance.”
That is not an isolated initiative. Across the globe, the financial sector is beginning to look at ways to get more involved in reducing forced labour in order to meet the targets of the 2030 Agenda for Sustainable Development. Estimates indicate that such crime, along with human trafficking, yields about 150 billion dollars annually.
The United Nations University, in partnership with the governments of the Principality of Liechtenstein, Australia and the Netherlands as well as banks, joined a Financial Sector Commission on Slavery and Human Trafficking. In addition to encouraging more information on the subject, the idea is to discuss the adoption of mechanisms to speed up its eradication. Members will meet in April in Australia to discuss financial innovations that could be used to eradicate slave labour and human trafficking.
The meeting is another step forward in the initiative, which has been working since September 2018 to design measures to eliminate the problem. A UN meeting in September 2019 in the United States will launch a report with concrete measures that could be adopted. “There is an effort to create solutions and for each actor to know what each country is doing”, said James Cockayne, director of the Centre for Policy Research at the United Nations University and head of Secretariat for the Liechtenstein Initiative for the Financial Sector.
Another initiative is the platform of Alliance 8.7, which gathers institutions working to combat forced labour, modern slavery, human trafficking and child labour to eradicate them worldwide by 2030. The tool was devised by the United Nations University in partnership with international organizations such as the International Labour Organization and Brazil’s Labour Public Prosecutor’s Office. The project includes data gathering, analyses, a discussion forum, news and studies on the four themes. It aims to spread public policies that contribute to eradicating the problem. “Having more information is essential”, Cockayne said.
At the end of the seminar, Anita Ramasastry, director of the Sustainable International Development Graduate Program at the University of Washington’s School of Law, said that the financial sector could provide more information to improve mapping of value chains. Since banks fund several links – from suppliers to construction companies to shareholders and investors – they have data that may help assessing the role of each agent and its impacts, which, in turn, may help to create tools, either to avoid forced labour or to develop policies to support the lives of those who have been freed.
“Precise information is very important in the fight,” she said.