Modern slavery

The use of blockchain to support cryptocurrencies has attracted significant worldwide attention. Less celebrated is the technology's potential to prevent deception in cross-border human resources recruitment. 18 months ago, I was not familiar with the issue of modern slavery. The Mekong Club, a Hong Kong-based NGO, has helped educate me on the scale and the depth of this issue. In the words of CEO Matt Friedman:

"There is no city in Asia that has had more exposure to this issue. With the tools that are being developed and the pledge that is coming out, I think Hong Kong will eventually be a best practice when it comes to corporate involvement in... helping to address humantrafficking."

This has led me to getting heavily involved in projects focused on combating slavery, child labour and unfair working practices via distributed ledger technology.

I try to understand the advantages of blockchain around transparency and disclosure. Regulation and policy frameworks are key. They drive an intersect with private sector implementation which can effect behavioural changes. This is particularly the case in what we call pre-competitive collaboration. In this phase, companies, governments, intergovernmental organisations and NGOs come together to try and solve issues.

Diginex's main blockchain project working to combat modern slavery is called eMin. Our aims are practical yet far reaching. We aim to significantly reduce the potential for employment fraud and forced labour; incentivise agents and corporations to act ethically and responsibly; reduce costs of migration between countries and companies; and process visa, work permit and employment applications with one identity. Overall, our purpose is to harness the power of blockchain technology to empower those at risk of exploitation.

Slavery – a thing of the past?

People have this concept of slavery as someone being snatched and taken away. That certainly is still the case, but what we focus on is forced labour within complex private sector supply chains. Around two-thirds of the 45 million modern slaves are people who voluntarily move from one country to another. They are simply looking for a better job, and then in the course of that journey they are exploited. Today, there are more people impacted by modern slavery than there are Canadians, and there are more people in slavery than there have been in any other time in history. It might be a young boy forced on to a fishing boat to work 18 hours a day without coming into port, or a sweatshop worker who toils 17 hours a day making jeans without a day off or any pay.

How does it happen?

Modern slavery is in the supply chains of the world's largest food manufacturers, apparel manufacturers, and electronics manufacturers. We are talking about the food that we eat, the clothes that we wear, and the cosmetics that we use. How does this modern slavery happen? Say, a person agrees a move from Cambodia to Thailand. Recruiters gain the trust of victims or their family members, but then may offer false promises of well-paid employment. They often offer young, vulnerable people facing hardship the chance to improve their lives and the lives of their families. In most cases, the victims have no idea of the reality that they will find themselves in.

Debt is a key tactic

Traffickers often charge excessive recruitment fees that require victims to borrow money or provide cash advances to the victim or the family, which must be paid off.

The victim is then held until the debt is completely paid. Often the lender uses false accounting, invents additional debt, or charges excessive interest to heighten the debt and create uncertainty over the timeframe for payment. In some cases, oppressive or illegitimate contracts are used to justify forced labour. Often, these fraudulent agreements are signed by victims who cannot read or are presented in a foreign language they don’t understand. Victims are told that if they leave the work for which they have signed a contract, penalties or fines will follow.

The average fee that a migrant worker pays in order to secure a role in the apparel manufacturing industry is US$3,000-4,000. Migrant workers are taking out loans from the very same people that are charging them the fees in the first place in order to secure the role. They are often being charged punitive interest rates, they often don't speak the local language, and they are fearful of going to the local police. They are physically or verbally abused and, crucially, there is a lack of cross-border oversight.

Hidden in complex supply chains

Complex supply chains made up of multiple levels create many opportunities for modern slavery to flourish. Take the manufacture of a coat. Tier one suppliers are the people who make our coats and here we have some degree of visibility. But beyond that, in tier two you have the people that make the buttons, and then in tier three you have people who make the pigments and dyes that go into the buttons that go into the coats. If you look at Nestle who work with 165,000 small stakeholder farmers around the world, it's very difficult for them to get transparency up and down their supply chain.

Transparency

The role of the employment agency is key. Say I'm someone in Bangladesh and I want to go to Malaysia. I work with an employment agent in my country of origin. Then I work with an appointment agent in my country of destination and I sign contracts in both. There are some employment agencies that do the right thing and some do the wrong thing. For those that want to do the right thing blockchain enables them to demonstrate to the large global brands that they are capturing information and they can be transparent as to their process.

eMin recently worked with a company who was happy to declare it worked with an auditing company. It made declarations around its holistic social governance policies, with 10,000 workers in Southeast Asia, and that the air conditioning was kept on 21 degrees all year round to promote a positive work environment. Then we found out that it only turned the air conditioning on for two days a year when the auditors came through. Every other day of the year the company turned it off, making a significant saving in electricity. With eMin's new procedures in place, the auditing company now captures the temperature of that factory in real time. External parties, NGOs, auditors, trade finance teams at banks can all understand more.

A race to the top

Companies are divided roughly into three groups. Those who culturally and ethically have always striven to do the right thing. We know who they are, that's part of their brand, they’re well known for it, and they aspire to be the best. The second group of companies are people who have run into legislative difficulties due to their working practices. Therefore, they need to demonstrate that they're trying to improve. Then you have the third category of companies trying to catch up. But certainly, in the first two categories there is a very sizable universe of large multinational companies who are trying to demonstrate to the world they’re doing the right thing around social governance.

Rather than going to a thousand factories once a year and saying: "I'm coming on 28th May with a clipboard, please get ready for me", how do we capture real-time information that makes the trip a lot more valuable from a resource perspective? We complete as much of the quantitative data collection before the auditor arrives so they can then focus on capability building and the gaps in the quantitative data.

Shrimp farming in Thailand

We’re very proud of our first pilot in Thailand working in the shrimp farming industry. Our aim is to improve the operational effectiveness of labour recruitment and record management practices.

Our team spent one week on-theground in Bangkok and Phang Nga, engaging with workers, managers, corporates, auditors, nongovernmental organisations and intergovernmental organisations to get feedback on the eMin tool.

More specifically, the eMin team garnered insights from managers and employees from shrimp farms that are being used to modify the process flow of the eMin mobile application and to integrate additional functionality.

Beginning with 350 workers across 17 shrimp farms, the next step for the eMin team will be to roll out the tool to wider groups. In partnership with data intelligence and analytics company Verifik8, we aim to reach 5,000 workers on 100 farms in Thailand, within agriculture and aquaculture. We have more pilots planned across Asia in the next few months.