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Solutions against child labour

Investment Board

The Erste AM Investment Board gives a structured form to the ongoing and responsive dialogue with and among sustainability research agencies. The Board offers the chance to integrate in-house and external research. It also discusses rating details, the ESG‘s assessment of the IPOs of new issuers and sustainability issues in general.

The good news is that child labour is on the decline, as substantiated by data from our research partners and from the International Labour Organization (ILO). According to ILO, the number of working children below 14 years of age decreased between 2008 and 2012 by 12%. UNICEF estimates that “only” ten percent of children in developing countries have to work anymore.

However, this is only one side of the medal. Whereas the well-known cases of child labour in large, international companies have been on the decline, the problem of child labour continues in the extended supply chain, e.g. in the production of raw materials. According to UNICEF, about a quarter of the children in the least developed countries remain affected by child labour.

There is no simple solution

The solution sounds simple: companies should not hire children. Unfortunately, the reality is more complicated than just having to check the age or the forged IDs of adolescents. The boycott of goods from regions at risk such as Congo is not constructive either. Such measures create a situation where children whose families depend on the additional income are forced to move from factory jobs to even more harmful child labour such as mines or prostitution.

Ideally the income of their parents would have to rise by such a degree as to ensure they can provide for their family also without the income made by their children. In addition, there have to be solutions to make schools accessible to all both financially and in terms of the organisation of daily routines. While this is the government’s task, there are pioneering companies that have built schools at their locations.

Companies are hiding behind certifications

Controls and the active cooperation of all agents within the supply chain represent a pragmatic approach. Commodity producers are of particular relevance, because their sectors come with the highest degree of risks. There is a fundamental difference between a textile company maintaining a direct, long-term relationship with its cotton farmers and one that sources its raw materials on the global markets with price as the main driver. Industrial initiatives such as Better Cotton and Electronic Industry Citizenship (EICC) in the IT sector support this development. However, experts are warning that companies continue to hide behind certifications instead of actively addressing the problem. Our partners have cited Samsung in the IT sector, Cargill in cotton trade, and Mondelez in the cacao industry as negative examples.

Even if the overall picture still has its darker areas despite all the improvements, there is hope. While child labour used to be a reputation risk above all, it has gradually turned into an operating risk. In 2016 a federal law was passed in 2016, starting with California, according to which companies have to prove that their products are free of forced labour and child labour. If goods infringe with the law, they can be confiscated. The UK has followed suit with a similar law. More are hopefully to follow.

[Dominik Benedikt]

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