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UCSD - GPS CASE 16 - 08

Seafood Industry in Thailand:
A Closer Look at the Supply Chain of Nestle’s Seafood
Sourcing in Thailand and Critiquing its Labour
Practices
By: Hrishikesh Somani

School of Global Policy and Strategy, UC at San Diego
Prepared for Professor Peter Gourevitch
Course on Corporate Social Responsibility
Winter 2016

Copyright 2016. No quotation or citation without attribution.

(Source: Verite: Recruitment Practices and Migrant Labor Conditions in Nestlé’s Thai Shrimp SupplyChain http://www.verite.org/sites/default/files/images/NestleReport-ThaiShrimp_prepared-byVerite.pdf)

Copyright 2016. No quotation or citation without attribution.
Executive Summary
The paper takes a critical look at Nestle’s sourcing of seafood material from Thailand, anindustry known to have inhuman labour working conditions in the country. Nestle, with
one of its largest seafood sourcing units in Thailand, recently acknowledged the fact that
their supply chain is rampant with slave labour conditions. The self-reporting act
created a stir; however, we will discuss in this paper if the act was actual self-policing ora PR gimmick. We will draw from what the company has done in similar social issues inanother part of its business, cocoa sourcing from Ivory Coast.
After establishing that, the paper delves into establishing mechanisms that can beemployed by Nestle / monitoring NGOs that could increase the effectiveness of policing.
The model’s effectiveness will come with some drawbacks, which will be included in thecritique; however, the expectation is to ultimately innovate practices that allow larger
room for the likes of Nestle to share responsibility with the society in the matter of its
supply chain.
Background
The fishing industry in Thailand, estimated at around $7bn a year1, has been under
scrutiny by various NGOs around the world for its human rights abuses. Infamous for
trafficking and slavery, the region is mired with inhumane labour practices in theseafood industry. In 2014, the US State Department’s Trafficking in Person (TIP) reportdowngraded Thailand to a tier three level, the lowest level there is in their scale.
1

The Guardian: Slavery and trafficking continue in Thai fishing industry, claim activists
http://www.theguardian.com/global-development/2016/feb/25/slavery-trafficking-thai-fishing-industry-Copyright 2016. No quotation or citation without attribution.
Due to such mal-practices in the seafood industry, Thailand, world’s third largest
seafood exporter, has been facing EU wide ban threats. In April 2014, EU issued Thailanda ‘yellow card’ threatening to ban seafood imports from the region unless they clearedup their illegal fishing and labour abuses. The ban could cost Southeast Asian nations
close to $1bn annually2.
Since the EU yellow card, which was a considerable threat looking at the scale of imports
they have from the region, Thailand has been working towards more stringent laws
against child labour and slavery, especially in this industry.
“A top-down government with absolute power ironically lacks mechanisms to solve humantrafficking problems at home, due to both a lack of cooperation and corruption fromagencies and personnel involved. Rectifying human trafficking cannot simply be ordered
and delivered from the top – it involves carrots and sticks on the ground,” said Thitinan
Pongsudhirak, director of the Institutes of Security and International Studies.3What is interesting to see is that up to 90% of these labour workers are migrant workers
from neighbouring countries, many of whom are trafficked into the region.
Amidst such hue and cry created by the ban threats, around 7 months later, Nestle
admitted to having found slave labour practices in its own supply chain in Thailand. In
an act of self-policing, the Geneva based food giant concluded its year-long internal
investigation and came up with the conclusion that there was, in fact, slave labour in its
sea food sourcing from Thailand. The official statement also mentioned how every
23Ibid.
Ibid.

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seafood sourcing company is facing the same challenge in their supply chains and that it
is a nationwide problem, instead of being just relevant to Nestle.4
The labour workers are from Myanmar, Cambodia, and other poorer neighbours ofThailand. When they arrive, the brokers illegally charge them extremely high brokerage
fees to get a job. Once in the job, they are forced to work in fishing fields, fishing vessels,
ports etc. to pay back a sum much larger than their earnings.5“Sometimes, the net is too heavy and workers get pulled into the water and justdisappear. When someone dies, he gets thrown into the water,” one Burmese worker
told the non-profit organisation Verité in a report commissioned by Nestlé. “I have beenworking on this boat for 10 years. I have no savings. I am barely surviving,” said another.
“Life is very difficult here.”Self-Policing
A question being debated now is if self-policing is the best strategy to deal with internallabour mal-practices in large organisations. What incentives does it give large
corporations to self-police and report all mal-practices fairly and work on the root
causes? Many also argue for the need for any incentives to do such a cleanup. For ahumanitarian anomaly, one shouldn’t need extra incentives for cleanup; the fact that thecleanup act can add value to thousands of lives should be enough for corporations.
4Bloomberg Business: Nestle Finds Abuse, Forced Labour by Thai Seafood Suppliers
http://www.bloomberg.com/news/articles/2015-11-24/nestle-finds-abuse-forced-labor-by-its-thai-seafoodsuppliers (retrieved on March 14, 2016)
5The Guardian: Nestle Admits to Forced Labour in its Seafood Supply Chain in Thailand
http://www.theguardian.com/global-development/2015/nov/24/nestle-admits-forced-labour-in-seafoodsupply-chain (retrieved on March 14, 2016)

Copyright 2016. No quotation or citation without attribution.
Although, corporations run with the core objective of maximizing profits, spending
money on expenses that have no direct financial returns is a disincentive for many
corporations.
In the situation as in our case, did Nestle really make a strong positive move by declaring
labour malpractices in their supply chain? Some labour experts and activists have very
convincingly claimed that owning up to a problem that has been widely acknowledgedby the world is not exactly self-policing. The reports of EU yellow carding Thailand forillegal fishing and slavery in seafood supply chain happened at least 6 months before
Nestle’s declaration of ‘self-policing’. Their contribution to the existing information on
seafood labour mal-practices was technically zero.
So what could self-policing actually imply? Nestle contracted Verite to conduct a study in
its operations in Thai seafood sector to better understand the risks of forced labour andhuman trafficking in the industry in Thailand.
Verite is an American organisation working with the mission of promoting fair labour
practices globally. The organisation claims to ‘illuminate problems, identify solutions,
implement solutions, and document outcomes’.6 The board of directors consists ofpeople from various labour specialisations, corporate responsibility groups, labour
union consultants etc.; implying that there is little chance of private capture on theorganisation.

6http://www.verite.org/what-we-do (retrieved on March 14, 2016)

Copyright 2016. No quotation or citation without attribution.
The report had findings that unravel many cases of human abuse; however, what was
upsetting was that the recommendations made to Nestle were the kind that a company
was not bound to follow and again, didn’t add value to the pre-existing knowledge on
mitigation strategies. To suggest a corporation to, ‘legalise employee immigration
without financial burdens’, ‘[providing] workers with unrestricted access to their personal
documents including passports’, ‘[ensure] humane treatment’, ‘providing all workers legal
or protected status and the documentation necessary to ensure labour protections…’,7 etc.
are very general, non-coercive recommendations to Nestle. They directly address theexisting problems by giving a direct solution, however, Nestle and the othercorporations are all aware of these solutions as they are very basic and what is lacking is
the incentive / coercive mechanism for them to implement them. Hence, overall, I found
the report to be intriguing with interesting finds but again, the recommendations need
to be more coercive and strategic in order to get Nestle and the likes to actually feel theimpending importance of labour treatment in their supply chains.
Nestle in the Ivory CoastIronically, with the self-policing claims by Nestle after the Thailand statement get
contradicted when they are seen fighting a lawsuit of child labour and slavery against

7

Verite: Recruitment Practices and Migrant Labor Conditions in Nestlé’s Thai Shrimp Supply Chain
http://www.verite.org/sites/default/files/images/NestleReport-ThaiShrimp_prepared-by-Verite.pdf (retrievedon March 15, 2016)Copyright 2016. No quotation or citation without attribution.
them in Cote d’lvoire (Ivory Coast). Along with Cargill, Archer Daniels Midland, Nestle
has been accused of alleged use of child slaves in coca farming in Ivory Coast.8
The situation is ironical because at one hand, Nestle is claiming to start a self-policing
regime for better labour conditions in its supply chain and on the other hand, it isfighting off a lawsuit for a more profitable business of theirs. According to Andrew
Wallis, chief executive of Unseen UK (a charity promoting better supply chainaccountability), Nestle’s self-reporting in Thailand could be a very well timed tacticalmove to avoid civil litigations.9However, I feel that Nestle might be onto starting a new era of self-reporting bycorporations by its responses on the official ‘Ask Nestle’ page. They have answeredquestions (some quoted below) that show how the company is at least claiming toinitiate programs under its ‘action plan’10 that will help reduce the child labour
participation in cocoa farming in Ivory Coast under its supply chain.

8Business and Human Rights Resource Center: Nestlé, Cargill, Archer Daniels Midland lawsuit (re Côte d'Ivoire)
http://business-humanrights.org/en/nestl%C3%A9-cargill-archer-daniels-midland-lawsuit-re-c%C3%B4tedivoire (retrieved on March 15, 2016)
9
The Guardian: Nestle admits slavery in Thailand while fighting child labour lawsuit in Ivory Coast
http://www.theguardian.com/sustainable-business/2016/feb/01/nestle-slavery-thailand-fighting-child-labourlawsuit-ivory-coast (retrieved on March 15, 2016)10
http://www.nestle.com/assetlibrary/documents/creating%20shared%20value/rural_development/action_plan_for_fla_%20cocoa_report.pd
f (retrieved on March 15, 2016)

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“The use of child labour is unacceptable and goes against everything we stand for. We’ve
set ourselves the goal of eradicating it from our cocoa supply chain and have put a
dedicated action plan in place.”11
Does this mean that if an action plan has been created, the problem will definitely besolved? No. In case of Nestle, their action plan still has many loopholes. For example:In 2012 we began a pilot monitoring and remediation system in two cocoa cooperatives toraise awareness about child labour and to identify children at risk.
Today, this monitoring and remediation scheme has begun in 22 farmer cooperatives,
covering more than 12,000 farmers. The scheme will be rolled out to all cooperatives that
supply us with cocoa in the country (about 70) by the end of 2016.
We have recruited and trained 18 child labour monitoring and remediation agents so far,as well as 332 community liaison people. The community liaison people and child labour
agents are trained to raise awareness about child labour, identify children at risk, andreport their findings to us, and to our suppliers.
The system is helping us to identify the root causes of child labour in each cocoa
community, and the interventions needed in order to begin to tackle them.
Remediation refers to the intervention efforts we put in place with our partners when achild, or group of children, is identified as being at risk. This could be something as simple

11

Nestle: Does Nestle have child labour in its cocoal supply chain? http://www.nestle.com/ask-nestle/humanrights/answers/nestle-child-labour-supply-chains

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as helping a family to get a copy of their child’s birth certificate so he or she can attend
school, or providing them with school equipment and uniforms.
The monitoring and remediation scheme looks very vague and I still miss the point ofwhat happens when Nestle doesn’t perform to the standards it is talking about in thisplan. The problem has been the lack of coercive measures to make companies takeresponsibility for labour conditions of their suppliers. Even though this action plan looks
like Nestle is making efforts, the current labour situation clearly shows how little Nestle
actually cares about the issue. To avoid this from becoming another convenient, PR
gimmick, there needs to be an external pressure that puts a lot more at stake for Nestle
than just temporary reputational, inconsequential reputational damage.
As in Ivory Coast, in Thailand too Nestle is one of the many big buyers of cocoa / seafood
respectively. For an effective clamp down on slave labour / child labour practices intheir supply chain, I have the following recommendations for different stakeholders:

Recommendation 1
Create Alliances with Other Major Buyers in the Region to Share Costs of Effective
Implementation
The seafood industry here has multiple major buyers, not just Nestle. A major reason
why they do not work towards these social evils is the costs associated to implementing
these plans. All players can divide these costs of program implementation to make itCopyright 2016. No quotation or citation without attribution.
easy on the financial front. The cost division can be done on different grounds likesharing costs for starting schools for underprivileged children to divert them away fromfishing boats and shrimp fields.
The classic boycott in buying has been an effective tool for controlling labour malpractices. For example, CP Foods supplied Shrimp to Walmart, Costco, Tesco, andCarrefour; upon the release of a report by the Guardian exposing the labour conditionsin their sourcing process of shrimp, Carrefour suspended its buying from CP Foods, andanother Norwegian retailer, Ica, announced that it would remove all products from its
shelves that were linked to CP Foods.12 An industry wide boycott could lead totantamount losses for the suppliers and might even threaten their company to shut
down completely if it gets prolonged. In that case, the suppliers would be coerced to set
up stringent, anti-slavery measures in their supply chain.
The downside would be that this process would increase the costs all over the supply
chain, shared by consumers, producers, suppliers and everyone else linked to theproduct. Getting all the buyers to cooperate for such a decision unanimously would bevery difficult as well as defecting from this decision would mean lower costs of sourcing
and ultimately higher margins. This would be an unstable model unless there were set
up some extravagant reputational or monetary costs to defection.

12International Labor Rights Forum: How companies can address human trafficking in Thai seafood industry
http://www.laborrights.org/blog/201406/how-companies-can-address-human-trafficking-thai-seafoodindustry (retrieved on March 15, 2016)

Copyright 2016. No quotation or citation without attribution.
Recommendation 2
Stricter regulations created by the Thai government and higher implementation
for companies to follow in order to curb unfair labour practices. The government
should work in tandem with multiple relevant government agencies, NGOs, andprivate sector stakeholders.
The Thai government should implement stricter regulations for controlling unfair labour
practices. Involving relevant anti-trafficking NGOs, various public organisations, andprivate agencies would ensure the involvement of multiple stakeholders and variousinterest groups.
The government’s Anti-Human Trafficking Action Plan had 4 aspects13 that should see astronger involvement in one or more of its aspects from Nestle and the likes.
1. Effectively identifying victims of labour trafficking
2. Increasing efforts to investigate and prosecute trafficking offenders or corrupt
officials involved in it
3. Improved standards and procedures of labour inspection
4. Enhanced efficiency in protection of workers in the fishing industry

13

LABOUR CONDITIONS IN THAI FISHERIES AND FOOD PROCESSING INDUSTRY: CHALLENGES AND SOLUTIONS
http://www.seafish.org/media/publications/140228_BSCI_Event_Working_conditions_Thailand.pdf (retrievedon March 15, 2016)

Copyright 2016. No quotation or citation without attribution.
Conclusion
The seafood industry in Thailand today is miles away from ridding itself of slave labourand child labour in the supply chain. However, following the above recommendations
with stronger involvement of the government and private sector alliances to tackle thecosts can make tackling the issue more effective and fruitful. Self-policing is a goodinitiative to have, however, I do not believe that the examples of self-reporting we haveseen are technically sound for us to have faith in the future of this technique. There stillneeds extremely strong outside pressure on these companies, that have always beenaware of these labour issues but went along until they faced major opposition fromvarious interest groups. Supporting the movement should also be done by NGOs, Thaiand international, to provide with ground data and situation reporting that many
government agencies and private sector players might miss. Having various parties also
allows for counter balancing of views and decisions can be more democratic instead ofbeing driven by single interest groups.