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September 19, 2014
Widespread Forced Labor in Malaysian Electronics Industry
    by Robert Kropp

A study by Verite finds that nearly one-third of foreign migrant workers in the Malaysian electronics industry work under conditions of forced labor.

The efforts of sustainable investors to address fossil fuel companies in their portfolios—either through divestment or by retaining a small number of shares to enable, as shareowners, ongoing corporate engagement—has been laudable. While the results of their actions have yet to force greenhouse gas (GHG) emissions to the levels urgently needed to avert the worst effects of climate change, sustainable investors were among the first to pressure corporations to start doing something about their emissions.

So with shares in fossil fuel companies reduced to a minimum or excluded completely, what industries predominate in the portfolios of sustainable investors? According to a somewhat snarky recent article in Truthout, “Whichever investments you choose, there's a good chance you'll be profiting off companies with bad human rights records because the backbone of many SRI funds are consumer technology stocks.”

(As a journalist who has interviewed Bennett Freeman, the dedicated Senior Vice President of Calvert Investments, on several occasions, I suspect the brief quotes attributed to him in the article were cherry-picked by the article's author; I know they simplify the nuanced understanding he has always brought to my conversations with him. Also, the decision by the pension fund TIAA-CREF to drop Apple from its Social Choice Fund is not treated by the author as a step in the right direction for the industry but as evidence that other sustainable funds value profit to the exclusion of environmental and social justice concerns.)

Nevertheless, the Truthout article is accurate in two important respects: consumer technology stocks such as those of Apple are prevalent in the portfolios of sustainable investors, and technology companies have had significant difficulty convincing human rights advocates that their attention to labor conditions in their supply chains is adequate.

Earlier this month, just a week before Apple was scheduled to announce the launch of the iPhone 6, China Labor Watch (CLW) reported that conditions at one of the company's suppliers was rife with human rights abuses. Student interns as well as regular employees were forced to work excessive hours in advance of the product launch, CLW reported, and employees were not compensated for overtime hours.

A recent report by Verite on labor conditions in the electronics industry in Malaysia does not, unfortunately, name the multinational brands that contract with companies there. But the report does paint a stark picture of the human rights violations that are still all too prevalent in the supply chains of the consumer technology products most of us utilize every day.

Forced labor among foreign migrant workers in the Malaysian electronics industry was reported by nearly one-third of respondents to Verite's audit; “this finding is based on conservative measures and should be understood as a minimum estimate of the problem,” the report states.

Also, almost every foreign migrant worker reported paying recruitment fees that “exceeded legal and industry standards equivalent to one month’s wage,” according to the report, and most had to surrender their passports in violation of Malaysian law.

“Vulnerability to forced labor is a prominent feature of the Malaysian electronics industry workforce,” Verite concluded. “The analysis...points to myriad connections between the core elements of forced labor in the Malaysian electronics industry and systemic, structural factors shaping the lives of foreign workers in the country.”

"The problem of forced labor within the Malaysian electronics industry is complex, but many of the solutions are not," Verite CEO Dan Viederman said. "Governments, companies and civil society alike need to increase transparency into the recruitment process for workers. Third-party employment agents should be regulated by governments and held accountable for their practices by their clients. Workers must not be charged recruitment fees, and must be allowed to hold their own passports. These actions alone will go a long way to ensure that workers are treated fairly within the industry, and that companies avoid the risk of forced labor in their supply chains and business operations."


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