By Risk Area

Third-Party Risk Management
Environmental, Social & Governance
Anti-Bribery & Corruption
Modern Slavery
Supply Chain Due Diligence

By Role
JAN 30TH 2023

As the world continues to navigate the aftermath of the COVID-19 pandemic, one thing has become clear: globalization in business will never be the same. The disruptions to global supply chains have forced manufacturers and companies across industries to rethink their strategies and diversify their suppliers.

JAN 30TH 2023

As the world continues to navigate the aftermath of the COVID-19 pandemic, one thing has become clear: globalization in business will never be the same. The disruptions to global supply chains have forced manufacturers and companies across industries to rethink their strategies and diversify their suppliers.

Child Labor Scandal Puts Third-Party Governance in the Spotlight

News of labor violations leading to human suffering is always difficult to receive, and emotions run even higher when those violations concern children. A recent and ongoing investigation by the U.S. Department of Labor has revealed the possible use of illegal child labor by a Wisconsin-based company that provides cleaning services to meat processing plants. Unfortunately, the investigation is a tragic reminder of how critical it is to monitor and audit third parties to mitigate ESG risks and enhance governance. 

Oppressive working conditions

The Department of Labor’s investigation began earlier this year, launched by a law enforcement tip about a child working overnight shifts and suffering a chemical burn at a JBS USA meat packing facility in Nebraska. Interviews with local school officials revealed that children working at the facility were an open secret, with multiple individuals expressing concern about students coming to school exhausted from their overnight shifts. 

Ultimately, the investigation uncovered that 31 children ages 13 to 17 worked for Packers Sanitation Services Inc. at JBS USA plants in Nebraska and Minnesota, in addition to a Turkey Valley Farms plant in Minnesota. A separate investigation into Packers Sanitation at a Tyson Foods plant in Missouri has also begun.

Minors can legally perform some jobs, but strict federal regulations do not allow them to do work that harms their health or is considered “particularly hazardous.” With multiple reports of long overnight shifts, chemical burns, and minors cleaning dangerous slaughterhouse machinery by hand, it’s clear that the DOL’s designation of “oppressive child labor” is an accurate one.

Big brands in the crosshairs

One of the unique factors in this situation is that it involves two of the biggest nationwide meat producers. JBS USA is the number one beef producer in the U.S. and ranks number two for both pork and poultry. Tyson’s Q2 sales for 2022 added up to a staggering $13.12 billion, thanks to products you can identify in any grocery store across the country.

In today’s tech-bound climate where missteps are instantly seized upon and trumpeted to the masses, a child labor scandal can thrust companies into a negative news cycle within a matter of hours. It doesn’t help these major companies that Packers Sanitation is denying all wrongdoing and has allegedly obstructed the investigation by deleting files and directing children to refuse to cooperate with the investigators. 

This is a clear case of a critical third-party’s actions potentially impacting reputation in a big way, and the manner in which the affected companies respond publicly will affect their ability to mitigate the damage of being directly associated with Packers Sanitation.

Exhibiting good governance

JBS USA, the company with the most meat packing plants subject to investigation, has taken a clear stance on the issue and provides a good example of how strong governance protects businesses.

The company’s Chief Ethics and Compliance Officer, Michael Koenig, stated that the allegations would be a serious violation of company ethical policies and that “JBS has zero tolerance for child labor, discrimination or unsafe working conditions for anyone working in our facilities. We expect and contractually require our partners to adhere to the highest ethical principles as outlined in our Business Associate Code of Conduct.”

The company is also launching an independent audit of all facilities to evaluate the situation.

This approach is a strategic balance between calling out the company’s ethical stance on labor and actually having proof that the third party agreed to work within those principles through a binding code of conduct. 

In this case, clearly defining the expectations of the third-party relationship from the outset with a code of conduct firmly established boundaries which today clarify that JBS USA cannot reasonably be held responsible for the actions of the third party–whether by outraged consumers or the Department of Labor. While it didn’t make the company bulletproof, that code of conduct may prove invaluable as the investigation continues. 

Accessible governance now

It’s not just big businesses that need to defend against rights violations and other ESG concerns. Today, businesses of every size and scale need full-spectrum visibility into their suppliers, vendors, and other third parties to avoid getting entangled in unexpected scandals. Digital third-party risk management tools like those you’ll find on the Ethixbase platform are essential for improving monitoring and audits for your highest-risk third parties and shoring up governance to define responsibility in the case of a violation of this caliber. 

Sign-up now for the latest industry news, straight to your inbox.

Introducing Ethixbase360: The Most Comprehensive Third-Party Risk Management Platform

Share via
Copy link
Powered by Social Snap