Corporate Liability For Exploitation In Supply Chains

02 Nov 2025 --
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Corporate Liability for Exploitation in Supply Chains

Corporations can be held liable for exploitation in their supply chains when they fail to ensure ethical practices, ignore labor abuses, or knowingly benefit from illegal or unethical practices carried out by suppliers or contractors. Exploitation may include:

Forced labor and human trafficking

Child labor

Unfair wages and unsafe working conditions

Discrimination and harassment

Environmental harm linked to exploitative practices

Legal frameworks often involve domestic labor laws, international human rights treaties, and corporate due diligence obligations.

Legal Framework

International Treaties and Guidelines

ILO Conventions on forced labor, child labor, and workplace safety

UN Guiding Principles on Business and Human Rights

OECD Guidelines for Multinational Enterprises

National Laws

UK Modern Slavery Act 2015 – Requires companies to report steps taken to prevent slavery in supply chains.

California Transparency in Supply Chains Act 2010 – Requires disclosure of efforts to eliminate human trafficking and exploitation.

French Duty of Vigilance Law 2017 – Corporate liability for human rights violations in global supply chains.

Corporate Liability

Civil liability for damages suffered by exploited workers

Criminal liability for knowingly benefiting from or facilitating labor exploitation

Reputational and regulatory consequences for failure to ensure ethical supply chains

DETAILED CASE LAW EXAMPLES

1. Nestlé and Child Labor in Cocoa Supply Chains (2019, USA/West Africa)

Facts:
Nestlé, along with other chocolate companies, was sued in the U.S. under the Trafficking Victims Protection Reauthorization Act (TVPRA) for allegedly benefiting from child labor in cocoa farms in Ivory Coast and Ghana. Children were reportedly forced to work in hazardous conditions on cocoa farms supplying Nestlé.

Charges:

Civil liability for complicity in child labor

Failure to implement due diligence and monitoring in supply chains

Outcome:

U.S. courts initially dismissed some claims citing challenges in corporate liability for overseas supply chains.

However, the case drew international attention and led Nestlé to increase supply chain transparency, adopt monitoring programs, and fund initiatives to eliminate child labor.

Principle:
Corporations may face civil liability if they benefit from exploitation in supply chains, even indirectly, and must actively monitor and remediate abuses.

2. Apple Inc. and Foxconn Labor Abuses (2010–2016, China)

Facts:
Apple was criticized for working with Foxconn factories in China, where labor exploitation, poor working conditions, and worker suicides were reported. Workers faced excessive hours, underpayment, and unsafe environments.

Charges:

Violation of labor laws and human rights standards

Failure to ensure safe working conditions in supply chains

Outcome:

Apple implemented audits and remediation programs through the Supplier Responsibility Program.

Foxconn upgraded working conditions, limited overtime, and provided better mental health support.

Principle:
Corporations are responsible for monitoring and enforcing labor standards in outsourced supply chains. Failure to do so can result in reputational, civil, and regulatory consequences.

**3. H&M and Forced Labor in Xinjiang Cotton (2020, China/Global)

Facts:
H&M faced allegations that cotton in its supply chain was sourced from Xinjiang, where Uyghur forced labor was reported. Activists claimed H&M indirectly benefited from state-imposed forced labor on ethnic minorities.

Charges:

Violation of international labor and human rights standards

Complicity in exploitation through negligent supply chain management

Outcome:

H&M publicly stated that it would not source cotton from Xinjiang until forced labor could be independently verified.

The company faced boycotts in China and heightened scrutiny globally.

Principle:
Even indirect sourcing from regions with known labor abuses can create liability and reputational risk. Companies must conduct due diligence to avoid complicity in forced labor.

4. Primark and Rana Plaza Factory Collapse (2013, Bangladesh)

Facts:
The Rana Plaza building collapsed, killing over 1,100 garment workers. Primark and other Western brands had clothing produced in factories in Bangladesh. Investigations revealed poor safety standards and overworked staff.

Charges:

Negligence in supply chain management

Failure to ensure safe working conditions and prevent exploitation

Outcome:

Primark contributed to a $14 million compensation fund for victims.

Global apparel brands, including Primark, joined the Accord on Fire and Building Safety in Bangladesh to improve working conditions.

Principle:
Corporations can be held financially and morally responsible for unsafe and exploitative practices in supply chains, even if the abuse occurs in a contracted factory.

5. Gap Inc. and Labor Exploitation in India (2007–2011)

Facts:
Gap Inc. faced lawsuits and criticism for using suppliers in India accused of child labor, unsafe working conditions, and unfair wages in garment factories.

Charges:

Civil liability for labor exploitation

Violation of international labor standards and corporate due diligence obligations

Outcome:

Gap introduced robust monitoring programs, improved supplier audits, and strengthened labor rights initiatives.

The case emphasized corporate responsibility for monitoring downstream suppliers to prevent labor exploitation.

Principle:
Companies must ensure continuous oversight of subcontractors and suppliers. Liability arises when corporations fail to act on reports of exploitation in their supply chains.

6. Walmart and Exploitation of Mexican Suppliers (2012–2016, Mexico)

Facts:
Walmart was accused of sourcing products from suppliers in Mexico who underpaid workers, forced excessive hours, and employed minors. Complaints alleged that Walmart benefited indirectly from these practices.

Charges:

Violation of labor rights and anti-exploitation laws

Complicity in supply chain exploitation

Outcome:

Walmart strengthened audits and supplier agreements.

Introduced global standards for suppliers, including worker protections and grievance mechanisms.

Principle:
Large multinational corporations are accountable for the ethical practices of suppliers, particularly when they profit from exploitative labor.