PART THREE: Financial and Material Impacts of Child Labour
Big Tech and Cocoa Industry scandal analysis
On the 15th December 2019, six US tech giants were implicated in a class action lawsuit, filed by International Rights Advocates on behalf of 14 plaintiffs. The companies were sued over child labour violations in their supply chain, specifically in cobalt mines in the Democratic Republic of the Congo (DRC) and were named as Apple, Tesla, Microsoft, Google, Dell and Alphabet. The 14 plaintiffs in the class action were either guardians of a child who had passed away in a mining accident such as a tunnel collapse, or were survivors of such an accident, and represented a larger class of children who had similar experiences, reported the Business & Human Rights Resource Centre.
While the above six companies were named and implicated directly in the class action, they represented a significant portion of buyers in the market; due to the nature of the cobalt supply chain and its interactions with Artisanal and Small-scale Mining (ASM), it is extremely difficult to directly trace supply to end-stage buyer. Despite this, it is highly likely that these six companies were sourcing cobalt from the DRC, considering around 70% of global cobalt is sourced there.
The specific legal claim, as reported by the Business & Human Rights Resource Centre, was "for forced child labour in violation of the Trafficking Victims Protection Reauthorization Act. They also seek relief based on common law claims of unjust enrichment, negligent supervision, and intentional infliction of emotional distress. They request that the Court order the defendants to create a fund to contribute to the appropriate medical care of the plaintiffs and other unnamed children who were injured while mining cobalt."
The implicated companies contended the following in their motion to dismiss on the 25th August 2020:
Global supply chain is not considered a "venture" under TVPRA definitions.
Child miners were not "forced" into labour as defined by TVPRA; only direct threats of force or harm from the employer are considered.
Labour compelled by economic pressure is not covered under the TVPRA's definition of "forced" labour.
Lack of "requisite knowledge" of the abuses at specific mining sites mentioned; general knowledge of problems in the industry is deemed insufficient to prove they knew about the violations that injured the plaintiffs.
In response to the companies' motion, the US District Court for the District of Columbia dismissed the case on 2nd November 2021. The plaintiffs appealed the decision in February 2022, based on alleged conflict of interest regarding the judge who was presiding over the case, Judge Carl J. Nichols, and his alleged financial investment in the defendant companies, according to Forbes. Whether this case was lawfully or unlawfully dismissed, companies with supply chains are now increasingly obliged to take responsibility for their entire value chain. The last point of contention claimed by the 6 Big Tech companies, a "lack of 'requisite knowledge' of the abuses at specific mining sites mentioned; general knowledge of problems in the industry is deemed insufficient to prove they knew about the violations that injured the plaintiffs," would no longer be a sufficient argument under new legislation.
For example, the Norwegian Transparency Act (NTA) came into force on the 1st July 2022 and applies to companies of a certain size based in Norway or selling in Norway. Importantly, "the due diligence requirements of the Transparency Act apply to a company’s entire supply chain." In addition, the level of due diligence should now be dependent on the severity and likelihood of violations, meaning the 6 companies named here would now be expected to carry out heightened due diligence in their cobalt supply chain, especially in the DRC, and so this contention could be unlikely to stand in Norway.
In this hypothetical case, should these 6 companies have been fined against the NTA, the financial implications would have been significant. Fines are 25 million NOK (~£2 million) or 4% of annual turnover, whichever value is higher.
Our second case study began on the 14th February 2021, when legal action was launched on seven of the world’s largest chocolate companies accused of using child labour. The suit was filed by the International Rights Advocates on behalf of eight former Malian child slaves, with Nestlé, Hershey, Mars, Cargill, Mondelez, Olam and Barry Callebaut being named as the defendants in the case.
The companies were accused of aiding and abetting the illegal enslavement of thousands of children in their supply chains, specifically in the Ivory Coast cocoa farms. The central allegation was that these companies ‘knowingly profited’ from the illegal work of these children. It also accused the companies of misleading the public in their efforts to reduce the use of child labour.
The former child labourers, originally from Mali, said they were victims of child trafficking after being promised paying jobs. They claim to have not received payment, to have been threatened with starvation and forced to live in squalid conditions.
This constituted the first-time class action of this nature had been filed against the cocoa industry in a US court. A federal judge dismissed the case on June 28th 2022 on the grounds that there was a lack of a ‘traceable connection’ between the seven defendant companies and the specific plantations where the plaintiffs worked. Again, this is a defence that is unlikely to hold against new and upcoming legislation such as the Norwegian Transparency Act.
Some sources state that the defendant companies faced punitive damages of $50 million USD per child and that “potentially tens of thousands (...) could then expect similar sums.” The companies settled with a “substantial amount of money to the plaintiffs” , said Terrence Collingsworth, Executive Director of IRAdvocates.
Original Hershey Chocolate Factory in Hershey, Pennsylvania. By Antarctic96 - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=18385452
PART FOUR: Cocoa Industry and Big Tech scandal analysis expected 14th September.
We will be releasing the full Financial and Material Impacts of Child Labour White Paper on the 26th October, for those who didn’t sign up to our early-release waiting list.
The White Paper will cover 6 company case studies of child labour scandals alongside HACE analysis.