The United Nations Global Compact was established in 2000, and by 2007, it had become the primary force behind the Geneva Declaration on corporate responsibility. The core premise was that companies would voluntarily and collaboratively respect human, labor, and environmental rights across their businesses and complex supply chains. This initiative was one of many, often catalyzed by investigative journalism or public campaigns, aimed at improving sustainability and ending abuses. Organizations like the World Benchmarking Alliance created a corporate human rights benchmark, while the Consumer Goods Forum (CGF) established a Human Rights Coalition. Major corporations, including Airbus, Google, Coca-Cola, and Cargill, published human rights guidelines that appeared rigorous on paper. Microsoft, for instance, declared that its suppliers must fully comply with all employment laws, share its commitment to human rights, and take effective measures to remedy any adverse impacts.
Yet, more than 20 years later, the efficacy of these efforts remains unclear. While some companies have shown commitment to better sourcing and monitoring, many have not. Johannes Blankenbach, a researcher with the non-profit Business and Human Rights Resource Center (BHRRC), noted that the primary issue with voluntary guidelines is the gap between stated commitments and real-life implementation. Watchdogs, including the BHRRC, Human Rights Watch, Walk Free, Somo, and The Breakthrough Institute, have found that most companies are failing to meet their commitments. Across the Global South, particularly in Asia where the majority of goods are manufactured, labor rights continue to be violated by suppliers to global brands.
Blankenbach explained that the voluntary system lacks central or reliable oversight. While some monitoring was performed by NGOs, it was not comprehensive due to limited resources, and there was no mechanism to sanction non-compliant companies. Organizations like the CGF or the U.N. rarely monitored their members, leaving non-profits like the BHRRC or the media to expose failures. Even then, the punishment was often limited to public shaming, with the strongest enforcement for groups like the Global Compact being the potential exclusion of a member. Furthermore, competitors are not always held to the same standards, especially those based outside of markets like Europe, the United States, or Japan, where consumers demand sustainability. An American shoe company investing in ethical supply chains may face a financial disadvantage against a Chinese or Vietnamese competitor that faces less pressure and lower costs. Under current market conditions, investing in due diligence can be a short-term financial disadvantage, which is challenging for companies focused on quarterly returns.
However, the landscape is shifting toward mandatory regulations in key importing markets such as the United States, Canada, and Europe. This year, new forced labor laws are being passed in nations like India and Vietnam, partly driven by tariff threats from the United States. These developments suggest a transition to a new paradigm where supply chains are monitored by strict laws and real financial repercussions rather than by media or non-profits. This will directly impact countries like China, where state-mandated forced labor of Uyghurs has been well-documented, but the entire Asia-Pacific region must adapt or face similar restrictions on foreign market access.
Mandatory human rights due diligence laws would impose legal requirements on companies to ensure forced labor, coercion, and social abuses are absent from their supply chains, with legal or financial consequences for violations. This approach levels the playing field, and some companies support it for that reason. The most prominent example is the United States’ 2022 Uyghur Forced Labor Prevention Act (UFLPA), which focuses on the Xinjiang region. Since 2018, Uyghurs have faced crimes against humanity, including a system of concentration camps housing up to 3 million people, alongside the destruction of mosques, cemeteries, and historic neighborhoods. Elfidar Iltebir, president of the Uyghur American Association, stated that the world must treat this humanitarian crisis with urgency.
For businesses, the evidence of state-sanctioned forced labor in Xinjiang—affecting sectors like cotton, tomatoes, and solar panels—is increasingly irrefutable. Dean Pinkert, a special advisor at the Corporate Accountability Lab, noted that the surveillance state in Xinjiang makes independent audits impossible. He advised that companies should simply extricate themselves from situations linked to regions or companies relying on state-imposed forced labor. While the UFLPA has been effective, preventing at least $1.3 billion in goods from entering the U.S. in its first year, it has led to supply chain bifurcation. Evidence suggests some companies are sending goods not linked to forced labor to the U.S. while shipping tainted goods to other markets like Mexico, Canada, Europe, and Southeast Asia. The non-profit China Labor Watch recently accused the fast fashion giant Shein of this practice, alleging it partners with industrial parks linked to Xinjiang textile firms while avoiding such sourcing for the U.S. market. Shein has consistently denied any links to human rights violations or forced labor in Xinjiang.
The solution, experts argue, is to expand laws like the UFLPA globally to cover other industries and markets. Europe is currently considering the massive Corporate Sustainability Due Diligence Directive (CSDD), and similar policies are being explored in Colombia and South Korea. Blankenbach expressed hope that this trend toward mandatory rules is here to stay, as it is both positive and necessary.
