News Analysis

Tesco faces modern slavery lawsuit

by Dan Byrne on Dec 20, 2022

Tesco, the British retail giant, is facing significant and disturbing charges regarding its supply chain. 

The company has been linked to allegations of worker mistreatment that may amount to modern slavery at a factory in Thailand. These allegations are fuelled by a major lawsuit and investigation by one of Britain’s most prominent newspapers. 

Tesco does not own the factory in question, nor is it located anywhere near its home country. It does, however, have extensive employee protection protocols in place.

Read more: What is modern slavery? 

What’s happened?

Over 130 former employees of the VK Garment Factory (VKG) in Thailand are suing Tesco in the UK for falling short of employee welfare standards. The factory produced Tesco’s F+F jeans and other denim products.

The factory is near the border with Myanmar and relies heavily, often illegally, on cheap Burmese labour, according to a report in the Guardian. 

Separately, the Guardian has also concluded its own investigation. Through interviewing the former employees, they have recorded allegations of mistreatment that, by any definition, would fit the description of modern slavery

The products made in the factory are officially for the Thai market. But the Guardian’s investigation has noted English-language labels. In any case, all profits eventually returned to the UK.

The employees’ allegations against Tesco’s supplier

  1. Working far more than the legal workday (13 hours) for far less than the legal minimum wage (£3 vs £7 minimum)
  2. Having no access to bank accounts. The factory would hold bank cards and passwords and use them to make it appear that the employees were earning more than reality. 
  3. Being subject to verbal abuse and lack of care in the case of injuries. 
  4. Being forced to work extensive overtime when large orders were received. Some employees reported falling asleep at their sewing machines. 
  5. Being kept in overcrowded accommodation. Some employees even had their immigration documents confiscated, leaving them trapped. 

Where does Tesco fit in all this?

Tesco doesn’t own the factory, doesn’t use it anymore, and is based halfway around the world, yet it finds itself at the centre of the scandal. 

Why? Because governance permeates all the layers of a company’s operations, even those outside its direct control, especially when the company in question is a significant international player. 

If all the allegations are true, Tesco’s governance structures have failed on this occasion.

How might they have failed?

In today’s ESG-oriented world, a company’s impact on its workers will reflect the standard of governance, including impact through partner businesses. 

The lawsuit and report indicate that Tesco partnered with a business primed for worker exploitation. 

Moreover, the Guardian had indicated that these exploitation practices were made known to Tesco before it began using the factory. Immediately, these should have been red flags for senior leadership at the grocery chain, but work proceeded as planned on this occasion. 

Ultimately, the board and executives are the last lines of defence in implementing corporate policy. Tesco’s handbook might say it is committed to high employee welfare standards. Still, if leadership can’t implement those standards everywhere, they should expect severe criticism, PR headaches, and legal action in response. Tesco now has all three.

What can Tesco do?

If Tesco is forced to admit it fell short of its own principles, heads will immediately turn to senior leadership. How could they have let this happen? Who is to blame? What can be done to make sure it doesn’t happen again? 

Such questions can prompt harsh solutions. 

One of the best moves the board and executives can make at this point is pro-activity – conducting their own investigation, making the business act as a check on itself, so it can implement the standards that it says it abides by the entire time. 

It’s not a perfect solution, but it’s better than being caught like a deer in headlights.

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Diploma in ESG

As a leader in ESG, you need to anticipate investors’ questions before they are asked, manage the associated risks and implement an appropriate ESG framework.

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Modern slavery

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