April 15 Childrens Rights and FIs

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APR 2024

TACKLING
CHILD LABOR
a guide for financial institutions
CONTENTS

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


INTRODUCTION.......................................................................... 2

A. WHO IS THIS GUIDE FOR?

B. CHILD LABOR: CONTEXT

1. A NOTE ON CHILDREN’S RIGHTS AND BUSINESS........... 4

2. SALIENT CHILD RIGHTS RISKS FOR BANKS AND


FINANCIAL INSTITUTIONS................................................... 6

3. DEFINING CHILD LABOR.......................................................7

4. LEVELLING UP ON DUE DILIGENCE FOR CHILD


LABOR..................................................................................... 8

4.1. IMPROVE SCREENING FOR INDICATORS OF CHILD


LABOR RISK

4.2 IMPROVE ENGAGEMENT WITH PORTFOLIO COMPANIES

4.3 PARTICIPATE IN MULTI-STAKEHOLDER INITIATIVES THAT


INCLUDE ACTION ON CHILD LABOR

5. CONCLUSION........................................................................ 17

ANNEXES....................................................................................19

ENDNOTES................................................................................ 23
SHIFT PROJECT

ACKNOWLEDGEMENTS.......................................................... 25

Cover image: Children in a community in Indonesia that produces natural fibres for a global
brand participate in a focus group as part of a child rights risk assessment.
Photo by The Centre for Child Rights and Business.
1
TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS
Image via Adobe Stock

INTRODUCTION
In June 2023, following concern from member banks over the persistent
scourge of child labor in global value chains1 and recent reports of the
alarming increase in child labor - particularly migrant child labor - in
the United States,2 Shift held a peer-learning session of its Financial
Institutions Practitioners Circle (‘FIs Circle’) on the topic. The session
explored how banks and financial institutions can strengthen their
efforts to respect children’s rights, particularly in the context of child
labor. As a report by UNICEF, Save the Children and the UN Global
Compact noted, children are still too often invisible in ESG reporting;3
SHIFT PROJECT

and the financial sector can play an important role in changing this.

This resource is a joint publication by Shift, The Centre for Child Rights
and Business (The Centre), and UNICEF. It captures some of the key
take-aways from this session, and draws on the experience of the three
organizations working with real-economy companies and financial
institutions.
2
WHO IS THIS GUIDE FOR?

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


This guide is intended for banks and other financial institutions
to strengthen approaches to tackling child labor in the activities
and value chains of their corporate clients. As providers of capital
and financing through projects or at a corporate level, banks
have important influence and ability to shape the human rights
performance of their clients. Based on current best practice, this
guide seeks to provide banks with simple tools to make this effective:
from improving screening practices and client engagement, to
encouraging and participating in multi-stakeholder initiatives.

CHILD LABOR: CONTEXT


Child labor remains an intractable and severe human rights impact
worldwide. In the last decade, many leading companies have
made significant progress in applying a child rights lens to their
sustainability work. However, despite this, in 2021, UNICEF and the
ILO warned that progress on eradicating child labor had stagnated,
resulting in child labor figures rising for the first time in two
decades.4
For financial institutions, a key exposure to child labor impacts arises
through the activities and value chains of their corporate clients.
Pursuant to the UN Guiding Principles and the OECD Guidelines,
and as set out in detail in the OECD’s Due Diligence for Responsible
Corporate Lending and Securities Underwriting, financial institutions’
responsibility to respect human rights extends to the activities and
value chains of the clients receiving their financing. As such, many
financial institutions have policies that prohibit business with clients
who have high exposure to child labor risk, and with weak due
diligence to mitigate such risks. However, as recent research by The
Centre has shown, child labor can often be endemic in high-risk
sectors, and as such these “prohibitions” can appear to be divorced
SHIFT PROJECT

from reality. There is ample scope for FIs to do more to use their
leverage with clients worldwide to influence them to better identify
and address child labor. This paper sets out how due diligence lines
of enquiry might give rise to better quality information and how banks
can more strategically evaluate and improve portfolio company
capacity to address child labor.
3
A NOTE ON CHILDREN’S
01

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


RIGHTS AND BUSINESS
Children’s rights describe the rights that all children have to achieve
thriving, fulfilling and healthy lives. Child labor is both a cause and
consequence of multiple children’s rights deprivations – and therefore
it is essential for business to understand and address child labor as
a child rights issue: one that can stem from violations of children’s
right to education, or to protection from abuse and violence. Business
must also understand that children who are in situations of child labor
may have other rights violated as a consequence – for example, their
rights to health, to play, etc. Business activities can also be a direct
cause of child rights impacts or exacerbate the systemic child rights
issues which result in child labor.
While this resource focuses on the
challenge of child labor, business 80% of children in
activities and relationships have over 25 countries reported
significant impact across the full feeling in danger of sexual
spectrum of children’s rights. For abuse or exploitation online
example, an estimated one-third (UNICEF, 2022)
of internet users are children,5 yet
some 80% of children in over 25
countries reported feeling in danger
of sexual abuse or exploitation
online,6 and potential risks include
those related to children’s presence on social media platforms.7
More than 340 million children and adolescents are overweight or
obese, and there is evidence that the marketing of unhealthy food is
associated with increased childhood obesity.8 SHIFT PROJECT

More than 340 million children and adolescents are overweight


or obese, and there is evidence that the marketing of unhealthy
food is associated with increased childhood obesity. (UNICEF, 2022)
4
Children can be more at risk even in the context of

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


climate change: for example, in 2018, the World
Health Organization warned than more than
90% of the world’s children were breathing in
toxic air every day, and children’s bodies, with
their smaller lungs and more rapid breathing,
absorb more pollutants than adults.9 More
than 800 million children are exposed to In 2018, the World Health
dangerous levels of lead poisoning due in Organization warned than
large part to business practices that fail to more than 90% of the world’s
properly recycle lead acid batteries.10 children were breathing in
When interviewed, children themselves toxic air every day. (WHO, 2018)
have complained that businesses
sometimes take away the places they have to play, or their families
have to leave homes to make way for business operations.11 Mining
operations, for example, can affect the rights of indigenous
children; in-migration of predominantly male workers can
drastically alter the social context; and the effects of toxic
effluents in water and soil can be greater
for children because they spend more
time playing in these landscapes.12

The effects of toxic effluents from business operations in


water and soil can be greater for children because they
spend more time playing in these landscapes. (UNICEF, 2017)

Children are also impacted by the conditions


of work of their parents and caregivers.
For billions of workers who are parents,
business policies on paid parental leave,
living wages that cover family costs, paid sick
leave, overtime and working hours have very real implications for the
physical, emotional and intellectual development of their children.13
Adverse impacts by business on the rights of children can be severe
SHIFT PROJECT

and irremediable as a result of their vulnerability and the pivotal


phase of childhood in terms of physical, emotional and intellectual
development. It is for this reason that the Children’s Rights and
Business Principles were launched in 2012; they build on the UN
Guiding Principles for Business and Human Rights to interpret
business responsibility vis-à-vis the rights of children as a particularly
vulnerable population.
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SALIENT CHILD RIGHTS
02

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


RISKS FOR BANKS AND
FINANCIAL INSTITUTIONS
In some circumstances, financial institutions’ own activities might
directly impact children: for example, as an employer, banks and
other financial institutions should consider whether and how long
hours worked by parents and the quality of policies such as maternity
protection, can affect children’s rights. In retail banking, anti-money
laundering efforts may need strengthening to identify financial flows
from the abuse and exploitation of children, as illustrated by recent
financial penalties paid by Westpac and Deutsche Bank in association
with customer payments that were consistent with the risk of child
exploitation.

In 2023, Westpac published the following list of ways in which the


bank could potentially impact children’s rights:

“While our direct engagement with children and young people can be
limited, we may be connected to impacts on their rights and wellbeing
through:

• Customers exploiting our financial platforms and products.


• Design of products and services that may not fully take into
account the interests of children and young people, including
those that might need extra care.
• Gaps in screening during customer onboarding and recruitment
processes that may increase potential child exploitation risks.
• Occurrences of the worst forms of child labor, such as child
trafficking, forced or compulsory labor, in our supply chain and/or
the supply chains of our suppliers and customers.
• Our access to, and handling of, customer personal information,
where the customer is a child or young person.
SHIFT PROJECT

• Accessing inappropriate information relating to children using


Westpac technology.
• Inappropriate interactions with children and young people in
physical environments such as our branches or workplaces.”

Source: Westpac Human Rights Position Statement and Action Plan


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DEFINING CHILD
03

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


LABOR

International human rights and labor standards define child labor as


work that deprives children of their childhood, their potential and their
dignity, and that is harmful to their physical or mental development
including by interfering with their education. Not all work performed
by children under 18 years of age is considered child labor. For
example, children are often able to undertake light work legally from
the age of 13 years (or higher as defined by national laws); or to work
full time starting at 15 years (or higher as defined by national laws)
as long as the work is not considered hazardous or the worst form
of child labor. The graphic below illustrates how child labor is both a
function of the age of the child, and the nature and conditions of work
that the child is engaged in. 

Restrictions on work by children and


prohibitions on child labor

Restrictions or Nature or Other worst


prohibitions Child’s age conditions forms of
due to: of work child labor

Basic
Subcategories Hazardous
Light work minimum
of work: work
age
SHIFT PROJECT

Age at Never
From 13 (12) From 15 (14) From 18
which allowed: allowed

Graphic adapted from ILO/IOE Child Labour Guidance


Tool for Business, developed with Shift
7
LEVELLING UP ON DUE

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


04 DILIGENCE FOR CHILD
LABOR
In this paper, we explore three ways in which FIs can strengthen
current approaches to addressing child labor risk in line with the UN
Guiding Principles for Business and Human Rights.
These are:
1. Improve screening for indicators of child labor risk
2. Improve engagement with portfolio companies on action on
child labor
3. Participate in multi-stakeholder initiatives that include action on
child labor

IMPROVE SCREENING FOR INDICATORS OF CHILD


4.1 LABOR RISK

Quality engagement with portfolio companies can be time consuming


and resource intensive. Where child labor is a salient issue in the
portfolio, many commercial banks undertake an initial assessment to
ascertain which segments of the portfolio are higher risk and require
enhanced due diligence (EDD). The framework below considers how
the likelihood of risk changes in relation to different variables. Banks
can reflect on these factors for the industry and country in question as
part of risk assessments. See Annex 3 for further examples and data
sources.

1.1 NATURE OF THE OPERATING CONTEXT


SHIFT PROJECT

There are a number of root causes of increased risk of child labor,


including a lack of decent work opportunities for young people and
parents, an absence of living wages for families, a lack of gender
equality and childcare options, a lack of access to quality healthcare
and education opportunities, and geographies with weak regulatory
frameworks, including weak child protection systems. Operational
contexts involving conflict, migration and displacement and
emergencies such as natural disasters can also increase the risk of
8
children ending up in situations of child labor.

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


1.2 NATURE OF THE BUSINESS RELATIONSHIPS

Where the impact would occur due to a business relationship, it’s


important to consider the risk in these relationships and the capacity of
business partners or others in the value chain to adequately manage
their impacts. For example, business models with overreliance on
labor agents can increase the risks of children being recruited into
situations of child labor (notwithstanding stated business commitments
to the contrary). Poor visibility into convoluted supply chains can
also increase risk: child labor risks increase with sub-contractors and
lower-tier suppliers. Sprawling supply chains thus require greater due
diligence and scrutiny.

1.3 NATURE OF THE BUSINESS ACTIVITY

Certain business models – such as business propositions which rely


on the lowest cost to consumers of goods or services (regardless of
the cost of production) or the sourcing of commodities that are priced
independent of farmer income14 - may inherently carry greater risk of
impacts on children. A decision to adopt such business models would
require greater investment in managing and mitigating such risks.15

1.4 PRESENCE OF VULNERABLE GROUPS

Certain groups of children may be at increased risk of child labor,


such as out-of-school children, children whose parents don’t earn a
living income, children heading their own households or living without
parents, and children of disadvantaged minorities – including ethnic
minorities - and children who are refugees or migrants.

SHIFT PROJECT
9

Likelihood Considerations, Shift


TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS
4.2 IMPROVE ENGAGEMENT WITH PORTFOLIO COMPANIES

Financial Institutions can use their leverage by asking better questions


and setting better expectations of portfolio companies.16 Asking
the right due diligence questions can ensure that FIs are able to
distinguish which companies are implementing effective approaches
to identifying and mitigating child labor risk. Enhanced due diligence
processes and meaningful expectations in sector policies can also
serve to signpost – and require - best practices to respect the rights of
children. In this section, we look at common due diligence questions
that financial institutions may already be asking – and embedding
in sector policies – and suggest alternatives that can provide a
better and more complete picture of portfolio company capacity and
commitment to mitigating child labor risk.
In this section we look at how Financial Institutions can ask the right
questions to help understand a company's:
a) Connections to Child Labor
b) Alignment with International Standards
c) Reliance on Audits
d) Efforts to Address Child Labor

A. BUSINESS CONNECTIONS TO CHILD LABOR

? LIMITED USEFULNESS

1. Do you have a “zero-tolerance” policy on child labor?


2. Can you commit to a zero-tolerance approach to child
labor?
SHIFT PROJECT

Too often the existence of a policy or mechanism is taken as an


indicator of maturity, without any consideration of its quality or of how
and whether that policy will lead to tangible changes in behaviors or
practices.17 In relation to “zero tolerance” of child labor, The Centre
has published a meta-study demonstrating that child labor is sadly
endemic to many value chains and has noted that having a zero-
10
tolerance approach to child labor can obscure the reality and stifle

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


open conversation.18 Finally, expert stakeholders stress that it is
important not to incentivize a "cut and run" approach when child
labor is discovered in corporate value chains. The UNGPs expect
companies to use and build leverage (influence) with business
partners to address impacts rather than automatically disengaging
from business relationships when problems are found. However,
the more severe an impact, the faster the FI will need to see change
before considering disengagement.

? BETTER LINE OF INQUIRY

1. How do you know whether and how your business


activities may connect you to impacts on the rights of
children, such as child labor?
2. Tell me about the last time you identified child labor. What
did you do?
3. For businesses with high-risk context/production: What
is the annual budget you plan to invest in the prevention
and remediation of child labor in your supply chains?

Rather than simply demanding a “zero-tolerance” approach that


does not reflect reality, financial institutions can seek to assess
the company’s willingness to acknowledge the problem and be
transparent about finding solutions. In the context of child labor, a
mature company in a higher risk context should be willing and able
to acknowledge the risk of child labor in its supply chains, discuss
the effectiveness of systems for identifying and reporting on child
labor, and most importantly demonstrate the robustness of response
mechanisms to take action to prevent and remediate child labor. It’s
important to keep in mind that contextual risk is dynamic; for example,
SHIFT PROJECT

as child labor has not typically been seen as a domestic risk in the
US, many businesses – and the banks that finance them - have lacked
robust due diligence, remediation and prevention plans with regard to
child labor. FIs should expect such companies to have in place child
labor monitoring and remediation mechanisms, including grievance
mechanisms and worker voice solutions which are accessible to
children. They should expect the company to track year-on-year
progress and adapt their actions as a result.
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B. ALIGNMENT WITH INTERNATIONAL STANDARDS

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


? LIMITED USEFULNESS

1. Do you follow all national laws and regulations


with respect to child labor (minimum working ages,
prohibitions on hazardous work for minors, etc.)?

Minimum legal compliance is never a guarantee that a business is


acting with respect for human rights: some governments are unable
or unwilling to enact regulation in line with human rights standards.
In 41 countries, children under 18 are not adequately protected by
legislation from hazardous work; and in 47 countries the minimum
age for employment is below 15 years of age which is the target
recommended in international standards.19 As a case in point, Bolivia
has the lowest minimum age for children working in the world, at 10
years.20

? BETTER LINE OF INQUIRY

1. How do you align with international standards on child


labor?

This is why as good practice continues to evolve, responsible


companies should adopt a “beyond [domestic legal] compliance”
approach. A financial institution purporting to incorporate human
rights into their due diligence processes should be assessing and
expecting portfolio companies’ alignment with international standards
on business and human rights, and children’s rights.21 They should also
SHIFT PROJECT

query reliance on – or lobbying for – regulation that falls short of these


standards.
In addition to assessing portfolio companies’ willingness and ability to
meet international standards, financial institutions can ask companies
how they handle legislation that creates a gap between minimum
compliance and international standards. Shift’s Business Model Red
Flags (Red Flag 23) set out due diligence lines of inquiry to pursue
12
where a portfolio company’s business model may rely on operations

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


or value chains in markets where regulations fall below human rights
standards. These are adapted below for the purpose of screening for
child labor risks:
• Do you operate in jurisdictions where legal child labor frameworks
are not aligned with international standards?
• Have you assessed whether and to what extent your engagements
with governments on regulatory developments are in line with your
responsibility to respect children’s rights and enable governments
to introduce protections in line with international standards?
• Have you examined your lobbying activities in light of your own
human rights commitments and strategies?
• Does your government affairs team engage routinely with the
corporate responsibility/ sustainability/ human rights teams, with a
view to internal alignment?

C. RELIANCE ON AUDITS

? LIMITED USEFULNESS

1. Do you undertake audits that include child labor?

Too often companies rely exclusively on audits, social assessments


and certification processes, to manage risks of child labor. While
audits can be a useful tool in corporate due diligence for child
labor, there are a number of reasons why they are not fail-proof
mechanisms.22 Audits tend to focus on the first tier of the business’
supply chain – while the greatest risks of child labor are frequently
at the level of (legal or illegal) sub-contracting, and/or in the deeper
SHIFT PROJECT

tiers of the supply chain, such as in the sourcing of raw materials.


Furthermore, even where they have coverage, audits can fail to
capture the reality of the workplace: there are all too frequent
instances in which workers are trained by managers to provide
inaccurate responses or engage in fraud in reporting. Check-the-box
approaches to audit - which don’t adequately include worker voices
and participation or focus on solving problems – are less suited to
13
addressing child labor impact.23 In some cases, companies providing

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


outsourced services are not included in audits.24 While social
assessments have seen much progress and improvement in the last
two decades, it is important for banks and financial institutions to go
beyond audits if they wish to meaningfully address child labor.

? BETTER LINE OF INQUIRY

1. How do you go beyond audit in addressing child labor?

CHILD LABOUR PREVENTION AND REMEDIATION PRINCIPLES


The Centre’s tried and tested solutions under their child labour prevention and remediation programmes.

Visit their website for more information on Child Labour Prevention & Remediation

Financial institutions can encourage or require higher risk portfolio


companies to implement leading child labor prevention and
remediation principles, such as those outlined by The Centre. For
SHIFT PROJECT

example, when clients provide decent work opportunities for youth,


they decrease the risk of children about the minimum age for work
ending up in hazardous work.
Shift’s “From Audit to Innovation: Advancing Human Rights in Global
Supply Chains” guide also offers examples and case studies of how
companies can address limitations of audits with alternative and
complementary approaches.
14
D. REFLECTING ON THE CLIENT'S LEVERAGE

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


? OTHER USEFUL LINES OF INQUIRY

1. How do you work with others (industry peers, other


business, government and other stakeholders) in multi-
stakeholder initiatives to address child labor?
2. How do you review lobbying/advocacy efforts to ensure
alignment with children’s rights?

Multistakeholder Initiatives:
FIs can also ask higher risk clients about – and/or require their
participation in – relevant multistakeholder initiatives (MSI)
addressing impacts on children. Where child labor is endemic in an
industry or geography, multi-stakeholder initiatives are important to
bringing together key stakeholders to tackle root causes, such as the
lack of birth registration or the absence of living wages for parents
and caregivers, and strengthen the capacity of critical government
and social systems in high-risk countries. (See Annex 2 on Root
Causes and Annex 3 on examples of Multi-Stakeholder Initiatives).
Lobbying/Policy Advocacy:
All companies should examine their own lobbying and policy
engagement activities and consider whether their strategies are
consistent with their human rights policies and commitments. Adding
a lens of children’s rights to this examination is critical for portfolio
companies for which the issue is salient. Shift’s Business Model Red
Flag 23 provides key questions that can be adapted, such as “How
has the company assessed whether the [e.g. minimum working age]
regulations it has opposed would have helped improve human rights,
SHIFT PROJECT

and how and to whom does it explain its conclusions?”

Banks should also examine their own opposition,


support or visibility in relevant regulatory debates
in light of their human rights responsibilities and
commitments.
15
TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS
PARTICIPATE IN MULTI-STAKEHOLDER INITIATIVES
4.3 THAT INCLUDE ACTION ON CHILD LABOR

As value chain participants connected to these impacts via their


portfolio companies, financial institutions should consider their own
participation in relevant Multistakeholder Initiatives (MSIs). MSIs,
particularly at the sector level, present an opportunity for FIs to align
around clear standards and support collective leverage. For example:
• The Financial Institution Task Force of the Responsible Sourcing
of Palm Oil Round Table (RSPO) includes banks such as ABN Amro,
BNP Paribas, Citibank and UBS. Members make a commitment
to the RSPO Code of Conduct, and are able to be part of a group
of like-minded financial institutions supporting sustainability
transformation in the sector.
• A multi-stakeholder collaboration under the Dutch Banking Sector
Agreement considered human rights issues in the cocoa value
chain, including child labor, to which Dutch banks are connected:
“Because Dutch banks finance companies that are active in the
cocoa value chain, we have a responsibility to address adverse
human rights impacts, such as child labor. Our multistakeholder
collaboration enables us to better understand the root causes of
those impacts, evaluate existing initiatives and explore what we can
do more or differently in order to contribute to a more sustainable
cocoa value chain.” – Representative of ABN AMRO, member of the
DBA Value Chain Working Group.25
• FAST – Finance Against Slavery and Trafficking26 builds on the
work of the United Nations University and the Permanent Mission
of Liechtenstein to consider how to put the financial sector at
the heart of global efforts to address modern slavery and human
trafficking – some of the worst forms of child labor. The initiative
has developed a series of tools such as the Financial Investigations
Tool27 and the Leverage Practice Matrix28 to strengthen actions by
the sector.
SHIFT PROJECT
16
05

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


CONCLUSION

For many banks, child labor is a salient human rights risk, high both
in severity and likelihood – so for financial actors, understanding
and addressing child labor is critical. Many financial institutions have
prioritized child labor for action, and are implementing portfolio
screening and client engagement – but there is a significant
opportunity to make this action more meaningful and impactful.
There is a clear business case for taking stronger action on child
labor and child rights impacts, associated with legal and reputational
risks to the institution.29 Further, a growing body of disclosure and
procurement requirements at regional (EU) and domestic level (such
as in the UK, US, Australia, France, Canada) are requiring companies
to conduct robust due diligence and share information on how they
are managing human rights risks, such as child labor.
This brief has provided recommendations for how banks and financial
institutions can strengthen action on child labor by better risk
screening, better conversations with portfolio companies, and through
participation in multi-stakeholder initiatives that tackle the root
causes of child labor. As the providers of capital, banks and financial
institutions have an important role to play in influencing portfolio
companies and other stakeholders and contributing to efforts to
eradicate child labor and advance children’s rights.

SHIFT PROJECT
17
ANNEX 1

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


DATA TOOLS FOR ASSESSING CHILD LABOR RISK
1. Corporate Human Rights Benchmark, World Benchmarking Alliance
• Includes indicators on child labor
2. Global Child Forum Investment Data on Children’s Rights
3. National Level Child Rights Benchmarks
• UNICEF has conducted child rights benchmarks in Australia and Finland.
The data shows the importance of financial institutions going beyond
requirements of a policy on child labor, and including indicators for
practices to address child labor.

ANNEX 2
FURTHER RESOURCES
1. Children’s Rights and Business Principles, Save the Children, UN Global
Compact and UNICEF,
2. Children’s rights in impact assessments - A guide for integrating Children’s
rights into impact assessments and taking action for children, UNICEF and
the Danish Institute for Human Rights
3. Tool for Investors on Integrating Children’s Rights into ESG Assessment,
UNICEF
4. Investor Guidance on Integrating Children’s Rights into Investment Decision
Making, UNICEF and Sustainalytics,
5. Child Labour and Responsible Business Conduct A Guidance Note for
Action, UNICEF
6. Financial Institutions and the Rights of the Child: An Overview of Policies and
Accountability Mechanisms, ICJ
7. Child Labour Guidance Tool for Business, ILO-IOE
8. Responsible Business Conduct for Institutional Investors, ILO-IOE
9. Child labour and responsible business conduct – A guidance note for action,
UNICEF
10. UN Global Compact and Save the Children, Children’s Rights and Business
Principles, UNICEF
11. Charting the Course: Embedding children’s rights in responsible business
SHIFT PROJECT

conduct, UNICEF
12. Global Child Forum
13. Due diligence principles for child labour remediation, The Centre
14. Child labour -The supply chain connection, The Centre
15. Case Study: “Is Private Equity Responsible for Child Labour Violations” NYU
Stern Centre for Business and Human Rights
16. Child Labor Database at the University of California Los Angeles, WORLD
18
ANNEX 3

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


RISK FACTORS AND ROOT CAUSES
 he drivers of child labor are complex and nuanced and often the result of the interplay
T
between the vulnerability of individuals and workers; gaps in legislation, weak enforcement
and access to justice by governments; and failures in responsible business conduct.30

Vulnerability of Families and Nature of the Operating Nature of the Business Activity
Children Context and Relationships

The socio-economic pressures Gaps in legislation and Failures in responsible business


that families and young people enforcement and access to conduct can heighten risks for
face are a major driver of child justice can increase the risk of children. For example:
labor. For example: child labor. For example:
Lack of Awareness of Child
Lack of decent work Weak Regulatory Frameworks: Labor Laws and International
opportunities for young Laws and policies are Standards by business and
people can leave them with required that are aligned with their suppliers; and of actions to
few alternatives and force them international labor standards, take to prevent and remediate
into more risky, hazardous and support birth registration for child labor is widespread.
unsafe work options. age verification, create and
resource mandatory primary Overreliance on Labor Agents
Lack of childcare options can schooling aligned with the can increase the risks of
also mean that parents are minimum age of work, and children being recruited into
forced to bring children along promote responsible business situations of child labor, despite
with them to work (common in conduct. At times, laws and stated business commitments
agriculture and artisanal mining policies may fail to keep pace to the contrary.
contexts), or may need to have with the changing nature of
older siblings stay at home to work (greater informality, non- Poor Visibility into
look after younger children. standard forms of employment) Supply Chains: Vertically
or changing contexts such as disaggregated supply chains
Poverty, Precarious Migration the pressures from informal with sourcing and production
and Lack of Social Protection migration. spread across the globe and
at a household level, including across multiple business
lack of decent work for Enforcement and Access to relationships can limit the ability
parents, informal work and Justice: Laws are but one part to identify and manage child
SHIFT PROJECT

unpredictable income, and the of the story; many countries labor risks. Moreover, the risk
absence of social safety nets may have laws to protect of child labor increases with
for times of sickness, injury children from situations of sub-contractors and lower-tier
and death can force families to child labor, but have weak
31 suppliers. Sprawling supply
rely on child labor to meet their enforcement capacity – poorly chains require greater due
basic needs. Conflict, climate resourced labor inspectorates, diligence and scrutiny to avoid
19
VulnerabilityPolicy Analysis
and Centre

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


of Families Nature of the Operating Nature of the Business Activity
Children (cont.) Context (cont.) and Relationships (cont.)

and other crises can exacerbate weak accountability and access risks of child labor.
poverty or drive precarious to justice when there are
migration and increase failures of compliance. These Lack of Understanding of
instability for families. are compounded by inadequate Business Model Risk:33 Certain
investments in the likes of birth business models – such as
Lack of access to quality registration, education, social business propositions which
education opportunities and welfare and child protection focus on the lowest cost
social norms, whether because mechanisms, and social goods or services, sourcing
schools do not exist, are too protection mechanisms. of low-paid labor from labor
expensive for families, or are providers (agents), or sourcing
of poor quality can make the Weak Child Protection of commodities that are priced
school-work tradeoff starker, Systems: CPS are critical for independent of farmer income
and leave young people preventing, responding and - may inherently carry greater
engaged in or at risk of child removing children from child risk of child labor. A decision
labor. Social norms relating labor. They coordinate social to adopt such business
to education, especially girls’ services for families and models would require greater
education can also be an children who may be at risk. investment in managing and
inhibitor. mitigating such risks.

Discrimination, Gender Poor Purchasing Practices:


Inequality and Violence at Procurement practices which
home or school can drive drive down prices, delay
children to run away and resort payment, support cancellations,
to unsafe work and child labor one-off and short-term
to survive. Gender inequality,
32
contracts, production quotas
discrimination against migrants or piecework payments, can
and other ethnic minorities are exacerbate the risk of child
important lenses to understand labor impacts.
children who may be more
vulnerable to child labor. SHIFT PROJECT
20
ANNEX 4

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


EXAMPLE OF MULTI-STAKEHOLDER INITIATIVES WHICH INCLUDE
ACTION ON CHILD LABOR34

International Cocoa ICI’s vision is of thriving cocoa-growing communities within a dignified,


Initiative sustainable and responsibly managed cocoa supply chain, where child
rights and human rights are protected and respected, and where child
labour and forced labour have been eliminated.
Responsible Mica The Responsible Mica Initiative brings together a cross section of
Initiative industries that produce or use mica - along with civil society and non-
governmental organizations - to address the root causes contributing to
child labor in mica mining. ’This initiative’s theory of change works across
three pillars – i) responsible business practices in processing units and
mines, ii) community empowerment and iii) appropriate regulation and
formalization of the mica sector.
ILO Child Labour Organized by the ILO, the child labour platform brings together member
Platform companies from across sectors to eradicate child labour in supply chains.

Child Rights in The Centre’s Child Rights in Business (CRIB) working group consists of
Business (CRIB) over 30 company members, working actively on sharing best practices on
Working Group (The
Centre for Child Rights child labour prevention and remediation.
and Business)
Global Battery Alliance The Global Battery Alliance (GBA) is a public-private collaboration
platform founded in 2017 at the World Economic Forum to help establish
a sustainable battery value chain by 2030. Child labor is a key feature of
this work.
Roundtable for RSPO bringing together stakeholders from across the palm oil supply
Sustainable Palm Oil chain to develop and implement global standards for sustainable palm oil.

Fair Cobalt Alliance The FCA is a multi-stakeholder action platform launched in August 2020
that brings together actors from across the entire cobalt mineral supply
chain to provide an answer to increasing scrutiny on ASM cobalt mining
and the DRC mining sector. FCA works to create child labour free artisanal
mining projects.
SHIFT PROJECT

In collaboration with the Centre for Child Rights and Business, the alliance
runs “The Hub” – a network for child labor prevention and remediation in
the Democratic Republic of the Congo.

More information on the Cobalt Alliance and it’s work on Child


Safeguarding
More information on “The Hub” initiative
21
TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS
Alliance 8.7 Alliance 8.7 is a global partnership taking immediate and effective
measures to eradicate forced labor, modern slavery, human trafficking and
child labor in accordance with SDG Target 8.7. The Alliance has strong
involvement with Member States and is Chaired by the Government
of Chile, with the Vice-Chair being the Government of Côte d’Ivoire.
Pathfinder Countries adopt national roadmaps to accelerate progress.

The Supply Chains Action Group brings together governments, business,


trade unions and others to address the challenges to achieve SDG 8.7 in
the context of global supply chains.

For more information on the Supply Chains Action Group

Global March Against The Global March Against Child Labour is a worldwide network of trade
Child Labour unions, teachers’ associations and civil society organizations working to
eliminate all forms of child labor.

Fair Labor Association The Fair Labor Association (FLA) provides training and tools to build
expertise in companies and drive innovation in business practices to
improve working conditions and the lives of workers. Though not solely
focused on child labor, the FLA's work includes initiatives to address child
labor issues in factories and agricultural settings.

Stop Child Labour The coalition is a partnership of NGOs such as Hivos, Cordaid, Mondiaal
FNV and others working with organisations in Asia, Africa and Latin
America who work on the principle that ‘no child should work and that
every child must be in school’. Through their “Work: No Child’s Business”
program, they work with business, communities and governments to
tackle the root causes of child labor in the supply chain.

For more information on Work: No Child’s Business


GoodWeave An NGO working to end child labor in the carpet and rug industry and
International promote fair labor practices. It also provides education and support
services to rescued and at-risk children in weaving communities.

Information for businesses


SHIFT PROJECT
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ENDNOTES

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


1 Child Rights Risks in Global Supply Chains: Why a ‘Zero Tolerance’ Approach is Not Enough, Centre
for Child Rights and Business 2023; and also see: Child labour rises to 160 million – first increase in
two decades, UNICEF, 2021
2 Child labor violations are on the rise as some states look to loosen their rules, NPR, 2023. Also see:
Alone and Exploited, Migrant Children Work Brutal Jobs Across the U.S., New York Times, 2023
3 UNICEF, “Charting the Course: Embedding children’s rights in responsible business conduct: A Brief
(2022, Geneva)
4 Child labour rises to 160 million – first increase in two decades, UNICEF, 2021
5 The State of the World's Children 2017, UNICEF, 2017
6 Protecting children online, UNICEF, 2022
7 ‘Your Product Is Killing People’: Tech Leaders Denounced Over Child Safety, New York TImes, 2024
8 Charting the course: Embedding children's rights in responsible business conduct, UNICEF, 2022
9 More than 90% of the world’s children breathe toxic air every day, WHO, 2018
10 A third of the world’s children poisoned by lead, new groundbreaking analysis says, UNICEF and
Pure Earth, 2020
11 How business affects us: Children and young people share their perspectives on how business im-
pacts their lives and communities, Save the Children, 2012
12 Child Rights and Mining Toolkit, UNICEF, 2017
13 Family-friendly policies: A global survey of business policy 2020, UNICEF, 2020
14 See Red Flag 19, Shift's Business Model Red Flags
15 See further on business models that embed increased risk of impacts on people in Shift's Business
Model Red Flags
16 See further Shift’s Using Leverage with Clients to Drive Better Outcomes for People
17 Valuing Respect, Shift
18 Child Rights Risks in Global Supply Chains: Why a ‘Zero Tolerance’ Approach is Not Enough, Centre
for Child Rights and Business 2023
19 According to the International Labour Organization Minimum Age Convention 138, “minimum age…
shall not be less than the age of completion of compulsory schooling and, in any case, shall not be
less than 15 years.” However, it also notes that member countries “whose economy and educational
facilities are insufficiently developed…may initally specify a minimum age of 14 years.”
20 de Guzman Chorny, N., Raub, A., Earle, A. and Heymann, J. (2019), "The state of child labor protec-
tions in 193 countries: Are countries living up to their international commitments?", International
Journal of Sociology and Social Policy, Vol. 39 No. 7/8, pp. 609-626.
21 i.e. the Convention on the Rights of the Child, the ILO Convention No. 138 on Minimum Age, and
Convention No.182 on the Worst Forms of Child Labor.
22 "Obsessed with Audit Tools, Missing the Goal," Why Social Audits Can’t Fix Labor Rights Abuses in
Global Supply Chains, Human Rights Watch, 2022
23 Ending child labour, forced labour and human trafficking in global supply chains, International Labour
Organization, Organisation for Economic Co-operation and Development, International Organization
for Migration, and United Nations Children’s Fund, 2019
24 Child Labor and the Broken Border, New York Times, 2023
25 Value chain working group, Cocoa value chain analysis, SER, 2018
26 Finance Against Slavery and Traffic (FAST Initiative)
27 Financial Investigations Tool, FAST Initiative, 2019
28 Goal 3, Using leverage creatively to mitigate and address modern slavery and human trafficking
SHIFT PROJECT

risks, Financial Investigations Tool, FAST Initiative, 2019


29 ILO-IOE (n 5) 6-7.
30 Ending child labor, forced labor and human trafficking in global supply chains, International Labor
Organization, Organisation for Economic Co-operation and Development, International Organization
for Migration, and United Nations Children’s Fund, 2019
31 Ending child labor, forced labor and human trafficking in global supply chains, International Labor
Organization, Organisation for Economic Co-operation and Development, International Organization
for Migration, and United Nations Children’s Fund, 2019
32 In fact, almost all countries have ratified the Convention on the Rights of the Child, and ILO Con-
vention 182 on the Worst Forms of Child Labor; while 80% of States have coverage of Minimum
Age Convention 138. See Ending child labour, forced labour and human trafficking in global supply
23
TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS
chains, International Labour Organization, Organisation for Economic Co-operation and Develop-
ment, International Organization for Migration, and United Nations Children’s Fund, 2019
33 Business Model Red Flags, Shift
34 Initiatives operative at the time of publication; inclusion does not necessarily offer insight into their
relative maturity or effectiveness.

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24
Tackling Child Labor: a guide for Financial Institutions
Shift, New York. March 2023

TACKLING CHILD LABOR: A GUIDE FOR FINANCIAL INSTITUTIONS


© 2024 Shift Project, Ltd.

ACKNOWLEDGMENTS

This guide is an output of Shift's Financial Institutions Practitioners Circle, and has been jointly
developed by Shift, The Centre for Child Rights and Business and UNICEF. This report was
authored by Subajini Jayasekaran (lead author; Shift) and Ashleigh Owens (Shift), and has
benefited from the generous advice and input of Erik Nyman and Jazz Smith-Khaira (UNICEF),
Malin Liljert and Ines Kaempfer (The Centre for Child Rights and Business).

ABOUT SHIFT’S FINANCIAL INSTITUTIONS PRACTITIONERS CIRCLE

Shift’s Financial Institutions Practitioners Circle is a carefully designed space for practitioners
working within financial institutions to discuss human rights challenges and co-create cutting-
edge solutions that fit their unique reality. In addition to peer conversations, Shift’s FIs Circle
membership provides access to 101 training on core concepts of the UNGPs – including
remedy – to which members may invite key internal stakeholders from across the institution.
To learn more visit: shiftproject.org/fiscircle or contact us at: [email protected].

ABOUT SHIFT
Shift is the leading center of expertise on the UN Guiding Principles on Business and Human
Rights. Shift’s global team of experts works across all continents and sectors to challenge
assumptions, push boundaries, and redefine corporate practice, in order to build a world
where business gets done with respect for people’s dignity. Shift is a non-profit, mission-driven
organization, headquartered in New York City.

Visit shiftproject.org and follow us at @shiftproject.

ABOUT THE CENTRE FOR CHILD RIGHTS AND BUSINESS

The Centre for Child Rights and Business supports companies in child rights, ESG, and human
rights due diligence to deliver improvements within their supply chains and yield positive
business outcomes. Our mission is to promote supply chain transparency, improve corporate
practices for businesses, and improve the lives of children and families by working with
companies to strengthen children’s rights. Our services cover child labour prevention and
remediation, child rights risks assessments, support packages for young workers and other
vulnerable groups, and services to create family-friendly workplaces in supply chains including
child friendly spaces and migrant parents training.

Visit www.childrights-business.org or contact us at [email protected].


SHIFT PROJECT

ABOUT UNICEF

UNICEF works in the world’s toughest places to reach the most disadvantaged children and
adolescents – and to protect the rights of every child, everywhere. Across more than 190
countries and territories, we do whatever it takes to help children survive, thrive and fulfill their
potential, from early childhood through adolescence.

And we never give up.

unicef | for every child


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