Introduction

This report examines child labour due diligence in supply chains, with a focus on improving effectiveness through systemic approaches and collaboration. Current due diligence frameworks prioritise risk assessment and compliance, yet evidence suggests they inadequately address child labour’s root causes. The global estimate of children in labour is 160 million, with 79 million in hazardous work. Regulatory developments like Mandatory Human Rights Due Diligence (MHRDD) and forced labour import bans highlight the critical need for re-evaluated approaches to protect supply chains and investments while improving outcomes for affected communities.

Context

Child labour is a widespread issue, deeply tied to systemic factors such as poverty, fragile governance, and displacement. Current frameworks often focus on minimising risks for top supply chain actors, leading to unintended consequences such as declining local livelihoods and exacerbating root causes like poverty. For instance, in the Democratic Republic of Congo (DRC), high participation fees for traceability schemes have reduced miners’ incomes, worsening conditions for children.

Despite significant investments in traceability and risk assessment, an OECD study found that little funding reaches the upstream supply chain, where child labour risks are most acute. The top-down approach, prioritising audits and compliance, leaves supply chain origins largely invisible, perpetuating inefficiencies and risk.

Mini case study

The case of tantalum mining in the DRC underscores the complexity of addressing child labour. The DRC produces 40% of global tantalum, 64% of which comes from artisanal and small-scale mining (ASM). ASM is strongly linked to child labour, hazardous conditions, and broader social issues. Due diligence efforts, including those under the Dodd-Frank Act, have failed to improve livelihoods or reduce child labour significantly. Instead, armed groups have adapted to maintain control over supply chains, bypassing monitoring mechanisms.

Key learnings

Participants in investor and corporate roundtables identified several key insights:

• Current risk management structures are fragmented and insufficient for addressing systemic child labour risks.
• Assessing child labour risks requires a bottom-up perspective across affected sectors rather than isolated assessments by individual companies.
• Transparency and assumption-based approaches, where child labour is presumed in high-risk supply chains, can improve mitigation strategies.
• ESG data providers and benchmarks must better incorporate child labour indicators to drive meaningful action.

Quantitatively, only 54% of companies benchmarked by the Global Child Forum identified child labour as a material issue, and just 20% reported preventative or remedial actions. Most actions focused on compliance rather than addressing root causes.

Systemic child labour risk

Systemic child labour poses a long-term material risk to supply chain resilience and investment returns. Increasing regulatory requirements amplify risks of supply chain disruptions, litigation, and reputational damage. Collaborative and systemic approaches, leveraging ESG data and origin community engagement, are essential to mitigate these risks effectively.

Next steps for investors

Recommendations for investors include:

• Assuming child labour exists in high-risk supply chains and using third-party verification to confirm its presence.
• Prioritising child labour in engagement strategies, addressing it alongside environmental considerations.
• Supporting long-term systemic changes in origin communities by aligning investment strategies with extended milestones.
• Collaborating with ESG data providers to enhance child labour metrics and influence regulatory frameworks.
• Engaging in collective initiatives to reduce duplication of efforts and scale effective interventions.

Next steps for companies

Companies are advised to:

• Reassess risk management processes, moving from company-specific to commodity-wide assessments that incorporate upstream risks.
• Adopt community-centred approaches by engaging local stakeholders, governments, and NGOs in initiatives that address root causes of child labour.
• Promote transparency in addressing child labour risks and focus on collaborative solutions for sustainable impact.