Blockchain and Anti-Modern Slavery
Interview with Mark Blick (Diginex)
How do you make an impact on global slavery using blockchain technology?
During this podcast 300 more people are going to be trapped into indentured work or human slavery. Imagine that you're one of them. You arrive into new job and find yourself already heavily in debt because of the fact that your contract has been changed without you knowing it, to include charges that you never knew existed. Diginex and the Mekong Club have been working in Southeast Asia with leading brands to make an impact on human slavery, leveraging blockchain's key characteristics of transparency and immutability.
It's a real pleasure to have Mark Blick here from Diginex to be able to explain how the project is going.
Mark, what did the world look like when you set up this new venture?
Looking through a wide lens, we see that 65% of procurement leaders say they have limited or no visibility beyond their tier-one suppliers. Within that, we know that modern slavery affects 40.3 million people in a $150 billion a year industry, with 9 million new people entering slavery every year. So that's 25,000 new victims every day. 1000 every hour. One new victim every four seconds. And today, amazingly, there are more slaves than there are Canadians and more slaves than any other time in history.
What we've started to see beginning with the 2015 UK Modern Slavery Act is regulators across Europe, Australia and North America passing legislation on modern slavery. We've seen class action lawsuits against Nestle, Cargill, Mars and Hershey for alleged child slave labor in Cote d'Ivoire in West Africa. We've seen a class action lawsuit against Costco and it's Thai seafood supplier alleging that Costco knowingly sold prawns from a supply chain tainted by slavery. Just before Christmas last year an undercover investigation exposed illegally long working hours and low wages for staff at a factory in China producing toys with Disney. And this happens in the UK too: a slave labor case in the UK against the Yorkshire based firm who supplies companies including Next & John Lewis.
The question used to be "do you employ slaves", which was a binary yes/no answer. The question now is much more nuanced: "Can you demonstrate that you are doing everything that can be reasonably expected of you to identify and eliminate cases of forced labor in your supply chain?" And there are very few, if any, companies that can meet that standard if they have complex supply chains around the world. We believe that technology and blockchain specifically can play a key role in helping companies to increase transparency in their supply chains and therefore focus on the actions that they subsequently take.
So that's a significant sea change going on that big names - Disney, Nestle, etc. are having to do something about.
Just to be clear, what we're talking about here are prohibitive costs being added to workers' contracts without their consent, contracts being withheld or contract terms being changed without their authorization. Is that right?
Yes. It's one new victim of slavery every four seconds.
There are two or three main triggers for this. The first is contract substitution. For example, a person moves from country A to country, B. In country A, they agree a contract that may be for 40 hours a week for x dollars. And when they arrive in country B, they find the contract has been substituted or edited: and now they're working a hundred hours a week for half the pay.
At the same time, they're having to pay thousands of dollars in fees in order to secure that role. A recent study in Taiwan found that the average amount of fees being paid to secure roles by migrant workers was between USD$3,000 to $5,000. And of course, many of these migrant workers don't have $3,000 to $5,000. So they then end up taking out loans (often from the same people who are charging the fees) in order to secure the roles.
So they're working longer hours for less pay and are highly indebted. That with other things, like passports being taken away, exploitation and the threat of violence means that these people are trapped in indentured servitude.
All of this starts from a very simple concept: How do we empower migrant workers with a trusted contract that they know can never be taken away from them, edited or tonight ever existed and can be relied upon as a single source truth?
What we have now is a trust issue. So I'm a migrant worker and I've signed my contract. That migrant worker contract is stored on a central server that is owned by the employer. So that's that's a trust issue. Why would I trust that contract to be safe when the reality is they all being changed? Or they are stored in a filing cabinet, which is a security issue: contracts can go missing or be damaged or, again, be changed.
So the key is solving for that trust issue and solving for that security issue. At the same time solving for that transparency issue of being able to demonstrate who is signing what and who is agreeing to what.
So the solution that we're talking about in terms of rolling out (if I am an employee in a factory in Vietnam, for example) is essentially two parts: it's a mobile app and then a database that sits behind that.
Yeah, that's exactly right.
At the time that we met Mekong Club, we were looking for a partner to work on a project that we believed blockchain technology would be beneficial for: Is there a question of trust, transparency and security? I tend to boil blockchain projects down to a single question which is "I need to know what I'm looking at is what you're looking at" and, within the context of this question, that is very much an issue.
You have a contract which is shown to the migrant worker (and sometimes even taken away from them), you have one which is shown to the brand, one for the regulator, one for the bank, one for the auditor and so on. We know in our conversations that, for many of these brands who share the same suppliers and visited had the same factories, that they are shown different contracts for the same workers that are customized to their own internal HR and and sustainability guidelines.
So we needed to create a scenario which was a single source of truth and remove that issue of multiple sources of truth.
So essentially we're talking about an app that, for example, an employee would use to store their employment contracts and then to be able to have that single source of truth - so that any changes to that contract would be logged and tracked and so that it would be absolutely transparent who was messing with it? And then off the back of that, and you're able to generate information for the corporate and for the regulators or the overseers of the corporate so that the whole ecosystem, derives the benefits of the employer and the employee putting the contract in the first place.
Yes. There are three things you can do with data on blockchain: You can enter it, you could add to it and you can read it. But you can't delete it. Nor can you edit it. So no changes can be made to that contract having been entered. What you can do is update it. So you can say, previously my wage was X, now it's Y. Or you can say "I meant to say I came from this country, but in fact I come from that country". So we have the ability to add to the original contract, but the data that was originally entered will always be there. You can see the trail and you can see the changes that have been made. And the migrant worker can have a record of the contract for themselves on their phone. They can also share it with friends, family through social media.
The Mekong Club mandate (and they are are 32 member business association of large global brands, manufacturing many of the clothes of you wear; make much of the food that we eat; and the cosmetics that people wear) was "how do we help them by policy advocacy; by giving them tools and by helping them understand their supply chains better?".
And we don't for any second think that this platform removes the need for the social audit processes that are already going on - either by external auditors, by the companies or by government regulators. What we want to do is empower them with better data analysis tools so they can focus their efforts.
I was in a Southeast Asian country the other week talking to an auditor. He was very frank saying, I have five thousand fish farms which I need to audit every year and I simply don't have the resources to be able to cover all of them in sufficient depth. And so, so a lot of it today is triaging. What we want to be able to do is enable that auditor to focus where they spend their time. So if you know with this bucket of companies that you need to go and see, there's 60% transparency into the employment records of the people that they have working for them; but in another pocket there's, there's 5% transparency, then that's where you will spend your time.
Exactly: I think one of the criticisms leveled against blockchain is that people generally say it's the all-singing, all-dancing answer to everything. Really what we're saying here is that it's a tool that empowers and drives efficiencies, but it's always going to need the human layer to make the answers really happen.
100% agree. We deliberately do not say statements like "blockchain is going to the solve modern slavery". What we focus on is "blockchain is going to enable better trust, transparency and security - particularly in the contracting process but also into what employment agency fees are being applied - and through that transparency and better access to data companies, auditors and regulators will be able to take more focused actions in eliminating cases of forced labour."
We've talked about the principals so far. We have this platform in hand in terms of the mobile app and the dashboards that run behind it. In practical terms, how are you finding the rollout so far?
We have been targeted in where we're looking to roll this out. Having talked to many people on this, we do believe that the tech Literacy and smartphone penetration among migrant workers within garments supply chain is relatively high. So that's a good place for us to start.
We signed our original MOU with the Mekong Club back in, in July last year. Over the course of August and September we then worked with six members of the Mekong Club's business association where we would build iterations of the tool and send it back to them and they would give us feedback and then iterate again. We finished that process at the end of September and presented it to all 32 members of Mekong Club Association.
But then what we really needed to do over Q4 last year was to refine it from a usability perspective. We got the process down from, I think, 14 clicks for a migrant worker to two or three - and it's all done through a mobile phone and QR codes. It's a very simple intuitive process that is very easy to understand and adopt.
We started implementing this platform in a company that has 17 shrimp farms and 350 workers. And then from that we will work as part of the larger infrastructure that will have access to through this organization around a hundred farms and 5,000 workers and both agri- and aquaculture across Thailand.
In terms of your daily life at the moment, are you finding that beyond the Mekong Club members, are you getting now companies coming to you saying that this is something they really need to look at?
We absolutely are having companies come to us on this. And I think that's been a change in the last year. We really spent the first 3 months building the tool and creating an awareness around this: and now we companies actively approaching us. And I think this is driven by one of two things: you have at the one end of the scale companies who have always been best in class at this as part of their culture. It's part of their internal policy to strive for a highly transparent, sustainable supply chain and they're always looking for new ways to achieve this. And then, at the other end of the scale, you have companies who may not have had those goals but whose feet are being held to the fire because they've been caught using forced labor or child labor in their supply chains and are having again to look at new ways in which they can help combat this.
What we do see almost uniformly with one or two exceptions, is that there's a current misalignment between the resources available to these companies and the scale of the problem we have in front of them. To be fair, the scale is comprehensive and complex: companies that we speak to have thousands of tier-one suppliers but then exponentially more tier-two, tier-three and tier-four suppliers. And they're expected to have a degree of visibility throughout that chain. And often they have tens of thousands of suppliers around the world. So there's, there's a global complexity there too.
On that point, if you have, for example, a major global brand, how successful are they in, in applying the necessary pressure to a tier-two or tier-three supplier when there's obviously a lot of dis-intermediation in the middle?
What we look to do is create what we've called "Coridoors of integrity" where we know, for example, from this brand to this tier-one supplier we can demonstrate a high degree of transparency on employment contracts. From there you look to grow both horizontally and vertically. Horizontally: you want to start working with more and more tier-one suppliers in creating those corridors of integrity. Vertically: you want to start going into tier-two, tier-three and tier-four suppliers. But this certainly isn't something which is going to happen overnight.
Presumably that's the challenge: at the brand level there's already a heavy element of stick as much as there is carrot. But the nearer you approach the actual employee, the more you need to use carrot and stick given the location of most of these organizations (and the limited likelihood of prosecution there), but also the amount they have to lose from giving up some of these practices?
Yes, I think that's fair. The lower you go, there can be some suspicion around "if I reveal this data to you, how will you use it against me? Will it be used to negotiate better terms or to put more pressure on me?". So we need to put in place incentives that, if you meet certain sustainability criteria around modern slavery and other topics, you are then rewarded with increased orders coming through to you.
Yes and presumably not just orders. Thinking aloud, presumably an organization that's proven to be a good player or to behave well would be significantly low-risk from a choice perspective. So they would receive not just more orders but presumably better access to credit, better access to all of the bells and whistles that society has to offer.
Exactly. And those are conversations we've begun having with banks.
Where do you aim to be, for example, in a year's time or two year's time with the platform?
There are two levels. There's the scale of what we want to do in terms of how many people we want to work with. And then there's also the future functionality that we want to build onto this platform.
Earlier on we covered on the point that we really are very focused around the issue of contracts and employment fees because who know from working with the Mekong Club and other intergovernmental organizations that those are the two key drivers of modern slavery. But when we talk to companies we have these questions "This is great - could you also add information on working hours?" "Could you also add information on salary verification?" "Could you also help with remittances and medical care?" and so we were beginning to look at how we build in these additional functionalities to the tool. I think probably from next year onwards we'll start to see those coming through.
Presumably also there's an outreach element now that the app is in the hands of the employee: in terms of being able to actually communicate with them on a more regular basis if they've got issues or if they've got questions. Is that part of the plan?
Yes. Education and awareness is very much part of it. And that goes back to our key strategy of public private partnership. Not only through the Mekong Club but also through Verificate and other local NGOs that we're working with.
So essentially what we're talking about a technology platform that now exists that builds on the most basic of blockchain features: which is just the simple fact that you can't mess with it. But you're putting that into the hands of major brands around the world in order to make sure that the end-employees benefit and so that contract manipulation can be stamped out - and necessarily therefore slow the tide of the thousands of people that are forced into indentured work and slavery every day.
Yes, I like the tagline of "Blockchain: You can't mess with it". We're focusing on that contract and just making it something which can't be changed. Through that process we can make a significant step in empowering the good actors and crowding out the bad ones.
Our goal is not to suddenly roll this out and for the problem to go away, but can we start working with the public sector and the private sector and start implementing blockchain technology and start reducing the 40 million to 35 - and start increasing the amount of people we help from 0.2% to 0.3%. I have a quote which I like, which is "don't let great get in the way of good." So can we get meaningful change quickly and aim for aspirationally great in the future - but can we do good now?
Fantastic. Thank you so much for running through this. It's an inspiring story and genuinely one that I think a lot of people are going to be watching from corporate desks around the world: to see when the right time is to jump. Not if but when.