MSC - Marine Stewardship Council Consultation Document – On-Shore Labour Practices

Consultation Dates 15 August-15 October 2018 MSC Contact Leah Buckley FOR CONSULTATION

1 1. Executive summary

Key points - This is the final consultation on the proposal to introduce labour requirements into the MSC Chain of Custody Standard, scheduled for release in February 2019 - Feedback is sought on the proposed process, risk assessment criteria, recognised third- party labour programs, a customised MSC-SEDEX on forced and and an amendment to CoC CR clause 6.2.9. - The drafted text for changes to MSC program documents, as well as new supporting documents, have also been made available and are open to comment. 2 3 4 2. Purpose of the consultation 5 This is the final consultation on the set of proposals to introduce labour requirements into the Chain of 6 Custody (CoC) Standard. This consultation requests input on: 7 • The proposed process to integrate labour requirements into the MSC CoC Standard 8 • The proposed risk-based approach that uses country-based risk indicators and prioritised scope 9 activities to determine a site’s need for an on-site labour audit 10 • The list of 3rd party labour programs MSC is planning to recognize, the minimum requirements for 11 recognition of an audit against each program and the suspension process 12 • An additional proposal for MSC to work with SEDEX (Supplier Ethical Data Exchange) to develop 13 a customised SEDEX audit focused on forced and child labour 14 • An amendment to the existing clause on forced labour (CoC Certification Requirements clause 15 6.2.9) 16 • The draft Chain of Custody Default Standards, CoC Certification Requirements (CoCCR) and 17 General Certification Requirements (GCR) clauses specific to the labour requirements 18 19 3. Project objective 20 Mitigate the risk that MSC certified organisations and their subcontractors use forced or child labour 21 and to provide greater assurance that MSC certified product is not associated with egregious labour 22 violations. 23

24 4. Definitions of forced and child labour 25 The MSC will use definitions from the International Labour Organisation (ILO). 26 Forced labour is, “all work or service which is exacted from any person under the menace of any 27 penalty and for which the said person has not offered himself voluntarily” (C029 - Forced Labour 28 Convention, 1930).

29 Child labour is work that is mentally, physically, socially or morally dangerous and harmful to children; 30 and interferes with their schooling by depriving them of the opportunity to attend school; obliging them 31 to leave school prematurely; or requiring them to attempt to combine school attendance with

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32 excessively long and heavy work. It includes work prohibited in national legislation and excludes 33 permissible light work. 34

35 5. Proposal 36 The proposal to introduce labour requirements into the MSC CoC program is a risk-based approach 37 that requires certificate holders in high-risk countries and engaged in prioritised scope activities (any 38 processing, (re-)packing and manual offloading) to complete an on-site audit against a recognised 3rd 39 party labour program, to be eligible to maintain CoC certification. 40 The labour audit must be completed within 12 months of initial certification (or 12 months’ after a CoC 41 holder’s first audit against CoC Standard v5.0) and must conform to the audit schedule of the relevant 42 labour program.

43 MSC is seeking feedback on the elements of the proposal to introduce and maintain the labour 44 requirements. Please see the relevant section of this paper for detail.

45 Note: This paper includes references to sites and certificate holders. The intention of the requirement 46 is that the CoC certificate holder is responsible for compliance, but the labour requirements are 47 applied on a site level. For example, if a low-risk country has a site in a high-risk country, only the site 48 in the high-risk country would be required to complete a labour audit.

ASC CoC certificate holders: Note that ASC is developing a social audit methodology, which may become applicable to ASC CoC certificate holders on a risk basis. The intended release date of the ASC tool is end-2019; for more information, please see www.asc-aqua.org.

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Table 1: Elements of MSC proposal for on-shore labour practices Element Section

Process: A decision tree to visualise how MSC envisages the Appendix A labour requirements to be implemented, including what auditors and certificate holders will need to do to comply. Risk-based approach: Appendix B i. Country-based risk scoring: The proposed indicators that will be used to evaluate if a country of operation is considered to be low or high risk of having forced or child labour in the seafood industry. ii. Prioritised scope activities: The proposed scope activities that would require a site operating in a high-risk country to complete an on-site labour audit to be eligible for CoC certification. Recognised third-party labour programs: The proposal for Appendix C audit programs proposed for recognition, the minimum requirements criteria set by MSC to recognise an audit against one of the programs, labour auditor competency criteria and suspensions process if the site does not meet MSC’s minimum requirements. Customised SEDEX audit: In addition to the recognised labour Appendix D programs, MSC proposes to work with SEDEX to develop a customised labour audit focused only on forced and child labour.

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Changes to existing clause on forced labour: MSC proposes Appendix E an amendment to CoC CR 6.2.9 on eligibility for certification for entities prosecuted for forced labour. Changes to MSC program documents: Overview of where Appendix F program documents will see change. Excerpt of the CoC Standard: Excerpt of the requirements Appendix G related to forced and child labour 50

51 6. Background Date Activity Outcome March-May 2017 Public consultation MSC collected consultation feedback on proposal for self-declaration and MSC labour panel May 2017 Review of public Proposal not supported for on-shore supply consultation feedback chains. Feedback from stakeholders that MSC could do more given the availability of solutions for on-shore operations, and that the proposed labour panel was confusing, complex and there were concerns over the availability of experts for the panel. This led to a split of off-shore and on-shore proposals

June-November 2017 Review and update of Further investigation and targeted consultation proposal on options for MSC to introduce labour requirements into the CoC program November 2017 Stakeholder workshop Workshop with stakeholders and industry experts to review proposed options and recommend an option to put forth to MSC governance bodies. The workshop recommended Option 2 for on-shore supply chains: 1. Option 1: Risk-based approach for self- assessment 2. Option 2: Risk-based approach for on- site audit 3. Option 3: Self-disclosure

December 2017- MSC governance sign- MSC governance bodies support Option 2 January 2018 off of proposal January-June 2018 Targeted consultation Consultation focused on feedback on the with over 200 proposal and understanding the scale of the stakeholders on impact across the program. Feedback is Option 2 via three summarised below: webinars, targeted Proposal: In general, stakeholders were not consultation events in surprised with MSC including Labour China and remote Requirements into its CoC program. Most meetings and emails. welcomed the proposal and initiative by MSC.

Working with existing labour programs:

The decision to recognise existing schemes rather than developing an MSC Labour Standard was supported by stakeholders as it acknowledges audit fatigue felt throughout the industry. Still, concern was raised by auditors and certificate holders that it could be perceived as too ‘weak’ and that a scope restricted to forced and child labour does not align with most labour , which cover a broader range of labour issues.

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Accessibility: Concern was raised as to the burden on small-scale entities, particularly those in the Global South who produce mainly for domestic markets, and whether the labour requirements would present a barrier to entry. Risk-based approach: Concerns were raised on the use of country-level indicators in the risk assessment, and the perception of targeting countries in the Global South and emerging economies. Concerns were also raised about the use of indicators from the US government (Department of Labour and State Department).

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53 For more detail, please see the MSC Program Improvements website background and supporting 54 documents.

55 56 7. Justification/Rationale for final proposals 57 The proposals put forth in this paper are the result of two years of research and investigation, 58 including two rounds of public consultation and extensive targeted consultation with over 300 59 individuals and companies via workshops, meetings, webinars, and emails including MSC and ASC 60 stakeholders from across the supply chain, standard setters, industry bodies, and NGOs and 61 international institutions working in the field of and labour issues in the seafood sector. 62 MSC also contracted expert consultants to help conduct background research and analysis and 63 develop the risk-based approach for application of the proposed labour requirements. 64 In addition, rationale is provided for individual elements of the proposal in each section, as well as in 65 the draft program documents. For more detail on the considerations that factored into the proposal, 66 please see Section 4: Considerations of the 2017 consultation paper.

67 68 8. Potential interactions with other work 69 This project is linked with the Labour in Fisheries and off-shore supply chains project. These 70 requirements will be released in August 2018 as part of the Fishery Certification Requirements v2.1. 71 72 9. Next steps 73 All consultation feedback will be anonymised and published on the MSC Program Improvements 74 website after the consultation closes. This will also be emailed to all respondents. 75 The revised CoC Standard, CoC Certification Requirements and GCR have an anticipated release 76 date of February 2019. 77

78 10. Who can comment? How do I give feedback? 79 This consultation is public and open to all interested parties. All associated documents can be found 80 on the Labour Requirements page of the MSC Program Improvements website. 81 The online feedback survey allows you to respond to specific questions on this topic. We also 82 welcome any more detailed comments that you wish to make on this consultation which can be 83 emailed directly to: [email protected] 84

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85 11. Timeline Date Activity 15 August-14 October 2018 Final public consultation November 2018 Risk assessment finalised and sent out to stakeholders who submitted feedback January 2019 MSC Board of Executives to make decision on final proposal February 2019 Release of revised CoC Standard & program documents August 2019 Effective date of revised CoC Standard & program documents August 2020 12 months grace period – All sites that meet the criteria for a high-risk operation should by now have completed an on-site labour audit. 86 87

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88 Appendix A Proposed process for labour requirements in the CoC program 89 Figure 1 represents the process for identifying a certificate holder and/or site’s need for a labour audit 90 and what will be expected of auditors and certificate holders to comply with the labour requirements in 91 the CoC Standard. The proposed requirements do not require the CoC auditor to audit, collect 92 evidence of labour conditions or interpret results. 93 Rationale: The rationale is to reduce the burden on certificate holders and auditors to implement the 94 labour requirements and make the process as clear as possible. The first step to ask certificate 95 holders if they have a labour audit is to collect evidence on the prevalence of labour audits across the 96 CoC program. 97

98 Figure 1: Proposed process to introduce and maintain labour requirements in the CoC program 99 This is a visual representation of CoC Certification Requirements clause 8.2.14-15.

100 Appendix B Risk-based approach 101 The MSC Labour Risk Scoring Tool comprises two components. The first part is the country based 102 labour risk scoring tree (Table 2), developed based on a set of indicators which are individually 103 weighted and used to derive a country score. The second part (Table 3) looks at the scope activity 104 under consideration, with certain scope activities prioritised based on their association with intensive 105 manual labour.

106 MSC proposes that if the country score is above a certain threshold score (to be determined) then the 107 country would be deemed ‘high risk. If sites in a ‘high risk’ country also engaged in the prioritised 108 scope activities (Table 3), then the relevant sites would be required to complete an on-site third-party 109 labour audit. The auditor must assess each operation site and subcontractor against the MSC Labour 110 Risk Scoring Tool and inform the certificate holder if one of their sites or subcontractors requires a 111 labour audit. The MSC proposes to make the country scores available on the MSC website and to

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112 update these scores annually. The objective of the risk-based approach is to reduce burden where 113 risk of forced and child labour in the seafood industry is low. Following stakeholder feedback, it was 114 determined that the risk-based approach needs to:

115 • target countries with weak legal regulations or legal enforcement regarding forced and child 116 labour, 117 • be simple and transparent, 118 • be informed by indicators or tools developed by competent authorities, 119 • based on ‘reliable findings and determinations by competent human rights authorities’ 120 • use publicly-available indicators, and 121 • not require individual judgement or research by the CAB or MSC. 122 Rationale: The use of country-based indicators was determined to be the most suitable approach for 123 MSC given available resources. A company-level risk assessment, although more thorough, would 124 require either full participation of all CoC certificate holders to do a self-assessment and/or for a social 125 auditor (or equivalent) to review documentation and even conduct an on-site visit to establish the risk 126 level of a site. This would be costly and excessively burdensome and was determined to be 127 unfeasible at this time. Scope activities were selected based on their association with intensive 128 manual labour.

129 The indicators were selected bearing in mind the above considerations. Ideal elements for scoring 130 add a risk or protection value that is clearly about seafood work. "Seafood" and "forced labour" 131 determinations were inclusion criteria in the first version of the risk methodology. However, limited 132 availability of such indicators prompted a look at other indicators including those on governance and 133 corruption, Illegal, Unreported and Unregulated (IUU) fishing, and broader labour issues (Rights to 134 Organise and Work in Fishing conventions). Please see Table 4 for a description of each indicator.

135 In previous engagements with stakeholders, some concerns were raised on the suitability of the 136 selected indicators including:

137 • Perception of biases in government indicators (US TiP report and List of Goods) 138 • The reliability and methodology of some indicators (Global Slavery Index, US TiP report) 139 • Relevance of indicators not specific to forced and child labour (Amfori BSCI, Right to 140 Organise, Port State Measures Agreement) 141 • Effectiveness of UN indicators with near-universal ratification (Forced Labour Convention 29) 142 Ultimately, there are no universally-accepted indicators specific to labour in the seafood industry that 143 do not flag at least one of the above concerns. The MSC recognises the need to work with the best 144 available information. The selected indicators reflect globally recognised sources and what is currently 145 used by businesses and organisations to develop risk tools for the seafood industry; still, MSC 146 requests feedback from stakeholders to identify which type(s) of indicator (government, NGO, 147 international institution) are considered the most robust and whether and how the indicators should be 148 ranked in importance. 149

Table 2: Country-Based Risk Scoring Tree Proposed indicator Increased risk when Weighting US Department of Labor List of Goods Produced by Country listed for seafood Child Labour or Forced Labour products.

amfori BSCI’s Country Risk Classification list Country listed as high or severe risk. Global Slavery Index compiled by Walk Free More than 1 in 200 of Foundation country’s population in modern slavery. Country has ratified the Palermo Protocol Not ratified ILO Work in Fishing Convention 188 Not ratified Country issued warning/sanction by EU Carding for Red or Yellow card IUU Fishing

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Country has ratified ILO Forced Labour Convention Not ratified 29 Country has ratified ILO Right to Organise Not ratified Convention 98 Country has ratified FAO Port State Measures Not ratified Agreement US Department of State Trafficking in Persons (TiP) Country listed on Tier 2 report Watchlist or Tier 3. Scores from weights are added up. If the score is Final score above a certain threshold (to be defined), the country and hence sites active in prioritised scope activities are deemed as ‘high risk’ and a third-party labour audit is required. 150

Table 3: Prioritised scope activities Processing Contract processing Use of contract processor Packing or repacking Manual-offloading 151

Table 4: List of proposed indicators for risk-based approach and rationale for inclusion Name of indicator Description Rationale US Department of The List is maintained by the This is an authoritative list comprised Labor List of Goods International Bureau of Labor Affairs, of all three of the List of Goods Produced by Child U.S. Department of Labor (DOL). produced by Child Labor or Forced Labour or Forced An entry indicates that, based on a Labor, the List of Products Produced Labour review of publicly available sources, by Forced or Indentured Child Labor, DOL has reason to believe that there and the Findings on the Worst Forms is a significant incidence of child of Child Labor. labour or forced labour in the production of the good in the It is also one of the few indicators country. It includes the application of that can be filtered by type of good. research and statistical analysis For the purposes of MSC, the under clear rules set by a global indicator would focus on the committee of experts. categories related to seafood.

The list can filter by forced labour, child labour or both. It can also filter by industry. There are six categories related to seafood that MSC would focus on: fish, dried fish, Nile perch, tilapia, shellfish, lobster and shrimp. Amfori BSCI’s The Amfori BSCI country risk The list is compiled by a competent Country Risk classification list is based on international organisation, the World Classification list. Worldwide Governance Indicators Bank, and the governance indicators looking at 6 dimensions of provide an estimate of the country’s governance identified by the World general rule of law, corruption, Bank. Amfori BSCI is recommending government effectiveness as well as the country risk classification list to other indicators which are its members as a support in their considered as important to prevent human rights’ due diligence forced and child labour to occur in a approach defining their priorities. It country without legal consequences. looks at governance rather than Amfori BSCI is also one of the human trafficking and modern proposed recognized labour slavery specifically. programs. Global Slavery The Index is developed by the Walk The Index is a credible report Index Free Foundation in collaboration with produced by an authoritative civil the UN’s International Labour society organisation. The indicators Organisation (ILO) and the look not just at incidence of forced labour but also the role of

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International Organisation of government and institutions in Migration (IOM). preventing and responding to It is comprised of three parts, using incidents of forced labour. It was multiple indicators for each: 1) therefore determined to be a suitable prevalence of forced labour; 2) indicator to evaluate the risk of a vulnerability to enslavement, and 3) country. robustness of government responses. The Global Slavery Index publishes its findings of prevalence based on nationally representative Gallup survey data. The methodology can be found on their website. Country has ratified The UN High Commission for Human The Palermo Protocol was the Palermo Rights Palermo Protocol defines developed by the Office of the High Protocol human trafficking. Its purpose is to Commissioner of Human Rights prevent and combat trafficking in (OHCHR). It was included as an persons, protect and assist the estimate of a country’s will and victims of trafficking, and to promote investment in protecting and cooperation among States Parties to providing restitution to victims of meet the objectives. human trafficking, who often end up in situations of forced labour. Country has ratified The ILO Convention concerning The ILO 29 was included as an ILO Forced Labour Forced or Compulsory Labour is an approximation of a country’s will and Convention 29 agreement to suppress the use of investment to protect its workforce forced or compulsory labour. It is one from forced labour and child labour in of the most widely ratified UN the production of goods. conventions (178 countries) and has been in place since 1930.

Country has ratified The Right to Organise and Collective Although not specific to forced and ILO Right to Bargaining Convention 98 is one of child labour, the ILO Right to Organise the eight fundamental ILO Organisation was included as an Convention 98 conventions, and has been in place approximation for a country’s will and since 1949. It sets out a framework investment to protect its workforce. for protection for workers to organise and negotiate working conditions with their employers. It has been ratified by 165 countries. Country has ratified The PSMA was adopted by the FAO Although not specific to forced and FAO Port State Conference in 2009. Its purpose is to child labour, the coming into force of Measures prevent, deter and eliminate illegal, the PSMA is aligning signatory Agreement (PSMA) unreported and unregulated (IUU) States around checks & balance fishing through the implementation of measures for legal seafood in the robust port State measures, for both global trade. domestic and foreign vessels seeking entry to ports or while they are in port. US Department of Annual report issued by the US State The annual Trafficking in Persons State Trafficking in Department's Office to Monitor and report is the world’s most Persons (TiP) Combat Trafficking in Persons, comprehensive resource of report ranking governments based on their governmental anti-trafficking efforts. perceived efforts to acknowledge It is included as an approximation of and combat human trafficking. the incidence of forced and child Countries are ranked into four tiers, labour and a country’s willingness to based on their compliance with investigate and prosecute such standards outlined in the Trafficking incidents. Victims Protection Act. 152

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153 Appendix C Recognising third-party labour audits 154 MSC proposes to work with recognised third-party labour programs to fulfil the labour requirements, 155 rather than introducing auditable labour requirements into the CoC Standard. MSC supports the use 156 of existing solutions to recognise efforts, take advantage of the work already being done in the 157 seafood industry on forced and child labour and to reduce duplicative efforts. The programs proposed 158 for recognition by MSC are: Social International’s SA8000 Standard, Amfori 159 Business Social Compliance Initiative (BSCI), and Supplier Ethical Data Exchange SEDEX 160 Members Ethical Trade Audit (SEDEX SMETA). Table 5 provides a description of each of the three 161 programs. 162 Recognising third-party programs in this way is a new process for MSC. Thus, we have tried to set a 163 bar of minimum performance that is acceptable to MSC and our stakeholders. At the same time, we 164 aligned the process and trigger points of each individual program as far as possible. Table 6 outlines 165 the minimum requirements to have an audit accepted by MSC, including auditor competency, 166 minimum audit performance criteria, and the reasons and timeframes for suspensions.

167 Rationale: The three labour programs were selected based on their reputation as credible labour 168 audits as well as existing uptake in MSC/ASC supply chains. The decision to work with a limited 169 number of programs in the first phase (February 2019) is to simplify implementation and maintain 170 control over the new approach and any potential impacts this may have on the CoC program.

171 MSC is also investigating the opportunity to recognise labour programs that have successfully gone 172 through the Consumer Goods Forum’s (CGF) Recognition Process: Sustainable Supply Chain 173 Initiative (SSCI). The SSCI Recognition Process is currently in development and is expected to launch 174 towards the end of 2018. Conversations have been initiated with the CGF who are supportive of the 175 collaboration.

Table 5: Proposed labour programs for recognition by MSC Program name and Audit Elements Audit approach description Social Accountability 1. Child Labour Pass/Fail certification model. International’s (SAI) SA8000 2. Forced or Compulsory (same as MSC Fisheries and Standard Labour CoC programs) 3. Health and Safety SA8000 is a social certification 4. Freedom of Association SA8000 requires entities to be program for factories and and Right to Collective audited against all principles of organisations. It measures Bargaining the SA8000 Standard. social performance in eight 5. Discrimination areas important to social 6. Disciplinary Practices accountability in workplaces, 7. Working Hours anchored by a management 8. Remuneration system element. 9. Management System Amfori Business Social 1. Social management Continuous improvement. No Compliance Initiative (BSCI) system and cascade effect certification (no Pass/Fail). 2. Workers involvement and Amfori BSCI is a Code of protection Amfori BSCI scores companies Conduct and set of tools for 3. The rights of freedom of from A-E on six social modules companies to monitor social association and collective and gives an overall score. It performance and support bargaining also sets a Zero Tolerance improvements across their 4. No discrimination status if forced or child labour supply chains. It is a buyer-led 5. Fair remuneration has been found to be present platform and all ‘producers’ 6. Decent working hours on site during the audit, that (suppliers) must be linked to a 7. occupational health and requires immediate action and ‘participant’ (buyer). safety remediation. 8. No child labour 9. Special protection for young workers 10. No precarious employment 11. No bonded labour

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12. Protection of the environment 13. Ethical behaviour Supplier Ethical Data Exchange 0.A. Universal Rights covering Continuous improvement. No (SEDEX): Sedex Members UNGP certification (no Pass/Fail). Ethical Trade Audit (SMETA) 0.B. Management Systems & Code Implementation Buyers set the criteria to which SEDEX is a buyer-led platform 1. Freely Chosen their suppliers must comply on: that supports coordinated Employment audit scope, frequency, auditor efforts and information-sharing 2. Freedom of Association competency and severity level to reduce duplicative social 3. Health and Safety of issues. Auditors assess a audits. Anyone can participate 4. Child Labour site’s performance against the in the SEDEX platform as soon 5. Wages and Benefits different audit elements and as they gain membership. The 6. Working Hours upload the results to the SMETA audit is an “audit 7. Discrimination platform. procedure which is a 8. Regular Employment compilation of good practice in 8A. Sub-Contracting and ethical audit technique” with Homeworking labour standards based on the 9. No Harsh or Inhumane Ethical Trading Initiative’s (ETI) Treatment is allowed . 10. Other Issues 10.A. Entitlement to Work 10.B2. Environment 2-Pillar 176

Table 6: Minimum requirements for recognition by MSC of third-party labour audit & suspension process All programs SA8000 Amfori BSCI SEDEX SMETA Auditor Independent Approved Accredited Amfori MSC is working competency third-party SA8000 lead BSCI auditor with SEDEX to criteria social auditor auditor require an APSCA- approved (or equivalent) auditor to conduct the SMETA audit if it is to be recognized by MSC. Minimum audit NA – see Valid SA8000 Certificate holder Pass “Freely performance individual certificate. follows Amfori Chosen programs CoC holder must BSCI procedure if Employment” and pass all ‘zero tolerance’ “No child labour” elements of the issue found. elements with no audit. Business Critical Audit schedule Issues (set by followed (A or B MSC). rating: onsite audit required Audit schedule every 2 years; C- followed (6 months- E rating: follow up 2 years, see audit required consultation survey within 12 months) question) How a CAB NA – see The status of Amfori BSCI audit SEDEX SMETA checks individual SA8000 outcomes are not audit outcomes are compliance programs certificates is publicly available. not publicly publicly available MSC is in available. on the SAI’s discussion with website. Amfori BSCI on MSC is working how to confirm a with SEDEX to CoC certificate obtain a ‘buyer’s’ holder’s membership which

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compliance. would grant access Options may to SMETA audit include requiring reports, pending a copy of the approval from the audit report site, to confirm a signed by Amfori site’s compliance. BSCI auditor or requiring the site to log into their Amfori BSCI account to confirm active status. Reasons for If labour audit Following If either: If either: CoC certificate not completed suspension or - zero - an MSC to be in specified withdrawal of tolerance business suspended timeframe (12 SA8000 status critical issue is months) certification reached OR found during - when follow- audit OR up or re-audit - no on-site audit did not has happened happen within within the required time determined frame frequency CoC certificate Labour audit is If CoC holder If CoC holder If CoC holder suspended successfully informs their informs their CAB informs their CAB immediately completed, CAB of the of the issue: of the issue: until… according to issue: Suspension lasts Suspension lasts minimum Suspension lasts either until 1) until either 1) performance either until 1) Zero Tolerance Business Critical criteria of the SA8000 issue remedied, issue remedied, relevant certification audit successfully audit successfully program. reinstated or 2) completed or 2) completed or 2) successfully successful successful completion of completion of completion of amfori BSCI or SA8000 or SA8000 or amfori SEDEX SMETA SEDEX SMETA BSCI audit audit audit If CoC holder does If CoC holder If CoC holder not inform their does not inform does not inform CAB of the issue: their CAB of the their CAB of the Suspension lasts issue: issue: for a minimum of Suspension lasts Suspension lasts three months or for a minimum of for a minimum of until the issue is three months or three months or remedied, until the issue is until the issue is whichever is longer remedied, remedied, whichever is whichever is longer longer

177 178

179 Appendix D Customised SEDEX audit on forced and child labour 180 As mentioned above, SA8000, Amfori BSCI and SEDEX SMETA audits all include a wider range of 181 social and labour related elements in their audits than MSC’s focus areas of forced and child labour 182 (e.g. Health and Safety, Freedom of Association). Therefore, MSC proposes to work with SEDEX to

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183 develop a customised MSC-SEDEX audit focusing on forced and child labour elements only. This is 184 being pursued with SEDEX because they are the only program that offers such an option. 185 This would not be part of the CoC audit. Rather it would be a tailored audit based on the SMETA audit 186 methodology but focused only on the labour issues (forced and child labour) prioritised by MSC at this 187 time. It would still be managed within the SEDEX platform.

188 Rationale: The proposal was developed to accommodate concerns raised during targeted 189 consultation over cost and time resources, particularly for smaller entities in the global south and 190 emerging economies, that are not export focused but produce for domestic markets. Existing MSC 191 CoC holders could decide to drop out of the MSC program facing the additional cost and time burden 192 of the new requirements, while potential new members could see it as too high of a burden to enter 193 the MSC program. Further investigation however indicated minimal audit cost savings.

194 A SWOT analysis aims to facilitate feedback on whether this is something MSC should pursue in the 195 lead up to release of the CoC Standard in February 2019.

Table 7: SWOT-Analysis for shortened MSC-SEDEX audit proposal STRENGTHS WEAKNESSES • Streamlined to target MSC labour • Adds complexity and is another product priority areas MSC would need resources to maintain • Potential for time saving in preparation • Does not necessarily reduce costs as for audit small entities may not need more than a • Potentially helps avoid smaller entities one-day for a full SMETA audit either dropping out of the program and therefore not being involved in any labour audit OPPORTUNITIES THREATS • Potential for shorter audit time • Could be perceived as less rigorous compared to full SEDEX SMETA audit because the audit does not include all • SEDEX has expertise in working with social elements typically included in a organisations to develop tailored SEDEX SMETA audit solutions to meet their needs • Confusion over MSC’s role and • A more manageable first step for those ownership of the audit entities with no experience in social auditing 196

197 Appendix E Changes to CoC CR 6.2.9 198 Given the new requirements on forced and child labour, MSC proposes to revise the scope of the 199 existing clause on forced labour. The intent of the changes is to:

200 • Include reference to child labour 201 • Apply only to sites in low risk countries 202 • Remove reference to ambiguous ‘entity’ and specify requirement is applied at the site level 203 • Allow an entry point for sites prosecuted for forced and child labour once they have successfully 204 complied with the labour requirements for high risk countries 205 In the case of a site prosecuted for forced or child labour, the site would not be eligible for the 12- 206 month grace period. Instead, they would need to successfully complete the labour audit prior to 207 (re)gaining CoC certification.

Table 8: Proposal to amend CoC CR 6.2.9 Existing clause Updated clause 6.2.9 6.2.9.If an applicant or a site currently sub- The CAB shall require the applicant to declare contracted by the applicant is classified as low any association to entities that have been risk regarding specific requirements to forced successfully prosecuted for a forced labour and child labour in 5.23 of the CoC Default violation. Standard and has been successfully prosecuted

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6.2.9.1 for violations of laws on forced or child labour in If an entity belonging to or currently contracted the last 2 years, the applicant shall not be by an applicant has been successfully allowed to continue in the CoC certification prosecuted for violations of laws on forced process until the prosecuted site complies with labour in the last 2 years, this entity shall not be the requirements for high-risk sites per 5.23 of allowed to continue in the CoC certification the CoC Standard v5. process. 6.2.9.1 Where an applicant no longer holds a a. Where an applicant no longer holds a valid valid contract for MSC activities with a contract with a subcontractor that fulfils the subcontractor that has been successfully criteria in 6.2.9.1, the applicant shall be allowed prosecuted for violations of laws on forced or to continue in the CoC certification process. child labour in the last 2 years, the applicant shall be allowed to continue in the CoC certification process without following the requirements for high-risk sites. 208

209 Appendix F Proposed changes to MSC program documents Table 9: Outline of where labour requirements will change MSC program documents

Document Change Detail Explanation

CoC Standard New section Draft CoC Standard v5 Labour requirements (hyperlink to follow) – proposed to sit within For excerpt see Principle 5, ‘Specific Appendix G requirements on forced and child labour’ CoC Certification New sections, clauses Draft CoC CR v2.1 New clauses for Requirements and sub-clauses. (hyperlink to follow) auditors to confirm compliance. This includes changes to sections on opening and closing meetings, requirements for all CoC clients, as well as subcontractors. Eligibility for certification (6.2.9) Amended clause amended to refer only to sites from low-risk countries. General Certification New sub-clauses Draft GCR v2.3 New sub-clauses Requirements (hyperlink to follow) added to the suspension process New documents New documents New documents to -Minimum support the application Requirements to of the proposed labour recognise third-party requirements social audit (Table 6) -Statement of Understanding (Appendix H) -Country-Based Risk Scores (updated annually on MSC website) 210

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211 Appendix G Excerpt of the CoC Standard 212 The below clauses are taken from the proposed CoC Default Standard v5.0 that is out for final 213 consultation (15 August-15 October 2018). The clauses are the same across the Default, Group and 214 CFO Standards.

215 Specific requirements on forced and child labour 216 5.21 If the organisation or any of its sites or subcontractors is classified as high risk for forced and 217 child labour violations according to the Country Labour Risk Scoring Tree, the organisation 218 shall: 219 a. Provide evidence by their second and each subsequent audit that the relevant sites or 220 subcontractors have completed an on-site labour audit with a recognised third-party 221 labour program and comply with Minimum Requirements for recognition of third-party 222 labour audits by the MSC. 223 i. Recognised third-party labour programs are: Amfori Business Social Compliance 224 Initiative, SEDEX Members’ Ethical Trade Audit, Social Accountability International’s 225 SA8000, and any Consumer Goods Forum’s Sustainable Supply Chain Initiative 226 (SSCI) recognised social standard. 227 b. Sign the Statement of Understanding stating that it agrees to undertake a labour audit as 228 per 5.21.a 229 c. Inform the CAB within 2 calendar days if the organisation or any of its sites or 230 subcontractors fails to comply with Minimum Requirements for recognition of a third-party 231 labour audit by the MSC.

Guidance 5.21 The Country Labour Risk Scoring Tree is Table 5 in the CoC Certification Requirements. Scores will be published annually on the MSC website at www.msc.org/for-business/certification- bodies/supporting-documents. The Statement of Understanding and the Minimum Requirements are available on the MSC website at www.msc.org/for-business/certification-bodies/supporting-documents.

232 5.22 If the organisation is an at-sea operation (e.g. a processing vessel), it shall comply with the 233 Fisheries Certification Requirements clauses XX instead of 5.21. 234

235 Appendix H Statement of understanding 236 The following has been drafted to ensure that the applicant understands the Requirements described 237 in Specific Requirements on Forced and Child Labour in Principle 5 of Chain of Custody Standard v.5. 238 It is not a self-declaration on any labour issues. Its intent is to provide a means by which the CoC 239 CAB can confirm that their client understands the labour requirements and agrees to carry out a 240 labour audit themselves or make sure their subcontractor carries out a labour audit. If the 241 subcontractor does not agree to comply with the labour requirements the client must cease its 242 contract for MSC product with the subcontractor in order to comply with the requirements. This 243 declaration would only be used for high-risk certificate holders. 244 245 [COMPANY NAME]

246 STATEMENT OF UNDERSTANDING 247 248 I, , (name of organisation) hereby confirm that I have read the MSC 249 labour requirements found in Specific Requirements on Forced and Child Labour in Principle 5 of the 250 Chain of Custody Standard v.5 clause I understand that I, the relevant sites within my CoC certificate,

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251 and/or my subcontractor(s) will need to comply with the following requirements by the time of the next 252 CoC audit and during the lifetime of the MSC/ASC CoC certificate: 253 a. complete a labour audit against a recognised 3rd party labour program (SA8000, BSCI, 254 SEDEX SMETA) to maintain MSC/ASC CoC certification within 12 months of my first 255 audit against CoC Standard v.5 256 b. ensure the labour audit complies with the Minimum Requirements for recognition of third- 257 party labour audits

258 c. comply with the Minimum Requirements of the relevant third-party labour program for the 259 duration of the CoC certificate or until the operation country(ies) or operation activity(ies) 260 are no longer considered high-risk as per the Country-Based Labour Risk Scoring Tree 261 on the MSC Website.

262 263 Signed: ______Date: ______

264

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