Transparency on workers’ rights reveals poor social performance by Brazilian corporate giants

Information posted on-line has led to reviews of international business supply relationships.

Even though the Brazilian economy has slowed down, it continues to offer attractive investment opportunities due to the country’s natural resources and government investment in infrastructure. The social reforms which lifted approximately 20 million people out of poverty in the past decade have also contributed to maintaining strong household consumption. These welfare programs have also been coupled with increased enforcement of laws for the protection of workers and indigenous peoples affected by companies’ operations. The enforcement actions are transparent, with a lot of information on inspections, fines and legal proceedings made accessible online. An example that stands out is the fight against forced labour, in which Brazil undoubtedly has assumed the leadership in Latin America. The Special Mobile Inspection Group created in 1995 composed of labour inspectors, labour prosecutors and Federal Police officers has been a key instrument for the enforcement of the prohibition of forced labour. The group conducts on site investigations into complaints of slave labour, frees enslaved workers and prosecutes the owners of the properties. When an employer is found guilty of having employed workers in conditions amounting to forcedlabour, the Brazilian Ministry of Labour and Employment registers the employer in its slave labour blacklist, which is available on the Ministry’s website. With a total of 398 entities blacklisted as of 31 July this year, the list is longer than ever. Due to the list being publicly available, it is closely followed by non-governmental organizations as well as the private sector. Many financial institutions in Brazil have committed to not providing credits to the companies on the list. In addition, many large transnational companies take the list into account in their supply chain due diligence. The world’s largest beef producer, JBS SA, reports that a number of its cattle suppliers were on the list, putting strains on its business relationships. In June this year retail giant Tesco plc, as well as IKEA and adidas, reportedly cut ties with JBS over concerns of the company’s involvement in slave labour as well as deforestation of the Amazon. The list also provides discouraging insights into the various faces of modern slavery. For example, the inclusion of one of Brazil’s largest real estate companies, MRV Engenharia e Participacoes SA, pointed to the fact that forced labour is not a practice isolated to remote rural estates, but is also common in urban areas. Transparency is not only

limited to Brazilian labour authorities. The judiciary also makes it easy to monitor lawsuits against companies online. For example, more than 10 ongoing cases against Brazil’s fifth largest company Vale SA involving the rights of indigenous peoples can easily be tracked through the respective courts’ websites. The amount of publicly available information on these legal proceedings continues to draw the attention to Vale’s failure to manage its impacts on indigenous peoples. While Brazilian companies’ social performance is not lagging behind thatof their peers in Latin America, their Brazilian operations are certainly facing more scrutiny due to Brazilian authorities’ openness. As an advisor to institutional investors in the area of responsible investment, we help our clients in engaging through dialogue with Brazilian companies regarding their management of social impacts. Brazil’s giants are in a good position to show that fast economic growth does not have to be achieved at the expense of workers and socially marginalized groups, such as indigenous peoples.
Maria Sjödin is Engagement Manager at Ethix SRI Advisors