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Keeping you in-the-know on environmental, social and governance developments

[Ed. note: No blogs will be published Monday in observance of Indigenous Peoples’ Day. Blogs will start up again Tuesday.]

Cargill, a US global food corporation based in Minnesota, was found guilty of using cacao suppliers with slave and child labor at plantations in Brazil. From a report in Reporter Brasil:

“According to prosecutors, Cargill neglected ‘its legal duty to restrain and prevent’ its suppliers from using child labour or subjecting workers to conditions typical of slavery. The Prosecution Service filed the lawsuit after compiling several cases at the multinational’s suppliers. For the prosecutors’ who filed the lawsuit, Cargill failed to adopt mechanisms to prevent the problems from recurring, even after these violations were found… the Court also gave Cargill 30 days to formalize contracts with cacao producers and suppliers, including social clauses to prevent the use of child labour. The multinational also has 60 days to create a control mechanism ‘within its purchasing departments.’”

The court rejected arguments from the company that they “could not be held responsible for the practices of its suppliers because it does not have any employment relationship with cacao producers and also because it does not have ‘police authority’ to inspect farms… [and that] its contracts with suppliers require that they declare that they do not use child labour or modern slave labour.”

While this ruling is based on Brazilian law, it should be a warning to other companies about being held responsible for the actions of their suppliers. Traditional legal defenses related to business control and contractual terms may not provide the protections they once did. It may also be a good time to review supplier audit programs/auditors and the company’s controls for ensuring supplier conformance to applicable social, ethical and environmental requirements.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile