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25 Feb 2020

Nikkei BP Consulting

Japan: Amid growing concern on modern slavery, Ajinomoto, Fast Retailing and Wacoal among companies adopting human rights initiatives

[Summary translation from Japanese to English provided by Business &Human Rights Resource Centre]

"Human rights issues directly tied to operational risk, investors strengthen efforts at corporate rankings", 1 Oct 2019

…Human rights risks involving foreign trainees in Japan are...high. [Cases] where interns take on debt [to be eligible] to work in the country is considered an example of modern slavery…

Recently, the Ministry of Health, Labour, and Welfare ordered Hitachi Manufacturing to change its labour practices after the company was revealed to use foreign trainees for various menial tasks that were unrelated to the training program. Mitsubishi Motors and Panasonic also lost their permits to hire foreign trainees. These incidents can be considered examples where trainees’ human rights were not respected.

…Seeing human rights issues as operational problems, investors have set forth to evaluate companies [on their commitment to human rights]. Investors, such as...Aviva Investors, have established the Corporate Human Rights Benchmark [(CHRB)] initiative, which published a scoring of corporate activities on human rights in 2018. Evaluating about 100 agriculture, apparel, and mining companies, CHRB gave scathing scores, with most of the firms receiving between 0 to 30 points out of a total of 100 points. Aeon and Fast Retailing were among the Japanese companies included in the benchmark, and they received low scores. This year CHRB will add scores for companies in the information and communications technology sector to the benchmark. Japanese companies will make up 18 of the approximately 200 companies that will be evaluated (results will be published in November). Automobile manufacturers will be included in next year’s benchmark.

Investors are already using the CHRB scores for investment purposes. For example, in the first half of this year alone, Aviva exercised its voting rights 38 times, including voting to oppose the reappointment of board members overseeing human rights [policies] at firms with low benchmark scores. In engaging with companies, Aviva has requested that they create new human rights policies or disclose relevant data.

…The number of Japanese companies addressing human rights has begun to increase. These firms have promoted transparency in their supply chain by disclosing factory lists and advancing initiatives to establish grievance mechanisms that employees can use to report human rights violations.

In September [2019], Ajinomoto published a report evaluating its human rights due diligence process (activity to evaluate human rights risk and minimize adverse impact). The report was written when…a nongovernmental organization (NGO) discovered forced labour among Myanmar migrant workers in a Thai chicken feed factory. The NGO named 16 Japanese companies that had used the factory as part of their supply chain.

Ajinomoto was the first to react when it heard about the abuse. The company flew to the site of the allegations and investigated the on-theground situation of its poultry and shrimp production. Ajinomoto found that its processing factory had already ended its contract with the poultry feed supplier accused of labour abuses prior to the report, but determined that human rights risks for many migrant workers would persist. The company then publicly released the results of its investigation in a report. It is currently determining whether to develop policies on foreign workers and strengthen its grievance mechanism.

Last year Ajinomoto separated its human rights policy from its corporate code of conduct, establishing the “Group Human Rights Policy” and setting up a board committee specifically for human rights with the cooperation of top management. “We were able to move quickly to investigate and create a report with the support of our production and procurement departments because we had a structure in place,” says Yozo Nakao of the Human Resources Development group.

The apparel industry is moving towards disclosing factory lists. Fast Retailing has provided a list of raw material suppliers for [its brand] Uniqlo in addition to the 242 major sew-and-cut factories producing items for Uniqlo and GU. Fast Retailing also created a group human rights policy in June last year and established a board committee to oversee [its] human rights [policies].

Fast Retailing is particularly focused on ensuring transparency. “Disclosing data is a way of fulfilling our accountability to our investors, and it leads to customer trust and employee pride. We try to disclose information even if we’re in the middle of making improvements,” says Yukihiro Nitta, Group Senior Vice President for Sustainability.

Wacoal Holdings also discloses a list of 135 factories [that produce] for its main brands—Wacoal, Wing, Lucian, and Peach John—and 15 factories for [its other brand] Ai. In Japan, there are approximately 540 foreign trainees at 40 factories that are suppliers for Wacoal Holdings. Since last year, the company has been in the process of identifying areas for improvement, looking into [foreign trainees’] wages, working hours, and recruitment channels…