Previously (see here , here , and here ), we have reported on a growing litigation trend relating to supply chains for food procured by major U.S. manufacturers and retailers abroad. Namely, beginning in August 2015, plaintiffs’ class action lawyers began filing putative consumer class action lawsuits against major U.S. food manufacturers and retailers, alleging that their products (mainly focusing on seafood from Southeast Asia and cocoa from West Africa) were farmed or harvested by suppliers who used trafficked or child labor.In November 2015, this trend expanded with a lawsuit against Wal-Mart Stores, Inc. brought by a shareholder group seeking access to Wal-Mart’s books and records to allow the plaintiffs to “investigate problems with the defendant’s world-wide supply chains, including the reliance on child and forced labor.”
One thing that nearly all of these lawsuits had in common was that they were precipitated by media (often UK publication The Guardian) or NGO reports documenting the alleged practices in question. The plaintiffs’ class action bar was often able to simply repurpose these reports’ alleged findings into legal complaints.
Now, it looks like the next target may be the tech industry. Last week, Amnesty International and the African Resources Watch publicly announced the results of a joint investigation into the cobalt industry – an ingredient used in lithium-ion batteries, necessary in all portable tech devices and any other technology that uses chargeable batteries (electric cars, power tools, etc.). According to the Amnesty International Report, a substantial amount of the world’s cobalt supply, much of which comes from the Democratic Republic of Congo (DRC) conflict region, is produced using child or trafficked labor, with little or no government oversight. Thus, this issue is related to, but conceptually and legally distinct from, manufacturers’ requirement to make conflict minerals disclosures in their SEC filings.
This discovery about cobalt may result in consumer class actions in the U.S., similar to what U.S. food manufacturers and retailers have experienced. So far, many of the big tech companies have denied sourcing cobalt from the DRC – or have explained that every effort is made to ensure that their raw materials are ethically sourced.
However, many in the food and beverage industry have learned that working directly with NGOs and collaborating industry-wide is a better way to address these sorts of issues. Corporate-NGO partnerships have existed since at least the 1990s, and are often effective at addressing corporate social responsibility concerns raised by activists, such as workers’ rights, sustainability, and protecting indigenous populations. Oft-noted examples include efforts by Nestle , Marks & Spencer, and McDonald’s to work with NGOs, according to a January 2016 report by Sigwatch , a global network that tracks and analyzes activist campaigns.
For the most part, tech companies have yet to make Sigwatch’s “Most Praised Corporations Worldwide List.” However, as tech companies continue to work though issues associated with international sourcing, they will increasingly face this area, where business interests, government oversight and policy, the law, and NGO intervention intersect.