From Blind Spot to Boardroom Agenda: A Grounded Theory of Forced Labor Risk Management

Abstract

Regulators and NGOs have taken an increasingly active role in reducing forced labor, and increasing investor scrutiny is compelling firms to address it, but the problem remains large and growing. For example, the United States imported $562 billion in goods at risk of being produced with forced labor in 2021 and 2022. Many firms perceive forced labor as occurring somewhere else, beyond the bounds of the firm or even their first-tier suppliers. As a result, firms may not view forced labor as their problem or recognize forced labor issues within their supply chains. Using grounded theory, we investigate executive perceptions of forced labor and its impacts. This research resulted in an emergent, practitioner-derived definition of forced labor that includes two additional components of forced labor: economically forced labor and unwanted mandatory overtime. Additionally, our analysis uncovered three aggregate dimensions related to firm efforts to reduce forced labor: defining forced labor, managing forced labor awareness, and managing forced labor risk. Managerial implications highlight the importance of identifying leadership beliefs regarding forced labor, standardizing forced labor prevention practices, and engaging in socially responsible forced labor remediation along the supply chain.