Investors can and should take tougher action against child labour

It seems like we all take child labour for granted. At least, you could almost draw that conclusion.

Meanwhile, we have been “celebrating” the International Day Against Child Labour for over twenty years. It is a day when we reflect on child rights violations that occur in the production of our cars, our clothes, and especially our food, among other things. Already since 2016, child labour has not declined on a global scale. The financial sector is also responsible for perpetuating child labour. After all, it invests in companies that may or may not participate in human rights violations.

More action needs to be taken from the financial sector. When investors are aware of the lack of action, they often shift their responsibility, especially to the so-called ESG rating agencies, which provide financial data on companies as well as human and environmental impact. There would be insufficient data available on companies’ performance on the issue of child labour.

Indeed, information on how rating agencies arrive at their assessments is not always publicly available. Let alone transparent. In addition, rating agencies use different criteria. This makes it difficult for investors to determine whether or not to include companies in their portfolios. One possible way to overcome this is for investors to request data on children’s rights directly from the companies. Herein also lies a role for corporations. They have to ensure that data corresponding to their activities and those of their suppliers in the field of child labour are provided in a clear and accessible manner. Rating agencies should then, in turn, make their methodologies transparent.

Cooperation is therefore needed. Collective action can be taken in various ways, for instance, by using engagement. That is, as an investor, engaging with a company to demand insight and improvement. For example, something like this is already happening at the Living Wage Financials Platform. Here, cooperation between investors forms the basis for achieving a living wage in the supply chain of different sectors. So working together is necessary and certainly possible, creating an immediate level playing field. This creates room among companies and investors for making a positive impact and tackling child labour.

Finally, there is help from Europe. Investors can recently rely on new European regulations: in particular, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). These regulations should clarify the positive and negative interactions between companies and society, which must be acted upon in practice. Companies’ social impact can be included in the investors’ assessment of these reporting obligations.

In short, investors should put child labour higher on the agenda. The financial sector has plenty of opportunities to integrate child rights more prominently into portfolio management and contribute substantially to eliminating child labour. This is necessary so that in 20 years, we will not still have to dwell on the International Day Against Child Labour. Because a vote against child labour, is a vote for a just society.