Modern slavery is a potential risk for all companies, but those with supply chains in high-risk countries need to be particularly careful to implement robust systems to avoid abuse.
Background: Electro-optics, eyeglass lens and medical devices manufacturer Hoya is headquartered in Japan, and has production facilities in countries including Thailand and the Philippines, where the risks of modern slavery practices such as forced labour are high. Our engagement seeks to ensure that the company has sufficient oversight of these specific risks, as well as applying adequate overall supply chain oversight.
Engagement approach: We engaged with Hoya on multiple ESG issues during 2019, including in-person meetings in the UK and Japan. Amongst other actions we included the company in a wider outreach to companies with potentially high exposure to modern slavery. The company sent a detailed response to our questions, providing information about how its Supplier Code of Conduct is used both to train staff internally and as a contractual requirement for new suppliers.
Following up on this, we had a call where we went into more detail on Hoya’s strategy in emerging markets, both in terms of its supply chain as well as its end markets. The company sees growth opportunities in markets such as China for its products. We also discussed its most recent factory in Vietnam, which is an attractive country for manufacturing due to its cost advantages, but which comes with heightened risks.
We were reassured to hear that the company employs staff directly in Vietnam rather than outsourcing, and that audits are in place; but we recommended it takes further steps to manage risk in Vietnam and elsewhere, in areas including the payment of recruitment fees or the surrender of identification documents by employees. We also called for stronger disclosure on this issue, and highlighted in particular the recommendations of NGO KnowTheChain, which had ranked Hoya 30th out of 40 companies in its benchmarking report due to a relative lack of detail in its modern slavery statement.
Outlook: In a market which is generally lagging other developed markets in its approach to sustainability, Hoya stands out as a company which was very responsive, with several engagements over the course of 2019. We have been pleased to see the company put in place a new ESG Committee, and we expect new sustainability goals to be published soon. On the key issue of modern slavery, we see the company’s approach as robust, though there remains some room for improvement particularly around disclosure.
In a market which is generally lagging other developed markets in its approach to sustainability, Hoya stands out as a company which has been very responsive.