The fifth article in this series exploring investment issues affecting children focuses on child labour within extended corporate supply chains. The previous two articles focused on areas where children are impacted directly by corporate policies, advertising or behaviours in the areas of technology and health and wellbeing. There is however, a flip side where goods themselves may be manufactured or sourced that involves child labour.
This is among the most intractable issues responsible investors face, given the myriad ways children become ‘trapped’ in modern extended and globalised supply chains. This phenomenon, though hardly new, remains elusive in its extent, and for the most part, practically invisible. Responsible investors adopting strong human rights policies, will almost certainly wish to avoid ‘child, forced and bonded labour’ at all costs, and will have clients concerned to pursue a policy of absolute avoidance. This article therefore explores the challenges in achieving this, the need for vigilance when investing, and why adopting a zero-tolerance approach may be impossible.
Child labour encompasses both paid and unpaid work, within and without the family unit. Whilst it can exhibit as a form of slavery, it may also be very low or non-paid work that takes children in poverty out of education or play, or represent a normal part of a family run smallholding growing crops. Estimates of the extent of child labour do vary given its invisibility, but UNICEF has estimated that 138 million children globally are impacted by the phenomenon of child labour1. Some of this may not be injurious to them; it’s why total eradication and zero-tolerance may be impossible. However, ILO (International Labour Organisation) and the Convention of the Rights of the Child place limits and boundaries on what is deemed to be ‘acceptable’. These, for instance, reference long hours and arduous or dangerous work where the child is below a certain age.
The good news is that overall numbers of children who work has reduced from 245.5m in 2000 to around 138m in 2024. A more pronounced trend has been improvement in the numbers of children aged 5-17 who are to be found undertaking hazardous work; here the numbers have fallen from 170.5m in 2000, to 54m in 20242. Trends therefore appear to be positive, in which case should investors continue to be unduly concerned?
It is undoubtedly true that coalitions of investors and responsible businesses have, over time, exerted strong influence over most aspects of corporate supply chains; ‘doing the right thing’, public scrutiny and reputational risk have all played their part in businesses taking proactive control of supply chains they previously claimed no responsibility for.
One example is the cocoa industry, where revelations around the extent of child labour led to serious interventions by the likes of Cadbury and Nestlé to understand the nature of child labour within family cocoa farms, and to mitigate the worst behaviours such as children working long hours, wielding machetes and losing education. Whilst problems remain, as responsible investors working over-time with the industry, improvements have been seen that have also benefited farmers in respect of improved husbandry techniques, higher yields and premium prices paid. Cocoa is among the most complex of areas for investors; children form part of the family unit that works and husbands the crop, making small holdings viable. Prohibiting this work would undoubtedly increase the risk to livelihoods and exacerbate poverty; can investors and their clients therefore ‘live’ with this compromise where child labour exists, but the worst effects are mitigated by controlled hours, time for education, rest and play, and the removal of hazardous practices?
Although the overall trend in the number of children caught up in paid or unpaid work is falling, the US Bureau of International Labor Affairs maintains a list of goods and services it stresses are likely to be sourced from child or trafficked labour. This list comprises 204 areas of production from 82 countries, pointing to the sheer breadth of work children may be involved in3. Children are most often found working in agricultural production or in some form of manufacturing, for instance brick-making in the Indian sub-continent. The US list has evidence of child labour in areas such as the harvesting of bananas in Central and South America, aluminium smelting and refining in Asia and especially China, and – to take one of the most challenging crops for responsible investors – cotton. Cotton harvesting is particularly prone to child involvement, where they are taken out of school in China and Uzbekistan, for instance, to pick the bolls. Investors via engagement have to interrogate corporate policies and processes to see whether companies understand where and how raw materials are derived when contracting suppliers to manufacture clothes in countries such as Cambodia, Bangladesh and Myanmar. Global NGO coalitions such as the Cotton Campaign4 help inform investors of salient issues, whilst investors can search for relevant evidence of strong oversight, such as the M&S Child Labour Procedure, that sets out required standards expected of suppliers.
It is often true that client expectations exceed the real, complex dilemmas surrounding child labour. As responsible investors, we seek to navigate these challenges via focused engagement and dialogue with a range of parties including expert NGOs. Avoiding child labour is far from simple and may be unavoidable given cultural and socio-economic realities in some sectors. The degree of genuine commitment can often be evidenced however, thereby avoiding investment where there may be embedded risk (for instance MPs questioned the degree of commitment and rigor applied by Chinese retailer Shein in the run up to its potential London IPO earlier this year), and rewarding ‘good’ companies, which if not perfect, are nevertheless grappling proactively with the issue to eliminate the most heinous examples.
September 2025
1 UNICEF https://data.unicef.org/topic/child-protection/child-labour/
2 UNICEF ibid
3 Bureau of International Labor Affairs https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods
4 The Cotton Campaign https://www.cottoncampaign.org/
Online Resources
There is a wealth of supporting resources dealing with the phenomenon of child labour; of interest see Nestlé Cocoa Plan and M&S Plan A ESG Report. Or the Primark Cotton Project. Other useful sources of information are those cited including UNICEF and the US Bureau of International Labor Affairs.