Amnesty International recently released a report alleging that supply chains for production of palm oil—a common ingredient in many consumer products—are tainted by forced and child labor. In the nearly 150-page report titled “The Great Palm Oil Scandal: Labour Abuses Behind Big Brand Names,” Amnesty International accuses several major brand-name consumer goods companies of sourcing palm oil from suppliers that operate plantations where the alleged abuses took place.

The report has already received substantial media attention, including articles published by Forbes, The Washington Post, Reuters and Yahoo News. Although the accuracy of the report’s assertions have not been tested, it nonetheless emphasizes the growing importance of proper diligence in supply chain management and compliance with associated legal obligations for a company’s disclosures about its supply chain practices.

Mitigating Risks

We recommend several steps to mitigate legal risk in these areas, including risk associated with follow-on litigation that has occurred after similar reporting about supply chain issues for other commodities. Specifically, we recommend that our clients take the following actions:

1. Review product lines for use of palm oil or other palm products, and assess practices and controls in related supply chains.

Palm oil is found in a wide range of consumer goods, including food products, cosmetics and detergents. Amnesty International estimates that approximately 50% of all packaged supermarket products contain palm oil. Amnesty International’s report and the corresponding increased media attention to palm oil supply chains make any manufacturer or retailer of products containing palm oil a potential target of consumer or government enforcement measures.

Companies should (1) review their product lines carefully to determine the prevalence of palm oil use; (2) assess existing controls and actual practices in their palm oil supply chains and (3) determine whether their palm oil is sourced from one of the suppliers specifically identified in Amnesty International’s report. Regardless of the actual merits of Amnesty International’s allegations about palm oil suppliers’ labor practices, any company that sources significant quantities of palm oil can mitigate their risk of government enforcement or private litigation by following these steps.

2. Review public supply chain disclosures for consistency with actual practices.

While Amnesty International’s report may serve as a fact-based catalyst for consumer and government enforcement measures, the legal hook will likely be laws requiring qualifying companies to publicly disclose the nature and scope of their efforts to eradicate forced labor from their worldwide supply chains. The most prominent of these are the California Transparency in Supply Chains Act (S.B. 657) and the United Kingdom’s Modern Slavery Act 2015. We recently published a review of these laws in an article titled “Don’t Let Forced Labor and Bribery in Your Supply Chain Spoil the Holidays.”

These disclosure laws are broadly applicable. The California Act, for instance, applies to all companies that have annual worldwide gross receipts in excess of $100M and “do business” (broadly defined) in California. If your company is a potential target of enforcement measures aimed at palm oil supply chains, it is essential that you review your company’s public supply chain disclosures for consistency with actual practices. Among the mistakes most commonly made by companies making supply chain disclosures is overstating the company’s actual efforts (as distinct from their aspirations). Exaggerations (e.g., “our supply chain is 100% free of forced labor”) and inconsistencies between disclosures and actual practices should be identified and avoided.

3. Adjust practices and disclosures as necessary.

If you determine there are inconsistencies or deficiencies in your company’s supply chain practices and/or disclosures, take measures now to cure the problems. Proactive, preventative action is relatively low-cost and will be invaluable from a human rights, reputational and litigation perspective. A swift and decisive response can make all the difference in the eyes of the public, a prosecutor or a jury.

4. Conduct a broad review of supply chain practices, controls and disclosures. 

Amnesty International’s report merely adds to a growing chorus of clarion calls for consumer product retailers and manufacturers to take a closer look at their supply chain practices, controls and public disclosures. Put another way, companies are now clearly on notice. As consumer and government scrutiny and enforcement ramp up in this area, any company that does not keep pace through increased supply chain oversight risks becoming the next poster child. To help your company get ahead of any problems, please contact experienced counsel.

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Photo of David T. Biderman David T. Biderman

David Biderman, a partner in Perkins Coie’s San Francisco and Los Angeles offices, focuses his practice on mass tort litigation and consumer class actions. He heads the firm’s Mass Tort and Consumer Litigation group. He has represented a wide variety of companies in…

David Biderman, a partner in Perkins Coie’s San Francisco and Los Angeles offices, focuses his practice on mass tort litigation and consumer class actions. He heads the firm’s Mass Tort and Consumer Litigation group. He has represented a wide variety of companies in state and federal courts in California for 30 years.

On consumer class actions, David represents packaged food companies, coffee companies, dairy companies, footwear companies and others whose nutritional or health claims have been challenged. He also has represented search engines and other online companies. He has a record of favorable results for clients. He successfully tried a major consumer fraud class action on behalf of one of the world’s major search engines in a case involving online gambling advertisements. For that same client, he negotiated a favorable settlement of a class action challenging its online advertising pricing. He represented a major coffee retailer in defeating a class action on standing grounds. He also has litigated pre-emption defenses arising out of food labeling and obtained a dismissal for a client whose nutritional statements were challenged.

For fifteen years, David managed the firm’s full-service product liability team responsible for defending over 1,000 toxic tort cases pending in Los Angeles and Northern California state courts. These cases entailed ongoing trial activity at various levels for several trials set each month. The highly experienced and well-coordinated team has handled thousands of asbestos toxic tort cases for a variety of clients, including FORTUNE 500 companies from such industries as consumer products, aerospace manufacturing, household goods, dry cleaning and industries that generate electromagnetic fields, such as electric utilities and operators of wireless communications systems.

Photo of Markus Funk Markus Funk

Markus Funk, who from 2016 – 2021 served as the firmwide chair of the White Collar & Investigations practice, is a decorated former federal prosecutor in Chicago, and a former section chief with the U.S. State Department-Balkans. He earned a PhD (DPhil) in…

Markus Funk, who from 2016 – 2021 served as the firmwide chair of the White Collar & Investigations practice, is a decorated former federal prosecutor in Chicago, and a former section chief with the U.S. State Department-Balkans. He earned a PhD (DPhil) in law from Oxford University, where he started his career as a lecturer in law. In 2021, Chambers ranked him “Band 1” for Litigation: White-Collar Crime & Government Investigations – Colorado and also included him in the rankings for FCPA – USA – Nationwide (a first for a lawyer based in Colorado/the Rocky Mountain Region).

In private practice since 2010, Markus focuses on internal investigations, complex commercial litigation both at the trial and appellate levels, white collar criminal defense, corporate social responsibility and supply chain compliance, and corporate counseling. He was selected to serve as a World Bank Group advisor and monitor to an Africa-based company seeking reinstatement following debarment, and he routinely counsels clients and conducts internal investigations and reviews throughout the world. During his time in public service, Markus and his team prosecuted “Operation Family Secrets,” which National Public Radio lauded as “one of the most important criminal investigations . . . in American history” (the 1995 movie “Casino” was based on the charged criminal activities). At the time of his departure from the U.S. Department of Justice, the Chicago Sun-Times described Markus as a “street-smart prosecutor with an Oxford pedigree.”

Markus also is the founding co-chair of Perkins Coie’s Supply Chain Compliance practice and in 2015 was tapped to head up the firm’s Africa Practice. The recipient of numerous awards, he was named Colorado’s “Best Overall Litigator” (2015); “Colorado White Collar Lawyer of the Year” (2015); one of “10 Best Attorneys for the State of Illinois” (2014) and “10 Best Attorneys for the State of Colorado” (2017); and “Lawyer of the Year” (2013). He co-founded the ABA’s Global Anti-Corruption Committee in 2010 and has chaired the section since then. He is also ranked “Band 1” by Chambers and Partners, who in their 2019 assessment quoted one of Markus’ clients, saying “his knowledge and experience base far surpasses any other attorney that we have worked with and he is always extremely thorough and proactive, enabling us to get well ahead of any situation at hand.”