A major global retailer received a hotline allegation that underage workers were at a factory producing one of their suppliers in China. Kreller was asked to conduct a surprise audit, utilizing the right-to-audit clause in their contract. 

Corporate Investigation

Kreller conducted due diligence at the company, which included interviewing employees, touring the facility, including the residential dormitories, and obtaining copies of personnel records, including resident identity cards. While we were provided many excuses to deter our interviews, such as that they had a handicap such as being deaf or mute, were sick, or were out on holiday, we were able to convince several employees to open up and confirm the names of four underage workers from the personnel records. 

According to management, the employees were not at the factory that day as they were on “holiday” and would not return for a month. We requested to interview one employee we saw in the facility who looked particularly young; however, no personnel records could be provided for her by management, and she indicated that she did not have her ID with her.

Key Findings

We requested the factory to send us copies of their identification documents for all employees we couldn’t interview or didn’t have identification on them on the day of the interview. Then, we compared the ID provided against the personnel records, compared the Chinese Zodiac Animals provided by the employee during the interview, and conducted validation of their ID number configuration to determine which employees appeared to have fraudulent identification. As a result of the investigation, the client discontinued their supplier relationship with the factory. Because of the corporate investigation, the supplier revealed a lack of due diligence by not verifying employee ages and ensuring compliance with labor laws.

Conclusion

This discovery highlights unethical and illegal sourcing in the global supply chain. Due diligence and transparency in business practices must be prioritized to ensure that all factories and businesses do not employ underage workers. Due to our findings, the major global retailer took responsibility and sent a message to the industry by terminating their relationship with the factory.