Walmart, Diesel and Hugo Boss face federal probe for alleged sale of items made with forced labour

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A watchdog created by the federal government to probe corporate wrongdoing abroad says it is opening investigations into whether three clothing retailers, Walmart Canada, Hugo Boss Canada and Diesel Canada, are selling products made in China with Uyghur forced labour.

These are the fourth, fifth and sixth investigations announced by the office of the Canadian Ombudsperson for Responsible Enterprise (CORE) since it began accepting complaints in March, 2021. Last month, CORE announced investigations into Nike Canada and Canadian mining company Dynasty Gold, and earlier in August it announced an investigation into Ralph Lauren Canada.

The federal watchdog is investigating all of the companies in response to complaints filed last year by a coalition of human-rights groups. Those organizations asked for a probe into allegations that some products sold by 14 Canadian companies – most of them subsidiaries of large U.S. businesses – are made with forced labour in China. CORE is expected to decide whether to investigate the remaining complaints in the coming weeks.

China’s northwestern Xinjiang region, which produces one-fifth of the world’s cotton, has been the focus of reports by media, researchers and rights groups, who say Beijing has committed grave human-rights violations against the region’s largely Muslim Uyghur population, as well as other minorities there. Among the alleged abuses is the widespread use of forced labour.

In 2020, the U.S. Department of Labor said an estimated 100,000 Uyghurs and other members of ethnic minorities in China may have been working in conditions of forced labour after having been detained in re-education camps. Michelle Bachelet, who was the United Nations high commissioner for human rights until August, 2022, visited Xinjiang last year. Her office’s report on the trip said China’s treatment of Uyghur Muslims in the region may amount to crimes against humanity.

The complaint to CORE cited a March, 2020, Australian Strategic Policy Institute (ASPI) report, which identified two Chinese companies the group had found were operating factories in Walmart Canada’s supply chain. Those facilities, the report said, were subjecting Uyghurs to work under conditions “that strongly suggest forced labour.” The report also cited a second report, published in November, 2020, by Laura Murphy, a professor at Sheffield Hallam University’s Helena Kennedy Center for International Justice. Prof. Murphy’s report identified three China-based manufacturers allegedly linked to forced labour in Walmart’s supply chain.

CORE said Thursday in a statement that it plans to probe the matter further. “Walmart Canada generally denies the allegations, but fails to provide a specific response to the allegations,” it said. “Given the company’s decision not to participate further in the CORE’s dispute resolution process, the CORE will conduct an investigation using independent fact finding to address the conflict between the allegations and the position of the company.”

Walmart Canada spokesperson Sarah Kennedy said in a statement that the company did participate in the CORE process. She said the factories mentioned in the complaint are not part of the company’s “active disclosed supply chain.”

“As indicated in the report, Walmart made it clear to the CORE that we have developed and executed policies, standards, controls and supply chain monitoring systems that support Walmart Canada’s corporate mandate to prohibit the use of forced labour,” Ms. Kennedy wrote. “Our policies are diligently enforced.”

In the case of Diesel, the complaints draw on both Prof. Murphy’s report and the ASPI report, which alleges that the company’s supply chain includes Jiangsu Guotai Guosheng, a Chinese supplier where Uyghurs allegedly work “under conditions that strongly suggest forced labour.”

CORE said Diesel Canada denies that it purchases material from Xinjiang or is involved in human-rights abuses. But the company did not participate in an initial assessment process after the complaint was lodged, according to CORE. The watchdog said this raised questions about the degree of transparency in the company’s human rights due diligence practices.

Diesel said in an e-mailed statement on Friday that it has no evidence products are produced in factories that use forced labour.

The complaint against Hugo Boss alleged the company has a supply relationship with Esquel Textile Co. Ltd., a Chinese company that ASPI identified as using Uyghur forced labour. Esquel owns several factories and subsidiaries in Xinjiang. To support their allegations, the complainants provided bills of lading, which show Hugo Boss as the consignee for multiple shipments from Esquel.

CORE noted that not all the receivers for these shipments were Canadian companies. It said one of the shipments originated in Singapore and was received by Hugo Boss Ticino SA. Another shipment was received by Hugo Boss Canada, but originated from Esquel in Vietnam, according to CORE.

Hugo Boss Canada stopped accepting shipments from Esquel in 2022, company spokesperson Matthias Jekosch said in a statement. “We believe it is wrong to launch an investigation based on an alleged supplier relationship which no longer exists,” he added.

Mr. Jekosch also said the company “does not source any goods in its direct supply relationship that originate from the Xinjiang region.”

CORE said the response it received from Hugo Boss “does not appear to consider fully the complex nature of the garment supply chain.” The watchdog said it has decided to conduct an investigation “using independent fact finding to consider these complexities as well as the indicators of risk relevant to working in high-risk contexts.”

CORE ombudsperson Sheri Meyerhoffer said in a statement that her office hopes the investigations will provide opportunities for the companies to strengthen their due diligence practices. CORE is able to recommend changes to businesses and the federal government, but does not have order-making power.

The three companies have so far declined to participate in mediation with the complainant, according to CORE.

Ms. Meyerhoffer told The Globe and Mail that companies that decline to engage fully with her office are missing opportunities to address complaints without them moving further.

She said in a number of instances companies have only begun to engage once they have realized CORE is about to issue a report.

“I think we need to show companies that this is a viable body – that we are going to be transparent, that there is a value to to engaging, and there is a consequence to not engaging,” she said.

Mehmet Tohti, executive director of the Ottawa-based Uyghur Rights Advocacy Project, applauded the investigations. He said Canadian companies that benefit from forced labour are complicit in China’s “systematic policy of enslaving Uyghurs” – a practice he said Canadians are no longer willing to subsidize.

The Global Slavery Index, produced by the Australian philanthropic foundation Walk Free, estimated in a 2018 report that more than $18.5-billion in goods imported annually into Canada are at risk of having been made with forced labour at some point in their supply chains, including clothing, computers, smartphones, gold, seafood and sugar cane.

Three years after the federal government amended the Customs Tariff Act to prohibit forced-labour imports, none have been seized by the Canada Border Services Agency.