A proactive approach to how VS Industry identified and resolved foreign labour issues

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  • Case Study
  • 6 minute read
  • May 15, 2023

CLIENT

VS Industry

INDUSTRY

Electronics manufacturing

OUR ROLE

A forensic approach to enhancing VS Industry's labour practices

VS Industry Berhad (VS) is a leading provider of electronics manufacturing services. The group, which manufactures electrical and electronic products for many global brands, employs more than 12,000 workers across Malaysia, China, Indonesia and Vietnam. VS has a widespread client base including those in Europe, Japan and the United States.

VS prioritises corporate responsibility and is committed to sustainable and ethical operations. Its Code of Conduct ensures all suppliers are working under a minimum set of internationally acceptable conditions that reflect policies set out by the International Labour Organisation (ILO).

Interview with Mr Chong Chin Siong

Interview with:
Mr Chong Chin Siong,
Group Financial Controller,
VS Industry Berhad

What is the biggest challenge faced by VS Industry in the arena of corporate responsibility?

“In 2021, Malaysia launched an important National Action Plan that aimed to eliminate forced labour across the country by 2030. Our Malaysian operations employ foreign workers from nine countries including Sri Lanka, Nepal, Bangladesh, Pakistan, India, Myanmar, Vietnam, Philippines and Indonesia. This is the first time we have been involved in a full scale forced labour review that compared our practices against the ILO’s 11 forced labour indicators. However, language barriers and cultural differences across our employee base posed a lack of clarity and visibility around these issues.”

How did VS Industry and PwC join forces to tackle this problem?

“We engaged PwC to review our labour practices and assess our compliance with Malaysia’s Labour Recalibration Programme (RTK). PwC visited 19 VS factories and hostels and held interviews and discussions with approximately 7% of VS’s foreign workforce.”

“PwC found that VS is compliant with the RTK programme and no longer employs workers hired through third-party subcontractors. It discovered that some foreign workers had paid recruitment fees in their home countries that we immediately reimbursed with interest and an ex-gratia payment. PwC also made recommendations for improving risk management, paving the way for an ethical culture that revolves around workers’ rights.”

How did PwC deploy innovative and original thinking during this process?

“PwC undertook its work using a forensic mindset, which is a novel and highly effective approach. Importantly, it collaborated with an independent labour rights specialist who provided civil society expertise. PwC also used trained interviewers to thoroughly drill down into our operations and engaged translators to ensure that discussions were conducted in the workers’ native language. All interviews were carried out without the presence of VS staff, ensuring that workers felt safe to share stories honestly. Ultimately, this meant that PwC was able to both swiftly identify issues, offer practical solutions and highlight the ways in which we were excelling.”

How did PwC’s involvement in this effort nurture trust?

“PwC and the labour rights specialist conducted a half day focused review for our board and management on forced labour and the crisis afflicting Malaysia, heightening our awareness around this crucial issue. PwC’s work, along with the swift response of our board and management team, has helped instil trust and confidence in investors – especially in relation to VS Industry’s recent successful issuance of sukuk bonds (Islamic financing). This proves that for VS, undertaking such an engagement with a credible firm such as PwC, can have significant business benefits. It can also lay the foundation for ethical labour practices now and into the future.”

Sustained outcomes

PwC did not identify evidence of systemic forced labour practices and concluded that VS has complied with requirements of the RTK programme

VS has fully reimbursed recruitment fees paid by workers, together with interest and an ex-gratia payment

VS promptly resolved all gaps identified by PwC 

VS no longer hires workers through third-party subcontractors

Contact us

Ivy Kuo
Ivy Kuo

PwC Asia Pacific Sustainability Leader, Partner, PwC China

Andrew Chan
Andrew Chan

Asia Pacific Sustainability, Strategy, Transformation, Clients & Markets, Partner, PwC Malaysia

Asia Pacific Sustainability, Strategy, Transformation, Clients & Markets, PwC Malaysia
Jeremy Prepscius
Jeremy Prepscius

Global Impact Centre and Asia Pacific – Sustainable Supply Chains, Managing Director, PwC Hong Kong

Asia Pacific Sustainability, Sustainable Supply Chains, Managing Director, PwC China