Strategic Insight 034/2023
14 December 2023
Combatting Modern Slavery and Exploitation in Corporate Supply Chains
Nearly 50 million people are trapped in modern slavery worldwide including 19.9 million people in forced labour within private enterprises or state-run companies. Millions more people are affected by less extreme forms of workplace exploitation including an estimated one in ten of all children alive today.
In response, national and regional governments, as well as supra-national bodies like the EU, have legislated or are starting to legislate to hold organisations to account for exploitation in their operations and supply chains. Current and proposed laws mandate transparency and reporting, due diligence, vigilance requirements, remediation requirements, civil penalty mechanisms or a combination of these to address this complex issue. Such legislation often takes as its starting point existing international guidelines such as the UN Guiding Principles on Business and Human Rights and those produced by the International Labour Organization and OECD.
There is a clear sense of acceleration in the past two years, with many more countries choosing to legislate. So far, these are overwhelmingly either in the EU or in the Anglophone world, and often places which already had relatively strong laws, standards and enforcement relating to workers’ rights and imported goods.
Global legislation differs in its approach to public bodies – some only place obligations on private sector businesses, while others include public bodies within their scope. These bodies are often substantial procurers, with notable leverage over the policies of their suppliers.
Countries that have passed relevant legislation include the UK via the Modern Slavery Act 2015 and the Health and Care Act 2022 section 81. Norway’s Transparency Act came into force in 2022 and the first phase of Germany’s Supply Chain Due Diligence Act has been in force since the start of this year. Australia, France, Switzerland, the U.S. (and individual states) and Mexico also have legislation in force, while the Netherlands, South Korea and New Zealand are among those countries with legislation that has either been proposed or passed but yet to come into force. In Ireland, the Dáil has been scrutinising the Labour Exploitation and Trafficking (Audit of Supply Chains) Bill, a Private Members Bill which the Government chose not to oppose on second stage.
Globally, there is evidence for how this type of legislation helps to ‘level the playing field’ for good businesses, which can otherwise be undercut on costs by those that do not respect human rights. Businesses must see reporting requirements not as a burdensome chore, but something they embrace. It can be a positive reputational signal to customers, partners and suppliers that the business takes seriously the human rights of workers within its own business and throughout its supply chains. Businesses must also realise this is not just about large retailers or manufacturers importing goods from high-risk regions of the world or those known for sweatshops and poor labour standards. It is also about businesses of any size which trade in local goods and services. This could include cleaning companies, facilities management, landscaping, construction, logistics, catering, waste and recycling management – all of these are industries where outsourcing and diversified supply chains have led to cases of exploitation and even modern slavery being uncovered. Of course, if a business uses or sells good that have been imported, that amplifies the risk factors. In fact, 77% of business leaders in one study said they believe some form of modern-day slavery is likely to exist in their supply chain.
Taking action shows leadership in a business’s sector. It protects and enhances credibility with investors, staff, suppliers and consumers, while mitigating the commercial implications and risk of penalties for non-compliance with legislation. It is a positive when a business avoids the kinds of poor policy and practices that lead directly to people being made victims of forced labour in supply chains.
Whatever the fate of the Irish Bill currently under discussion, many businesses examining its provisions are also likely to fall within the scope of new EU Directives on this issue, which are gradually phasing in mandatory human rights due diligence and full sustainability reporting for businesses over certain thresholds during the coming years. Businesses are therefore advised to align human rights practices to these EU Directives, specifically the Corporate Sustainability Due Diligence Directive and Corporate Sustainability Reporting Directive. Their requirements are complex and they place an expectation on companies to take specific actions and to have a risk-based approach to prioritising due diligence. It is better to be prepared – especially if enforcement and penalties become even tougher, through for example exclusion from public procurement contracts.
Even if a business is not directly under the scope of the legislation – particularly if they are too small – they could still be asked what steps they are taking by a customer who does fall within the scope of the legislation. It is therefore beneficial for businesses to be transparent about any risks they face: not to hold back and certainly not to cover up incidents if they find potential victims of exploitation in their operations and supply chains, and instead to support them in accessing the right support and remediation.
Similar laws to that being considered in Ireland, such as the UK Modern Slavery Act 2015, have shown the value of mandated and specific reporting periods, where businesses must specify on whose authority the publication of a statement has to be approved. Most legislation rightly obliges this to be at the most senior executive or board level. The weakness in the UK Act is that some businesses have found excuses and loopholes to avoid being completely open and transparent.
A strong focus on supply chains and cross-border provisions mean that increasingly all of a business’s global activities are being caught in the scope of various laws. This means businesses should take them into account as they negotiate with suppliers, develop their strategies and consider their operational footprint.
Marc Stanton is Director at Slave-Free Alliance, a not-for-profit social enterprise wholly owned by the charity Hope for Justice.
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