Existing legislation on modern slavery is failing to prevent forced labour and human trafficking in global supply chains – with many companies not complying with reporting requirements and others not disclosing specific or detailed enough information, new research has found.
Released to coincide with this week’s four-year anniversary of the UK Modern Slavery Act, the ‘In its Full Disclosure: Towards Better Modern Slavery Reporting‘ research from the International Corporate Accountability Roundtable (ICAR) indicates that while laws on modern slavery and transparency in the supply chain now exist in several countries, they are failing to induce businesses to meaningfully address and adequately report on their efforts to tackle forced labour and human trafficking in their supply chains.
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“Our research has shown that compliance with these laws has been inconsistent and that the breadth and quality of information companies disclose is insufficient and does not reflect serious efforts to tackle the problem. Additionally, the information included in modern slavery statements has not been adequate to enable civil society to effectively monitor company performance nor engage meaningfully with them,” ICAR says.
“Reporting is meaningful only when companies have taken effective action to identify, prevent, mitigate, and address the human rights impacts of their business activities and when these actions result in tangible improvements to rights-holders. This can only be achieved if reporting is outcomes-oriented and based on identifying concrete risks of forced labour and human trafficking within corporate supply chains.”
According to ICAR’s research, there are an estimated 24.9m people in forced labour globally, of which 16m are exploited in the private economy. Forced labour and human trafficking generate an estimated $150bn in illicit profits annually – in marked contrast to the $124m spent by governments around the globe to combat it.
“Forced labour and human trafficking remain global plights for which there is shockingly little accountability”
“Forced labour and human trafficking remain global plights for which there is shockingly little accountability.”
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By GlobalDataOver the past decade, modern slavery disclosure laws have been enacted in the US, the UK and Australia in a bid to address the issue. They require companies to report on the actions they have taken to prevent, address and mitigate the risks of forced labour and human trafficking in their global operations.
But while existing modern slavery transparency frameworks largely focus on the role of corporate reporting to prevent and mitigate forced labour and human trafficking, the research points out that today’s global supply chains are long and complex – which requires not only laws but also policies, regulations and a truly integrated multi-sector approach to tackle the issue.
The report examines the effectiveness of three pieces of legislation: The UK Modern Slavery Act 2015, The California Transparency in Supply Chains Act, and the Australian Modern Slavery Act. While each has gone some way to raising awareness of the problem, the elimination of modern slavery and human trafficking in supply chains is hindered because only companies earning over a certain amount are able to be held to account the legislation, often excluding medium-sized enterprises where the issue may be prevalent; there is a lack of tools for monitoring compliance; and a lack of enforcement mechanisms on non-compliant companies.
The wins
Greater awareness: There is greater conversation among businesses, investors, CSOs, trade unions and the general public about forced labour and human trafficking in supply chains. Mandatory reporting requirements put pressure on companies to develop a plan to assess the risk of forced labour and the steps they are taking to address it throughout their supply chains. This conversation and increased awareness has been powerful, particularly for companies that were not already undertaking steps to identify and address the issues.
Higher-level reporting: Modern slavery legislation has forced reporting on forced labour and human rights up the chain of command to business executives. This new, or heightened, interest from the top of companies has allowed Corporate Social Responsibility and sustainability officers to create and implement new anti-trafficking policies and programming. Executive-level attention has often led to an increase in corporate resources being funnelled to address these issues.
Better performance tracking: Where modern slavery acts have mandated annual reporting, CSOs, trade unions, and investors have been better equipped to track companies’ performance in addressing modern slavery year-on-year. Tracking performance has enabled those stakeholders to help businesses improve their analyses and practices where appropriate.
Investors are paying closer attention to the information that companies are including in their reports and are increasingly connecting reporting to better forecasting of long-term sustainability and sustainable growth
Investor interest: Investors are paying closer attention to the information that companies are including in their reports and are increasingly connecting reporting to better forecasting of long-term sustainability and sustainable growth.
But equally, there continue to be gaps in reporting to date.
The fails
Compliance: Many companies that fall within the legal parameters of the law are not reporting at all. These companies are often non-consumer facing or are otherwise insulated from the reputational damage that can be brought upon a company for not reporting. In 2018, the Business and Human Rights Resource Centre’s (BHRRC) review of FTSE 100 companies reported that just half of the 11,000 to 18,000 UK companies that fall under the requirements of the Modern Slavery Act have published statements. And while many have reported once, they have failed to publish annual statements. Others simply recycle statements without making updates for the current reporting year.
Poor enforcement: A lack of enforcement on the part of the government has allowed non-reporting companies to fly under the radar. These companies are often hard to identify because no jurisdiction with a modern slavery law currently publishes a list of companies to which the legislation applies – which makes it difficult for CSOs and trade unions to call attention to non-reporting companies; and companies are less likely to comply without any threat of penalty. Analysis comparing the UK Modern Slavery Act reports shows that out of 150 companies, only 54% had produced a new statement between 2017 and 2018. And of those who had produced an updated statement, only 58% incorporated substantial changes, while a significant minority (42%) had made no or only minimal changes.
Lack of substantive and specific information: Modern slavery reporting remains primarily a tick-box exercise. At present, Modern Slavery and Transparency in Supply Chain (TISC) statements focus on describing company policies, rather than demonstrating how these policies are being implemented, their effectiveness, and what is being revealed through their implementation. The lack of information beyond policies prevents other stakeholders from truly understanding how businesses identify, respond to, and remediate risks and instances of forced labour and human trafficking in their supply chains. These deficiencies in reporting also prevent CSOs, trade unions, and investors from providing feedback and guidance. Where companies are reporting, they speak more vaguely about general risks of forced labour and human trafficking in supply chains, rather than the specific risks in their own supply chain. And there is a wide variety in quality and information covered in published modern slavery and TISC statements.
Requiring companies to publicly disclose their policies and practices to prevent forced labour and human trafficking in their supply chains is only a first step. Companies will need robust due diligence plans including a process to identify, prevent and remediate forced labour in their supply chains.
“Forced labour and human trafficking are some of the most egregious human rights violations found in today’s complex global supply chains. It will take a set of complementary policies and regulations, as well as a multi-sector approach including companies, governments, civil society and other stakeholders all working together to eliminate forced labour and human trafficking,” concludes ICAR.
“Requiring companies to publicly disclose their policies and practices to prevent forced labour and human trafficking in their supply chains is only a first step. Companies will need robust due diligence plans including a process to identify, prevent and remediate forced labour in their supply chains. These plans should also include working with civil society to provide guidance and training, and to gain insights into workers at all levels of their supply chain.”
How companies can use Modern Slavery and TISC legislation to stomp out forced labour and human trafficking
- Companies must determine whether they are required to comply under modern slavery reporting requirements, regardless of inclusion or not in government-issued lists of companies falling under the scope of legislation.
- Reporting on modern slavery should be integrated into companies’ annual sustainability reports. Reporting on modern slavery should be regarded as part of other regulatory and governance obligations.
- Companies should report both on their policies and processes in place to respond to risks of forced labour, as well as on the outcomes and results of such measures, and on long-term plans to continue to respond to such risks. Reporting should be based on risks and include all risks identified, including those that arise from a company’s own business model and supply chain practices.
- Companies’ risk assessments should be gender-sensitive and take into account patterns, prevalence, and structural conditions enabling forced labour and human trafficking.
- Companies should engage with relevant stakeholders including CSOs, trade unions, and workers when designing, implementing and assessing the effectiveness of measures to identify, prevent, and address risks of forced labour and human trafficking.
- Company statements should include a map of their supply chain in geographic areas at highest risk for forced labour, including factory names and addresses, information about the segments of their workforce that is most likely to be affected including second and third tier suppliers and contractors; a description of due diligence and risk assessment processes, including thorough and comprehensive mapping of risks. Risk mapping should be conducted through consultation with external stakeholders, including local civil society organisations and trade unions.
- Company statements should also include a description made up of quantitative and qualitative analysis of how a company’s policies and processes were implemented and how effective they have been; information on identified risks of forced labour or human trafficking and the actions taken in response, as well as about the plan to prevent further occurrences in the future and information about remedial actions taken.
