Is it necessary for modern slavery legislation to include a responsibility for businesses to investigate their own supply chains?
In order to tackle modern slavery, recent legislative changes have included a responsibility for businesses to investigate their own supply chains. Is this a necessary step?
The shocking discovery of a distress note allegedly written by prisoners from Shanghai Qingpu prison within one of Tesco UK’s charity Christmas cards in December 2019 not only managed to attract media attention but also reminded us about the prevailing issue of forced labour and slavery within our society. This is unfortunately just the tip of the iceberg as there are many more similar incidents that demonstrated the vulnerability of workers involved in supply chains where cost-effectiveness has been commonly prioritised over the rights and welfare of its labour force.
In this article, an overview of the current situation will be provided which focusses on how supply chains based especially in poorer third-world countries are vulnerable to the exploitation of forced labour. Secondly, we will examine the approaches taken by Section 54 of the UK’s Modern Slavery Act 2015 (“MSA”) before critically analysing their impact and drawing conclusions to infer how governmental legislative efforts are necessary and should not be undermined.
Modern Slavery and Supply Chains As mentioned by the UN Secretary-General António Guterres, to chart our path forward to eradicate modern slavery, we need to first have a clear understanding of our current stance. According to the International Labour Organisation (ILO), at any given time in 2016, an estimated 40.3 million people are in modern slavery, including 24.9 million people trapped in forced labour. In the private economy where supply chains are highly responsible for the exploitation of forced labour, more than 2,400,000 people are victims in the manufacturing sector, and nearly 1,920,000 people were involved in the commercial agriculture and fishing industry.
Furthermore, typical abuse suffered by forced labours include employers imposing excessive working hours, the illegal beating of workers, non-payment of wages and many more. It is not by chance that global supply chains are one of the most susceptible sectors towards modern slavery as they operate under different legal and cultural value systems. Not only the victims are difficult to identify purely through an auditing procedure conducted by a parent company that is located on the other end of the world, it is also complexed and usually involves several underlying contexts. They include the Industry, Socioeconomic, Geographic, Cultural and Regulatory context whereby supply chain slavery occurs commonly in circumstances where there is a need for low-cost labour-intensive work in a more remote and less regulated society.
Like a harmful parasite that has long attached itself to its host, slavery in supply chains should be uprooted but at the same time dealt with equal parts of caution and care. Sudden abolishment or rash decision-making may only negatively affect the lives of vulnerable individuals.
The Modern Slavery Act 2015 The main legislation that we will be evaluating is the UK’s Modern Slavery Act 2015 (“MSA”). This is because it is one of the first legislation that specifically addresses slavery and trafficking, enhances support and protection for victims as well as having a great influence globally where companies established in the UK are encouraged to take action to ensure their end-to-end supply chains are slavery-free. To be specific, Section 54 of the MSA is implemented to promote better transparency within large corporations. It requires every organisation that carries out businesses in the UK with a global annual turnover of £36 million or more, to produce a slavery and human trafficking statement for each financial year. The statement should include the steps taken by the organisation to identify and eradicate modern slavery from its business and supply chain.
This requirement is timely and necessary as up to 2015, around 71 percent of UK companies believe there are a likelihood of modern slavery occurring within their supply chains, especially migrant and vulnerable lower-tier workers. There is a dire need for companies to formulate effective measures to stop indirectly supporting the employment of forced labours. Moreover, in English Law, since multinational companies are regarded as separate legal entities from their suppliers, businesses hold no vicarious liability for the crimes or torts they commit. With the MSA, even though they may still not be held vicariously liable, but an explicit responsibility for businesses to investigate their suppliers and bear the burden of reputational damage if their products were manufactured by forced labours mark a positive start within the commercial industry.
Slowly but surely: a necessary step that is not necessarily flawless Being a legislation that is highly dependent on the cooperation of businesses and the spending habits of consumers, the MSA has been constantly at war with immense uncertainties. According to the annual assessment of transparency statements by the FTSE 100 conducted by the Business & Human Rights Resource Centre after the enactment of MSA, up till 2018, most companies still only publish generic statements committing to fight modern slavery. Only a handful of leading companies demonstrated a genuine effort in their reporting to identify and mitigate risks. It is also worth noting that by investigating the FTSE 100 which are the largest companies in the UK, we will be able to draw a meaningful overview of how industry standards are influenced by MSA. Currently, the average score of key areas such as the transparency, due diligence, and effectiveness of addressing modern slavery amongst FTSE 100 companies still score below 40 percent (with “Effectiveness” scoring the lowest at 17 percent). Furthermore, approximately 45 percent of companies did not disclose their supply chain structure, goods and services procured as well as the country or region where their suppliers are located. There are even around 25 percent of the companies assessed are yet to have a code of conduct in place for suppliers or business partners to comply.
Moreover, modern slavery seems to be an issue that inclines towards tackling the form rather than the actual matter itself under the MSA. For example, fewer than 20 percent of companies reported any prohibition on the imposition of financial burdens on the worker hired by their suppliers or recruitment agencies. However, high recruitment fees as mentioned earlier is one of the primary factors that lead to the indebtedness of migrant workers thus increasing the risk of debt bondage slavery. Besides, fewer than 15 percent of companies have engaged directly with key stakeholders such as workers, trade unions and local NGOs. This means there a major barrier still exists between the central organisation and its less visible or lower tiers supply chains. Without incentives for companies to take the extra effort besides complying by publishing public statements or setting up a standardised code of conduct, actual exploitation of forced labour in supply chains remains largely untouched.
Curious readers at this point may start to question the necessity of imposing responsibilities on businesses via governmental legislation since the impact of MSA had not been very ideal. To answer this question, we would like to emphasise that their weaknesses, by all means, should not devalue its necessity on mankind’s journey to curb modern slavery once and for all. The way we interpret these numbers since the law is relatively new and companies need time to readjust are also very important. Thus, we would argue that not only did the MSA affected approximately 12,000 UK and non-UK companies upon its enactment, it has become a significant agent of change that is constantly pushing companies to comply with a more transparent business model. Moreover, the existence of the MSA has also put companies at risk of corporate criminal liability for offences committed under sections 1, 2 or 4 MSA. If a company defendant knows, or ought to have known that an offence was being carried out, then they will still be able to be held liable. This may not extend yet to section 54 of the MSA, but since the courts have previously decided that a corporate entity can commit an offence of harassment by fulfilling an objective/subjective mens rea test, then it could potentially apply on the MSA in the future, leaving corporations no option to turn a blind eye.
Moreover, the idea of using informed consumer choices to drive companies to be more ethical does not always work as consumers may be too indifferent to respond or unwilling to change their existing buying habits. For example, in 2014, Krispy Kreme Doughnuts explicitly states that they do not engage in specific measures to verify its product supply chain is free of slavery and trafficking, nor do they provide training for their employees who have direct responsibility for supply chain management. This officially disclosed statement, however, did not lead to any measurable impact on sales or corporate reputation besides being highlighted by KnowTheChain. Even though this may not be a common approach by corporations nowadays, but it demonstrates the weakness of a legislation that only require corporations to disclose their anti-slavery efforts and rely mainly on consumers’ reactions to “punish” and influence business ethics.
In short, the MSA had proven to be necessary to raise the standards and make companies more responsible and cautious while dealing with supply chains that are more susceptible to forced labour. Even though it takes some time for all companies to comply and there are still rooms for improvement, these legislations have kickstarted the gears of a society that deters and determined to eradicate modern slavery for good.
Going the extra mile to create a slave-free world Moving forward, we agree that public accessibility should be improved by setting up a central government-run repository managed by an independent body to which companies are required to upload their modern slavery statements.
Moreover, regulatory measures or intervention by states on corporations should be enforced. Even though it may be politically difficult to have substantial control in how private enterprises operate, we agree that at least a mandatory due diligence should be implemented besides only requiring companies to publish generic statements that make little difference to the problem. Companies should be required to publish and act on an effective due diligence plan that applies to their sub-contractors and suppliers abroad. Victims of modern slavery should also be able to access civil and criminal remedy, and goods of companies that fail to demonstrate due diligence from high-risk regions should be seized. This is to create a substantial deterrence effect to businesses that are profiting from forced labour.
Besides, we also believe that consumer awareness and a change in buying patterns are pivotal to stamp out modern slavery. If consumers actively choose to deal only with businesses that take modern slavery seriously, then real changes in attitudes within the wider society will be possible. It is a necessity for states to legislate against modern slavery by imposing responsibility for businesses to monitor their supply chains. However, it may not be a straightforward journey and a more proactive approach should be taken by both the government, corporations, and consumers. Only with a concerted and gradual effort can we all put an end to modern slavery, a hideous and sad problem that puts millions of innocent lives around the world at great risk.
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