In 2015, the British Parliament made a bold move in the fight against modern slavery. That year, it enacted the Modern Slavery Act (“UK MSA”), which aims to end forced labor and human trafficking by promoting transparency. The UK MSA requires all companies doing business in the UK with an annual turnover of £36 million or more to produce a Slavery and Human Trafficking Statement. In the Statement, the company must detail the steps it has taken to “ensure that slavery and human trafficking is not taking place” within its supply chain or business. This statement has three minimum requirements: it must be (1) approved by the board of directors (or equivalent), (2) signed by the same, and (3) published prominently on the company’s website. Companies may also publish a statement stating that they have taken no steps to ensure forced labor does not exist within their supply chain. Though this is a remarkable piece of legislation, it has failed to improve transparency in supply chains.
The legislation lacks both specificity and force. It does not, for example, require that companies disclose any particular information. While it does offer guidance on what the statement may include, companies are left to determine the scope of the statement on their own. They may, for example, include information about the organization’s structure and supply chains, its anti-slavery policies, or the due diligence procedures it has in place. They may also discuss the most at-risk parts of their supply chain and the steps taken to manage these risks; the company’s effectiveness at ensuring that its supply chains are free from forced labor and trafficking; or the training procedures it has in place for staff. Most importantly, the legislation does not impose penalties if a company fails to comply. Public pressure from consumers and civil society organizations, though meaningful, does not carry the same threat as civil or criminal liability.
The UK MSA is now part of a growing number of anti-slavery legislation around the world. In 2010, California introduced the California Transparency in Supply Chains Act, which requires all companies doing business in California to report on their efforts to eradicate slavery from their direct supply chain. Section 1502 of the Dodd-Frank Act (Conflict Minerals Provision) similarly requires disclosure of products that use materials from the Democratic Republic of the Congo or nearby. Last year, France passed a new due diligence law, which is broader and more comprehensive than the UK MSA. More are on the way: the Australian federal government is discussing its own Modern Slavery Act (in late June 2018, New South Wales introduced its own its own state-level version) and Hong Kong is not far behind.
In light of these developments, it is productive to look at the company reports produced under the UK MSA and to consider how they could be more effective. Over the past three years, civil society organizations have tracked companies’ Slavery and Human Trafficking Statements to measure compliance and progress. In December 2017, the Business and Human Rights Resource Centre (“BHRRC”) released a report that examined the statements of all FTSE 100 companies. Earlier this year, Know the Chain examined the statements of companies within the electronics industry.
Both reports reached similar conclusions. First, although most large companies published a statement, few complied with all three minimum requirements. Know the Chain found that only 18 percent of statements it analyzed were fully compliant, and the BHRRC found that 43 percent of companies failed to meet all three requirements.
Second, the statements rarely offered clarity on the organization’s supply chain beyond simply describing its products and services. They frequently failed to trace the entire supply chain, and offered little information on the number of suppliers and sub-contractors. This has two effects. Primarily, it suggests that companies do not know the structure of their own supply chains, which suggests they cannot effectively prevent or mitigate the risks of forced labor that exist within them. This is not without precedent. After the 2013 collapse of the Rana Plaza, it emerged that many companies were unaware their lower-tier suppliers and sub-contractors had engaged workers in the building. The lack of clarity also means that there is little public information for civil society organizations to use when urging companies to minimize the risk of forced labor. This prevents them from successfully monitoring and preventing risks.
Finally, although many companies had a code of conduct or similar policy, few had a policy that specifically addressed the risks of forced labor or adopted it into its “broader human rights strategy.” This indicates that companies have neither fully internalized the possibility that forced labor exists within their supply chains, nor have they integrated it into the company’s training procedures.
Taken together, these findings suggest that the current legislation does not achieve its ultimate goal: transparency in supply chains. Without filling the gaps identified through two years of UK MSA implementation, the Modern Slavery Acts from Australia and Hong Kong risk becoming another “tick-the-box” exercise. Legislators can prevent this in several ways. First, by publishing a list of the companies that fall within the scope of the legislation. This will pressure them into compliance by heightening public scrutiny around their reporting efforts.
Second, instead of giving companies the option of reporting on six suggested areas, legislation can provide a list of specific information that companies must disclose. This will streamline the statements and make across-the-board analyses by civil society more productive.
Third, they can improve monitoring and sanction mechanisms to make sure companies required to publish under the UK MSA actually do so, or face civil penalties. At the moment, businesses that fall under the UK MSA seem to be responsive primarily to public pressure. This type of toothless legislation will not lead to concrete improvements on the ground.
Policymakers in Australia and beyond should take note of where the UK MSA has fallen short, and should strengthen their own Modern Slavery Act bills so they improve the lives of affected workers and strengthen corporate accountability.
Julia Jacovides, Legal & Policy Intern