Human rights rise to top of business agendaMay 2017
By Tom Idle — Business respect for human rights has been given a big boost with the “historic step” taken by the French Parliament to green light the much-awaited corporate duty of vigilance law.
The legislation applies to the largest of French companies, with at least 5,000 employees if their head office is located in France, or 10,000 employees if it is located abroad. Around 200 companies are likely to be directly covered. The law will, for the first time, mandate that businesses consider and address the negative impacts their activities might be having on people and planet.
Once a year, they will need to publish ‘public vigilance’ plans, highlighting not only in-house efforts to tackle instances of human rights abuse, but also the efforts of suppliers and sub-contractors. Failure to transparently publish such details could result in a fine of up to €10 million. And should a company fail to develop a plan and that then leads to injuries that could have otherwise been prevented, a €30 million fine could be handed down.
The French’s Government’s appetite for getting more stringent when it comes to corporate human rights activity is one part of a growing trend by governments responding to increased pressures from individuals, investors, NGOs and activists to weed out abuse and social injustice along company supply chains. The UK’s Modern Slavery Act and the California Transparency in Supply Chains Act have helped to pave the way for more progressive regulation in an area that has for too long been ignored by the public and private sector alike.
It has been two years since the UK’s MSA came into force, a piece of legislation warmly welcomed across the board. And it is starting to have an impact. The conviction of the Markowski brothers, sentenced to six years in prison for trafficking young men from Poland to work in a Sports Direct warehouse, is evidence that it is working. Their actions described as being like something out of a Dickens novel, Erwin and Krystian encouraged vulnerable Poles to one of its warehouses in the north of England where they were paid below the legal minimum and faced full body searches every morning before coming into work.
However, question marks remain as to the real impact the MSA is likely to have in the long-term. The jury is still out as to whether the regulation’s tick-box-encouraging exercises will really deliver the changes NGOs have been calling for, especially when it comes to dealing with the most serious instances of human rights abuses, both in the UK and around the world.
Yes, the all-important issue of worker wellbeing has reached the boardroom for the first time, with more than 12,000 CEOs within businesses turning over more than £36m annually now having to put their signature to a modern slavery statement. Effectively, these documents are a way of proving a business is doing meaningful due diligence to find risks and do something about eradicating forced labour and human rights abuse from its own operations and supply chain.
The quality of such reporting has been called into question by the Business & Human Rights Resource Centre (BHRRC), the organisation which maintains a registry of some 1,300 MSA statements.
In an analysis of the first 27 FTSE 100 companies to report under the MSA, it found a “gulf in the quality of action between a handful of leading companies and the rest”. While the likes of Marks & Spencer and SABMiller were singled out for producing the most detailed statements that disclosed some robust measures, “improvements are needed across the board”.
However, despite the lacklustre findings, it is clear the MSA is driving change, according to Patricia Carrier, project manager of the MSA Registry at the BHRCC. “Statements we analysed stated that as a result of the Act, modern slavery policies and processes have been developed and implemented, or were in the process of being developed,” she says.
Marks & Spencer has, as of May 2016, revised its ‘global sourcing principles’ on forced labour and agency labour by adding a new statement prohibiting the payment of direct or indirect recruitment fees to secure a job, and requiring suppliers to have adequate due diligence in place to ensure this does not happen.
The media business Sky has conducted a specific modern slavery risk assessment across its own operations and all its suppliers. Fashion brand Burberry is developing specific modern slavery and labour rights training for staff that interact with its supply chain networks.
Meanwhile, a Ethical Trading Initiative and Hult International Business School investigation confirmed that most companies are “more actively engaging with peers since the Act”, believing that the engagement with stakeholders is critical for significant change.
One of the biggest gaps in reporting noted by BHRRC was the lack of detailed information on the structure of supply chains and the specific risks or instances of modern slavery in the supply chain. “This is particularly discouraging…from investors to consumers, people reading these statements want know what companies are sourcing and from where,” says the BHRRC.
The truth is, few companies yet know completely what their supply chains truly look like, let alone whether human rights abuse is happening on the ground.
But the UK’s MSA is offering a blueprint for other nations to follow. In the US, loopholes in trading laws have been closed to better identify instances of modern slavery. In the Netherlands, the government has passed a new law on child labour and in Australia, a parliamentary inquiry has been opened on the subject of adopting its own version of the MSA.
The political and economic uncertain times in which we find ourselves are significant for many reasons. Finally dealing with age-old instances of human rights abuses hangs in the balance, and governments have a real opportunity to make a difference to the corporate response to the issue.
US President Donald Trump’s efforts to protect American interests above all else puts Bangladesh’s garment sector at risk as it recovers and improves workers’ rights four years on from the Rana Plaza disaster, which saw more than 1,000 people lose their lives as a result of poor health and safety checks. As its biggest export market, US intervention could be crucial in driving through the changes needed on the ground.
Similarly, the UK’s exit from the European Union could mean Bangladeshi-made garments entering into the UK market no longer qualify for duty- and quota-free access. When markets are squeezed, the temptation is to put social protection issues on the back burner – something the country can ill-afford to do.
The official warning from the EU, which currently accounts for around 62% of all Bangladesh’s garment exports, is a good example of what governments can do to affect change. Trading preferences will be scrapped unless the country makes progress in the implementation of workers’ rights, says the European Commission. Currently, Bangladesh gets duty-free access to EU countries for all products under the Everything But Arms preferential tariff scheme. Fail to tackle workers’ rights in a meaningful way and those privileges will be removed, a move which might see a 12% tariff applied to Bangladesh imports.
It is early days in the evolution of company responses to human rights, but thanks to lawmakers responding to increased stakeholder pressure, the tide is slowly turning. And that is just as well; the issue of worker exploitation is one that no company wants to be embroiled in, as well as one that every company is most certainly exposed to. Being as open and transparent as possible remains the best way for companies to future proof themselves by taking steps now on due diligence.