The UK government recently provided updated guidance on the transparency in supply chains reporting requirement in section 54 of the Modern Slavery Act (about which, see more here). Brands with an international footprint should be aware of developments in the guidance as well as developments on the cards in other countries.
According to the guidance, companies are now expected to publish transparency statements ‘at most’ six months after their financial year’s end. They are encouraged to leave statements from previous years on their websites to enable investors, employees and other stakeholders to monitor progress. These expectations, taken together, have the potential to impact brands by imposing the regular upkeep of a developing, public modern slavery policy footprint, which may expose brands to deeper scrutiny.
For now, the updated Guidance states that relevant companies ‘should aim’ to (rather than ‘may’) cover certain information in their statements. Companies are encouraged to “paint a detailed picture” of all the steps taken to address and remedy modern slavery, forced labour and human trafficking, and are reminded that progress against prior years may be scrutinized by both stakeholders and consumers. The guidance provides detailed information about the type of activity that could be included under each suggested heading and why such information is recommended.
For example, brands may consider including information about:
- Organisational policies. Such policies demonstrate commitment to the issue and ensure appropriate action is taken throughout the business. In drawing up organisational policies, brands in particular might need to consider questions such as:
- What minimum labour standards are expected of the business, its subsidiaries, manufacturers and suppliers?
- How does the business factor labour costs into production and sourcing costs? and
- What due diligence will the company commit to conducting regarding its supply chain?
- Due Diligence. The guidance acknowledges that due diligence is an essential management tool to improve risk identification and long-term social, environmental and financial performance. Brands might consider including details of their due diligence processes, impact assessments, stakeholder engagement, risk management procedures and grievance mechanisms. Due diligence in relation to modern slavery should form part of a business’ “wider human rights due diligence process”, where possible. At present, compliant statements published under the U.K. Modern Slavery Act vary dramatically in terms of both content and detail. A proposed U.K. Bill would, if passed, see the content of the statements mandated. Earlier this year, recommendations from the Joint Committee on Human Rights included the prospect of mandatory due diligence for U.K. businesses.
- Future developments?
U.K. developments are not isolated.
- The Netherlands — the Child Labour Due Diligence Bill is awaiting approval by the Senate (session scheduled in late November this year), and would, if passed, require any company supplying goods and services to Dutch consumers (including certain goods and services online) to identify instances of child labor within their supply chains, and develop plans to combat those practices in line with the UN Guiding Principles on Business and Human Rights. Non-compliance may result in fines of up to EUR 820,000 or 10% annual turnover.
- Australia — the government recently announced its intention to enact and is currently consulting on proposals for a corporate modern slavery reporting requirement. Draft legislation is anticipated in the first half of 2018. Brands operating in Australia and meeting certain turnover thresholds would be required to report annually on efforts to address modern slavery in their operations and supply chains. Among other things, relevant entities may be required (not merely encouraged) to provide information about their due diligence processes relating to modern slavery and the effectiveness of such measures.
- Germany — the country’s national action plan for business and human rights laid an expectation that all enterprises should introduce corporate due diligence and stated that if 50% of private companies with more than 500 employees have not implemented voluntary human rights due diligence processes by 2020, the government will consider binding legislation.
Publication of the U.K. Guidance also coincided with the UN intergovernmental working group’s publication of Draft Content for a treaty on Transnational Corporations and Other Business Enterprises with Respect to Human Rights. The Draft Content – due to be discussed during the third session of the working group at the end of October 2017 – indicates that any state that ratifies the treaty may be required to take action (including legislation where necessary) to require private organisations to design, adopt and implement effective due diligence policies and processes, including codes of conduct, and to identify and address human rights impacts resulting from their activities. The Draft Content also hints at the introduction of criminal legal liability for the acts of transnational corporations, including possible personal liability of directors and executives.
Brands readers who may want to find out more about potential new requirements and their implications can contact Christopher Walter, Thomas Plotkin, Helena Milner-Smith or Hannah Edmonds. We will continue to track further developments in this space.