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Efforts to clean up global supply chains so far come up short

The UK’s Modern Slavery Act fell short of holding companies accountable for forced labour in their supply chains. Can the loopholes be fixed? 

Matt/Flickr. (CC BY-NC 2.0)

Forced labour taints goods and services of all kinds, from everyday garments to high-end electronics. There is a very good chance that something you have purchased was the product, at least in part, of forced labour. The International Labour Organisation (ILO) estimates that 21 million people around the world are forced labourers. These workers are often migrants who have been recruited by unscrupulous subcontractors and are easily exploitable due to their status.  Some of these workers are producing goods within the supply chains of global firms.

Initiatives to prevent human trafficking or ‘modern slavery’ have multiplied in recent years. More recently, the ILO adopted the Protocol to the Forced Labour Convention (Convention 29), which requires ratifying states to combat trafficking for forced labour, prosecute those responsible, and provide effective remedies for the victims. This protocol is supported by the 50 for Freedom campaign, which seeks to get 50 member states to ratify the protocol by 2018. The Solidarity Center is actively participating in this campaign. The protocol went into force in 2016, though only 11 of the 187 ILO member states have yet to ratify it.

The United Kingdom passed the Modern Slavery Act (MSA) in 2015, just before the ILO protocol went into effect. Its provisions take inspiration from a 2010 California state law, the California Transparency in Supply Chains Act, which requires companies with annual revenues of more than $100 million to disclose on their websites specific information concerning efforts to eradicate slavery and human trafficking in their direct supply chain.

The MSA has attracted a significant amount of international attention, specifically for its provisions requiring supply chain transparency. While the MSA is a step forward, it suffers from many limitations. Furthermore, initial compliance with its ‘requirements’ has not been robust. A report by UK NGOs CORE and the Business and Human Rights Resource Centre found that the required annual statements were little more than public relations exercises and that many companies did not disclose information recommended by the law.

Closing the loopholes

In January 2017, the International Trade Union Confederation (ITUC), the global confederation of labour based in Brussels, Belgium, published ‘Closing the Loopholes: How legislators can build on the UK Modern Slavery Act’, which identifies key limitations with the MSA.

For example, the law does not require the disclosure of any information. The areas indicated in the law and guidance are entirely permissive. While the act recommends disclosure of a company’s due diligence policies, it does not actually require a company to conduct due diligence – which falls well short of the expectations under the UN Guiding Principles on Business and Human Rights (UNGPs). Under the UNGPs, due diligence is a core feature to ensure that businesses are respecting human rights in their operations. Further, there is no penalty for not issuing a statement: while a company may be in technical breach of the MSA, there is no fine or other consequence for failing to comply with the law.

While the act recommends disclosure of a company’s due diligence policies, it does not actually require a company to conduct due diligence.

The law currently only applies to companies with an annual revenue of $44.2 million (£36 million) and does not appear to apply to wholly owned subsidiaries of UK corporations outside of the country. Indeed, so long as the goods do not enter the country, they are exempt from the disclosure ‘requirement’.

Meanwhile, there is no public, centralized repository of disclosures, meaning that concerned parties would have to search one company website at a time to assess compliance (though some NGOs, like the Business and Human Rights Resource Centre have since filled the breach).

As a final point, the MSA does not include provisions for extraterritorial application, meaning that if a UK-based person or company extracted forced labour from a worker overseas, they would not face liability under the MSA. This is in contrast to the United States’ Trafficking Victims Protection Reauthorization Act of 2013, which has explicit provisions to allow parties to pursue civil and criminal sanctions against US citizens for acts of forced labour committed outside the country. Additionally, the United States passed the Trade Facilitation and Enforcement Act of 2015, which amended Section 1307 of the Tariff Act of 1930. As amended, the law now prohibits the importation of goods that are the product of forced labour.

Despite the transparency laws in place, it is not clear to what extent workers in supply chains have benefitted from these protections. Goods produced through forced labour continue to be imported into the United Kingdom and California despite these laws. For example, recent efforts in California to sanction Nestle for using forced-labour produced shrimp in its pet food fell flat when a US District Court ruled that the law had in fact created a ‘safe harbour’ from liability – exposing the weakness of California’s legislation. Nestle could not be held liable for failing to disclose forced labour in its supply chain, as the law didn’t require more than to describe its efforts.

It is important for Australia to learn from the UK’s example and close these loopholes, as recommended in the ITUC report.

Right now, the government of Australia is considering the adoption of a Modern Slavery Act. It is important for Australia to learn from the UK’s example and close these loopholes, as recommended in the ITUC report. This would set a new standard for supply chain transparency and perhaps move us one step closer to true accountability for forced labour in global supply chains.

Despite these early efforts, much remains to be done everywhere to revise legislation and create the institutions necessary to prevent forced labour wherever it is found. At a minimum, mandatory human rights due diligence combined with judicial mechanisms and dissuasive sanctions in the case of a breach are necessary to get companies to take responsibility for their supply chains and to provide an effective remedy for those workers who fall victim to exploitation, including forced labour. 


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