Around the world, nearly 50 million people are trapped in modern slavery, including 19.9 million people in forced labour in private enterprises or in state-run companies. Millions more people are in other forms of workplace exploitation, including an estimated 1 in 10 of all children alive today.
In response, national governments, state and regional governments and the EU have legislated to hold organisations to account for exploitation in their operations and supply chains. They have mandated transparency and reporting, due diligence, vigilance requirements, remediation requirements, civil penalty mechanisms or a combination of these to address this complex issue.
Such legislation often makes reference to international obligations and frameworks, such as the UN Guiding Principles on Business and Human Rights, and guidelines by the International Labour Organization and the OECD.
There is a clear sense of acceleration in the past two or three years, with many more countries choosing to legislate.
Countries that have passed relevant legislation include England and Wales via the Modern Slavery Act 2015, which has ‘transparency in supply chains’ that also extend to Northern Ireland and Scotland; and the Health and Care Act 2022 section 81. Norway’s Transparency Act came into force in July 2022 and the first phase of Germany’s Supply Chain Due Diligence Act has been in force since 2023. Australia, France, Switzerland, the USA (and individual states) and Mexico also have legislation in force, while the Netherlands, South Korea and New Zealand are among the countries with legislation either proposed or passed but yet to come into force.
Globally, this type of legislation could help ‘level the playing field’ for good businesses, who can otherwise be undercut on costs by those that don’t respect human rights.
At Hope for Justice and Slave-Free Alliance, we urge businesses to see reporting requirements not as burdensome, but as something they embrace. It can be a positive reputational signal to customers, partners and suppliers that a business takes seriously the human rights of its own workers and the workers throughout its value chains.
Be aware that this is not just about large retailers or manufactuers who import goods from high-risk regions of the world, or those known for sweatshops or poor labour standards. It is also about businesses of any size who buy in local goods and services: think about cleaning companies, facilities management, landscaping, construction, logistics, catering, waste and recycling management – all of these are industries where outsourcing and diversified supply chains have led to cases of exploitation and even modern slavery being uncovered. Of course, if a businesses uses or sells good that have been imported, that just amplifies the risk factors. In fact, 77% of business leaders in one study said they believe some form of modern-day slavery is likely to exist in their supply chain.
Taking action shows leadership in a business’s sector. It protects and enhances credibility with investors, staff, suppliers and consumers, while mitigating the commercial implications and risk of penalties for non-compliance with legislation. It is a positive when a business acts in accordance with its values and wants to do the right thing in the world, and avoids the kinds of poor policy and practices that lead directly to people being made victims of forced labour in supply chains.
There are two important new EU directives on this issue, which are gradually phasing in mandatory human rights due diligence and full sustainability reporting for businesses over certain thresholds during the coming years. The Corporate Sustainability Reporting Directive (CSRD) is at a more advanced stage than the Corporate Sustainability Due Diligence Directive (CSDDD), which was provisionally agreed in December 2023. Technical negotiations are ongoing for the next few months, and we’re likely to see it come into force in 2025. Companies have three years to get their processes in place after it is adopted and after they come into scope (which is likely to be on a staggered basis, based on company size). Who is affected? All EU companies with 500-plus employees and a net turnover over 150 million euros, plus smaller companies in high-risk sectors and certain non-EU companies with “signicant” turnover within the EU. The financial services sector is currently exempt.
Those companies in scope will have significant due diligence responsibilities to identify “actual or potential adverse impacts” on the environment and human rights – including labour trafficking and exploitation – within their own operations and across their value chains. There will need to be ongoing monitoring, and of course prevention, mitigation or elimination of those impacts, plus public communication about all of this, via the CSRD obligation for those companies also covered by that Directive, or via an annual website statement.
Since these Directives will place an expectation on companies to take specific actions and to have a risk-based approach to prioritising due diligence, it is better to be prepared – especially if the enforcement and penalties get even tougher, for example exclusion from public procurement contracts.
Even if a business is not directly in the scope of the legislation – for example, if they are too small – they could still be asked what steps they are taking by a larger customer. The strong focus on supply chains and cross-border provisions mean that increasingly all of a business’s global activities are being caught in the scope of various laws, whether as a buyer or seller of goods and services. Businesses must not ignore these developments and should be taking them into account as they negotiate with suppliers, develop their strategies and consider their operational footprint.
Any business or entity seeking advice or consultancy on any of these issues can contact us at [email protected]. We are a not-for-profit enterprise, wholly owned by the global anti-trafficking charity Hope for Justice and Slave-Free Alliance offers services to members and non-members, with clients and partners in multiple countries.
by Tim Nelson, CEO of Hope for Justice and Slave-Free Alliance
Sources for statistics cited:
- 50 million people worldwide now thought to be in modern slavery (hopeforjustice.org) https://hopeforjustice.org/news/the-latest-global-estimates-of-modern-slavery/
- Report: Child Labour: Global estimates 2020, trends and the road forward (ilo.org) https://www.ilo.org/ipec/Informationresources/WCMS_797515/lang–en/index.htm?ssSourceSiteId=global
- Ethical Trading Initiative, Global trends and insights https://www.ethicaltrade.org/sites/default/files/shared_resources/Ethical%20trade%2C%20Global%20trends%20and%20insights.pdf?#page=6
