With two-thirds of consumers saying they would stop purchasing a product if they discovered there was modern slavery in its supply chain, according to a recent survey, and the Modern Slavery Bill about to become law, domestic pressure on businesses to respect human rights in the way they do business continues to grow.
Yesterday at Eversheds’ conference on business and human rights, Jo Swinson, Minister for Employment Relations and Consumer Affairs, reiterated the Government’s expectation that businesses should ‘know and show’ their respect for human rights: including knowing what the business is doing which could adversely impact the human rights of others, taking action to stop human rights abuses and reporting (or ‘showing’) its progress.
This duty to report progress on tackling human rights is contained in the Modern Slavery Bill and a new EU Directive – the aim being to put pressure on businesses to take action, or risk having to report a lack of progress to investors, consumers, employees, the government and pressure groups, potentially jeopardising both their reputation and profit.
At the same time, a new global reporting framework has been launched (the UN Guiding Principles Reporting Framework) which dovetails with the UK and EU reporting legislation and which provides practical guidance on how businesses can report on their commitment to respect human rights.
Transparency: what is expected?
The Modern Slavery Bill (MSB) – Expected to receive royal assent before the end of March and to be implemented later this year, the MSB will require businesses over a certain size (the threshold is yet to be confirmed) to report annually on what steps they have taken to ensure their business and supply chains are slavery and trafficking free. Draft government guidance sets out the expectation that such annual reports will include a description of relevant policies including due diligence and auditing processes, any training provided, the principals risks that the business has identified and metrics in place to track the effectiveness of its anti-slavery and trafficking actions.
The EU Non-Financial Reporting Directive – The directive must be implemented in the UK before the end of 2016 and requires, primarily, listed companies with more than 500 employees to disclose in their annual reports information on policies, risks and outcomes as regards, amongst other things, respect for human rights.
The UN Reporting Framework – The framework is aimed at helping businesses report on their human rights performance by annually responding to a minimum of eight key questions which address how the business manages its human rights impacts, with the focus on severe human rights abuses.
What are the risks and penalties for businesses?
Formal penalties for businesses ignoring the new reporting duties are currently weak or non-existent, for example, the MSB provides for the Secretary of State to seek an injunction for non-compliance, which seems highly improbable in reality.
However, as today’s BBC report on labour conditions in Cambodian clothing factories emphasises, some consumer facing businesses are already taking the issue of global human rights very seriously, given the reputational and other risks involved. Going forwards, more businesses, including consumer brands, those companies tendering for work in the public sector and those operating in inherently challenging human rights environments, should expect to come under increasing pressure to report how they, too, are taking action to address their human rights impacts.