The U.K. government has provided updated and firmer guidance on the section 54 Modern Slavery Act transparency in supply chain reporting requirement (about which see more here). Organisations are now expected to publish transparency statements ‘at most’ six months after the organisation’s financial year end. Businesses are also encouraged to leave statements from previous years on their websites to enable investors, employees and other stakeholders to monitor progress.
As previously reported, a U.K. Bill would, if passed, see content of the statements mandated. The updated guidance states that relevant organisations ‘should aim‘ to (rather than ‘may’) cover certain information in its statement. Organisations are encouraged to “paint a detailed picture” of all the steps they have 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 civil society. 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, businesses 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 organizational policies, businesses might consider questions such as:
- What minimum labour standards are expected of the business, its subsidiaries 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. Businesses might consider including details of their due diligence processes, including 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.
We recently reported on the recommendations from the Joint Committee on Human Rights, which included the prospect of mandatory due diligence for U.K. businesses. The government’s updated guidance clearly recognises human rights due diligence as best practice.
Last week’s publication of the guidance 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 member states may be required to take action (including legislating if 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 also hints at the introduction of criminal legal liability for the acts of transnational corporations, including possible personal liability of directors and executives.
With the growing recognition that the UN Guiding Principles represent best practice for business, and a UN treaty potentially in the pipeline, mandatory due diligence seems increasingly likely. We will continue to track and report on further developments in this area.