Reporting requirements ‘lacking’ around modern slavery: Report

Greater monitoring and enforcement needed around employer compliance

Modern slavery has emerged as a pressing issue over the past few years, with reports of forced labour and human trafficking making headlines.

In response, several governments around the world have made an effort to better address the issue through reporting requirements, with positive outcomes, such as increased awareness and employers allocating more resources.

Company reporting has also strengthened the ability of external stakeholders to provide guidance and measure their performance on these issues year over year, according to the report Full Disclosure: Towards Better Modern Slavery Reporting, by the International Corporate Accountability Roundtable (ICAR) and Focus on Labour Exploitation (FLEX).

However, these steps are not adequately preventing forced labour in global supply chains, found the report.

“Compliance with these laws has been inconsistent and… the breadth and quality of information companies disclose is insufficient and does not reflect serious effort to tackle the problem,” it said.

“Reporting remains primarily a tick-the-box exercise.”

The report recommends ways governments can improve modern slavery laws and regulatory options, while companies improve reporting practices.

Background

The most recent push to pass modern slavery reporting requirements started in 2010 with the California Transparency in Supply Chains Act. This was followed by the 2015 United Kingdom Modern Slavery Act and the 2018 Australian Modern Slavery Act.

In Canada, in October 2018, the Subcommittee on International Human Rights of the House of Commons Standing Committee on Foreign Affairs and International Development released the report A Call to Action: Ending the Use of All Forms of Child Labour in Supply Chains.

It recommended “more concerted action, in the form of legislative and policy initiatives that motivate businesses to end the use of child labour.”

In response, in February, the federal government indicated it would “begin a process in 2019 to consult on possible supply chain legislation,” said MP Marie-Claude Bibeau.

At the same time, Bill C-423, An Act respecting the fight against certain forms of modern slavery through the imposition of certain measures and amending the Customs Tariff was introduced.

About 90 per cent of Canadian businesses would want to comply with this kind of legislation “as long as the mechanism is something that is easily accessible, and the information generated can be useful,” said MP John McKay, who introduced the private member’s bill.

“You’re always going to be dealing with the 10 per cent who, for a variety of reasons, don’t want to, primarily because their entire business model is built upon some direct or indirect use of slave labour.”

But shareholder groups keen to invest in companies want to know about the ethics of the supply chain, he said.

“If, in fact, that takes hold in the checklist of things you look into when buying shares in a company, then that will do far more than any legislation.”

There’s also growing investor interest in the risks associated with modern slavery, said Carole Gilbert, an associate at Norton Rose Fulbright in Montreal.

“Companies are getting more and more pressure in the form of things like shareholder proposals pushing for disclosure on CSR (corporate social responsibility) issues, including disclosure on how modern slavery risks are being managed.”

More recently, the All-Party Parliamentary Group (APPG) to End Modern Slavery and Human Trafficking announced the completion of the Transparency in Supply Chains Act to be tabled in the Senate. It outlines four mechanisms to improve compliance including: a reporting requirement on qualifying entities; and mechanisms to receive and investigate disclosures of forced labour and child labour from whistleblowers.

“It would include not only annual reporting obligations, but also it proposes to impose a statutory duty of care on businesses meeting a certain annual turnover threshold, which would be a first in this space,” she said.

“There’s a lot on the radar in Canada right now…  And for companies, there’s litigation liability at stake. And there’s also reputational and competitive risk. So, companies have every incentive to get on top of their supply chain.”

Results thus far

Despite the apparent progress, companies’ compliance with modern slavery reporting laws has been inadequate. The reporting requirements have failed to bring meaningful improvements for workers, found the ICAR/FLEX report, which is based on 28 interviews and in-person expert consultations in London and Washington, D.C., which included input from 15 companies, 38 civil society organizations and trade unions, and 12 government and four investor groups.

In addition, employers have failed to investigate and address how business practices and operating models create the conditions for such abuses. And the information provided by companies lacks the breadth and quality needed to reflect effective human rights due diligence processes, it said.

“There’s not enough information for civil society investors and consumers to be able to get a clear picture of what is happening in companies’ supply chains and to be able to understand exactly what companies are doing, and mainly if they are if they are doing enough,” said Marion Cadier, legal and policy co-ordinator at ICAR in New York.

Employers need to have a broader understanding of the risks, not just for the company, but the people and communities affected by business operations, she said.

“There’s sort of a misperception that modern slavery mainly arises out of criminal activities. But we feel that it’s important to know that modern slavery arises basically on the continuum of labour rights violations, which tend to lead to forced labour.”

The monitoring and enforcement of governments are also too weak to lead to effective corporate responses to modern slavery risks, said the report. As a result, Full Disclosure makes several recommendations, such as penalties for non-compliance with reporting requirements; risk-based company reporting that includes information on corporate policies and processes in place to respond to risks of forced labour, as well as the outcomes and results of such measures; and mandatory human rights due diligence legislation.

It’s all about more teeth, said Cadier.

“Mandatory human rights due diligence-type of legislation will emphasize the fact that companies have to take action, rather than having to report only, so we think that this might be more effective,” she said.

Implications for HR

All of this is part and parcel of the CSR umbrella, which keeps on getting bigger, said Sharon Singh, an associate at Bennett Jones in Vancouver.

And CSR shouldn’t be a department that’s separate from other departments. It’s about HR, procurement, communities and managers, for example, she said.

“Each individual or each department has one role to play in the governance of ensuring that modern slavery is addressed. So… ensuring that, for instance, HR is not just (involved in) the hiring of individuals, but they are also involved in addressing the policies that are in place, sometimes for your contracts or workforce... you have your speak-out policies, you have other policies. So HR plays a role in that for sure.”

HR is responsible for the employee training aspects, said Singh.

“(That means) the internal communications aspect of it, the training aspect of it, overseeing any programs that would go into your corporate governance programs.”

This is predominantly a CSR and legal issue, and it’s definitely an HR issue from an implementation perspective, said Gilbert.

“The legal team would have the role of putting into place an effective system and collaborate with HR. But it would be really up to the HR people in various jurisdictions to work together to ensure that the risk management system is actually effective.”

That would also include training and communication around any kind of whistleblowing policy, along with the grievance mechanisms, she said.

Looking at the composition of the workforce is also important, said Cadier, as some populations are more at risk of being exploited, such as migrant workers and women. A 2017 report from the International Labour Organization, for example, found women and girls are disproportionately affected by modern slavery, accounting for almost 29 million or 71 per cent of the overall total of 41 million.

“It’s important for businesses to have a gender-sensitive approach to both preventing and addressing these issues.”

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