UK Modern Slavery Act

Transcription

1 UK Modern Slavery Act Beyond Compliance & Long-Term Strategy to Address Human Trafficking in Supply Chains BSR Human Rights Advisory Services May 2016 Contents 1. Issue Background 2. UK Modern Slavery Act Compliance 3. Strategic Approach 4. Current Practices 2 1

2 Issue Background Human Trafficking in Supply Chains Compliance & Strategy 3 Human Trafficking and Forced Labor Modern slavery is rampant throughout the globe and is recognized as one of the biggest business risks, with prevalence throughout the supply chain Scope Estimated that 21 million people are in forced labor globally, which generates about $150 billion per year in illegal profits. Of these, 10.7 million are exploited in agriculture, mining, manufacturing, construction and utilities sectors, generating $43.4 billion in illegal profits annually Regulation State and national governments like California and the UK are requiring corporate disclosure of efforts to address HT/FL in supply chains Why act? Companies face reputational risk, loss of brand equity, and litigation for failure to comply with regulations. E.g. Recent Costco lawsuit, Nestle and child labor. OECD Human Trafficking and Corruption 4 2

3 Challenges in Managing HT/FL Risk The difficulty of mitigating risk of human trafficking/forced labor in supply chains is compounded by several root causes. Lack of Transparency Low visibility into Tier 2+ recruitment practices Intentionally shadowy Trafficking often found in the informal economy Lack of Disclosure Suppliers not forthcoming or don t know what to report on Audits inaccurate; no magic questions Lack of Capacity Lack of expertise or resources from suppliers to address issue Brands lack access to resources to help address Lack of Incentives Systemic Challenges Business Models Few commercial incentives for suppliers to improve Suppliers and brands may not understand the business case HT/FL often begins in countries that lack strong governance or rule of law Corruption is an enabler Lack of unions to help provide protection Brand procurement practices Seasonality drives need for short-term labor Lack of requirement for direct contracting 5 Labor Trafficking is Particularly Difficult to Uncover Victims Estimated Labor Trafficking 85% Sex Trafficking 15% Cases Identified Sex Trafficking 85% Labor Trafficking 15% Labor vs. Sex Trafficking Labor trafficking victims do not usually self-identify There s nothing inherently wrong with working in a factory, or being a housekeeper very difficult to see where the crime is. Labor victims don t always view us as saviors 6 3

4 UK MSA Compliance Human Trafficking in Supply Chains Compliance & Strategy 7 Legislation Timeline In the last 6 years there has been a proliferation of legislation focused on human trafficking, some of which require company disclosure and reporting of mitigation efforts, across the globe. UNGPs Business Supply Chain Transparency Act introduced E.O : Strengthening Protection Against Trafficking in Persons in Federal Contracts EU Directive on ESG Disclosure (Directive 2013/34/EU) Ca. Transparency in Supply Chains Act Australian Slavery, Slavery-Like Conditions and People Trafficking Act UK Modern Slavery Act EU Directive on Preventing and Combatting Trafficking in Human Beings UK Bribery Act Focus on Supply Chains Business and Supply Chain Transparency on Trafficking and Slavery Act 2015 introduced 8 4

5 UK Modern Slavery Act: Compliance Overview Businesses supplying goods or services in the UK with global gross income of at least 36 million. Required to post an annual statement with link from website homepage Approved by Board of Directors and signed by a company Director Enforcement through required disclosure. Court of public opinion will focus on due diligence efforts how much do you investigate when a problem is identified? Content of Statement Statement must set out the steps taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or in any part of its own business, or a statement that it is taking no such steps. No other requirements any length, any format. Transparency in Supply Chains etc. A Practical Guide 9 UK Modern Slavery Act: Compliance Suggested Statement Contents The organization's structure, its business and its supply chains Policies in relation to slavery and human trafficking Due diligence processes related to slavery and human trafficking in its business and supply chains Parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk It s effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate Training and capacity building about slavery and human trafficking available to its staff Transparency in Supply Chains etc. A Practical Guide 10 5

6 Stakeholder Expectations The spirit of the law is to encourage companies to develop a longer term strategic approach to addressing modern slavery in their supply chains. Basic Compliance Strict compliance with reporting requirements and detail on current efforts to identify and reduce trafficking, even if minimal. Ensure Senior Executive or Board-level sign-off. Emerging Good Practice Governance structure in place with long-term strategy and approach Risk-based targeted due diligence based on geography, product, commodity or other known trafficking hot spots Collaboration with other companies, governments, or NGOs to develop remedies consistent with human rights Transparency on lessons and challenges Current leaders already have some of these efforts in place. 11 UK Slavery Act First 100 Reports Mostly voluntary as they are out before year-end deadline. Highlights Some good examples of statements that are relatively detailed in setting out an approach to due diligence, the majority do not go beyond broad commitments to ensure no modern slavery. Short nearly all under 1000 words, 50% are under 500 Most refer to auditing efforts & training Some report on KPIs 12 6

7 Ford s UK MSA Statement Statement discusses policies, risk assessments, and training. 13 Strategic Approach Human Trafficking in Supply Chains Compliance & Strategy 14 7

8 Core Elements of a Strategic Approach Gain Visibility Internal Buy-In & Alignment Remedies & Solutions Collaboration Transparency We cannot manage what we cannot see or understand Need to de-link visibility from responsibility Supply chain mapping aligned with UN Guiding Principles Hot-spot analysis and targeted due diligence in highrisk areas / auditing program Conduct policy gap analysis to ensure prohibition on forced labor and human trafficking is included in all relevant policies Consider specific policy statements, e.g. no recruiting fees; confiscation of passports Consider revising procurement policies Determine scope of responsibility High-touch engagement / capacity building with suppliers Incorporate worker voice through interviews & effective grievance mechanism Consider ending relationship with supplier Process Identify review and and build operating strategic model partnerships industry, NGO, Report review and government, benchmarking solutions provider Reporting Engage strategy host and and home content development governments Engage in public policy discussion / consider lobbying for anti-trafficking legislation Transparent about what you find Transparent about solutions Transparent about challenges Partner with an organization when making public statements 15 Gain Visibility 1 Gain Visibility We cannot manage what we cannot see or understand What To Do Internal Map supply Buy-In chain & to as many Tiers as possible Alignment Identify FL/HT hot spots; beyond Tier 1 in highest risk areas Conduct targeted and ongoing investigations; consider collaboration Auditing begins the conversation, it s not the final solution Country Risk Commodity Risk Sector Risk Need to de-link visibility from responsibility Supply chain mapping aligned with UN Guiding Principles Hot-spot analysis and targeted due diligence in highrisk areas / auditing program When you understand more about the risks, then you can start to understand where the root causes lie and what the most effective interventions look like. Head of Responsible Sourcing 8

9 Internal Buy-In & Alignment 2 Internal Buy-In & Alignment Conduct policy gap analysis to ensure prohibition on forced labor and human trafficking is included in all relevant policies Consider specific policy statements, e.g. no recruiting fees; confiscation of passports Consider revising procurement policies What To Do Build awareness internally about FL/HT and the company s responsibility to address it Review existing labor policies, identify and close gaps Analyze whether procurement policies should be revised to change incentives for suppliers Make the Chief Procurement Officer the hero. When I joined our company there was a lot of resistance from the buying teams of, Oh yeah, fine, sales prevention. It took getting people on board to understand why you re doing it and educating them and training them across the business. And we still do it. It took a good year and a half, two years and then the mind-set changed. Head of Corporate Responsibility Remedies & Solutions 3 Remedies & Solutions Determine scope of responsibility High-touch engagement / capacity building with suppliers Incorporate worker voice through interviews & effective grievance mechanism Consider ending relationships with supplier What To Do Determine the scope of responsibility: visibility responsibility Approach legitimate suppliers as partners in remediation, not red flags to be addressed Understand supplier s willingness and incentives to partner Engage with workers wherever possible, always taking into account their situation, fears, incentives; consider making available an anonymous direct grievance hotline or other mechanism Build staff capacity to conduct enhanced engagement through workshops, interviews with employees, capacity building Consult with experts to determine appropriate remedy, always bearing in mind the victim s perspective and potential impacts A big part of our team overseas is simply having experts in the field, on the ground, building the relationships, building networks and starting to understand where all these risks are. It s only by having that close connection which helps drive us to do things which absolutely no one knew about before. -- Head of Responsible Sourcing 9

10 Collaboration 4 Collaboration Process Identify review and and build operating strategic model partnerships industry, NGO, Report review and government, benchmarking solutions provider Reporting Engage strategy host and and home content development governments Engage in public policy discussion / consider lobbying for anti-trafficking legislation What To Do Identify industry associations for collaboration; cross-industry groups Engage host and home governments wherever possible take a shared responsibility approach Engage in policy discussion; consider lobbying on these issues. Conduct due diligence on NGO partners be strategic and long-term 5 Academics 4 Foundation s & NGOs Workers & Unions Suppliers Int l Labor 1 Globlal Companies Int l Finance Developmen t Agencies Developed Govt s Developing Govt s 2 Five years ago, the impression was that we could fix this ourselves. We truly thought that if we audit every one of these suppliers, very, very frequently, they re going to get it and they re going to be doing the right thing. And I think, frankly, over the last five years, we ve seen the folly of that and we ve seen the reality that we cannot do this on our own. -- Head of Responsible Sourcing 3 Transparency 5 Transparency What To Do Share with others what you re finding on the ground Can be a full report, e.g. Nestle, or can happen behind the scenes Share publicly your strategy or other effective remediation efforts Transparent about what you find Transparent about solutions Transparent about challenges Partner with an organization when making public statements 20 Jacobs Douwe Egberts admits that it is possible that coffee from plantations with poor labour conditions ended up in their products, and coffee giant Nestlé acknowledges having purchased coffee from two plantations where authorities freed workers from conditions analogous to slavery in What has led to that change I think is very senior people within the business travelling, seeing it first-hand. When an issue hits the old proverbial fan or you re in the press, or you re being hounded by an NGO the business sits up and listens. How could this have happened? What do we do to prevent it again? -- Head of Corporate Responsibility 10

11 Current Good Practices Human Trafficking in Supply Chains Compliance & Strategy 21 Nestle Forced Labor in Shrimp Industry Nestle recently published a report detailing forced labor in seafood supply chain in Thailand Background: After media reports such as the Guardian discovered forced labor in supply chains, Nestle launched a year long investigation in Dec 2014 revealing forced labor in Fancy Feast supply chain Action: Nestle commissions Verite to conduct a 3 months assessment; Verite interviewed 100+ people, including about 80 workers from Myanmar and Cambodia, and boat owners, shrimp farm owners, site supervisors and Nestle suppliers Results: Instances of forced and child labor, human trafficking, deceptive recruitment practices, inadequate and unsafe working conditions, excessive recruiter fees, restricted movement 22 11

12 Investigating Beyond Tier 1 - Patagonia Overview of forced labor among Tier 2 suppliers in Taiwan Background: Patagonia reviewed working conditions in the mills that produce the fabrics it uses in products One quarter are located in Taiwan with instances of trafficking and exploitation in most of them Issue: Labor brokers were charging labor workers high fees for jobs in mills, as much as $7000 Response: Patagonia published an Employment Standards and Implementation guide for Taiwan based suppliers and beyond Patagonia held a forum to explain the standards to Taiwanese suppliers and required suppliers to repay fees to workers who were hired before June 1, 2015; 5000 workers will be repaid Patagonia 23 Collaboration with Government: Delta Delta is one of the first airline companies to adopt the US Customers and Border Patrol s Blue Lightning initiative Computer-based training program that provides airlines with tools to help identify and report suspected instances of human trafficking To date, over 68,000 Delta employees have been trained through the program on how to identify traffickers and their victims and respond accordingly Employees can call the Immigration and Customs Enforcement Homeland Security Investigations Tip Line Real-time reporting mechanism allows law enforcement to analyze information and coordinate an appropriate, effective response 24 12

13 Collaboration: Shrimp in Thailand After an article noted abuses in the Thailand shrimp supply chain, Costco organized and joined the Shrimp Sustainable Supply Chain Task Force. Comprised of representatives from Thai shrimp feed manufacturers, shrimp processors, retailers in the U.S. and Europe, and NGOs Three goals: 1. Implement verification systems to trace fish supplied 2. Create and enforce a code of conduct for vessels sourcing fish for fish meal plants 3. Improve the sustainability of two of Thailand's major fisheries that supply fish meal Worked with the Thai government to develop port control measures and documents Engaged a multi-stakeholder group to develop audit protocols in its membership supply chains 25 BSR Advisory Services Human Rights Peter Nestor Associate Director, Human Rights pnestor@bsr.org Salah Husseini Manager, Human Rights mlee@bsr.org