Modern Slavery/Forced Labour/ESG/Supply Chain Due Diligence and Compliance Legislative News Roundup

Introduction

This article is a snapshot of where things currently stand with UK and EU legislative developments concerning modern slavery/forced labour/ESG/supply chain due diligence.

UK developments

The following is where things currently stand in the UK:

• Modern Slavery Act 2015 & Modern Slavery Bill – under the UK Modern Slavery Act 2015 (the 2015 Act) compliance disclosure and transparency requirements an organization with an annual turnover of £36 million (approximately USD $43 million and €40 million at today’s rate) or more that sells goods or services in the UK is required to annually publish a slavery statement demonstrating what they are doing to ensure that there is no slavery or human trafficking in the business or the supply chain – this also applies to organizations based outside the UK selling goods or services into the UK. In May 2022 the UK government announced in the Queen’s Speech that the UK government would be introducing a Modern Slavery Bill (which we assume will amend the 2015 Act) in the current parliamentary session. According to the government, the key elements of the Bill include: (a) strengthening the requirements to publish an annual modern slavery statement to set out steps taken to prevent modern slavery in their operations and supply chains; (b) making the reporting areas to be covered in modern slavery statements mandatory; (c) requiring organisations to publish their statements on a government-run registry; and, (d) introducing civil penalties for organisations that do not comply with the requirements. To date the Bill still hasn’t seen the light of day and it isn’t currently known when this Bill might be introduced;
• Human Trafficking (Child Protection) Bill – this is a Bill to make provision for the creation of secure safe houses for children that have been subject to human trafficking, which is currently at the first reading stage in the House of Commons;
• Human Trafficking (Sentencing) Bill – this is a Bill to make provision for penalties for human trafficking offences, which is currently at the first reading stage in the House of Commons;
• Independent Anti-Slavery Commissioner (Appointment by Parliament) Bill – this is a Bill to make provision for the appointment by Parliament of the Independent Anti-slavery Commissioner if the post is vacant for three months or more, which is currently at the second reading stage in the House of Commons. It should be noted that whilst the previous Independent Anti-Slavery Commissioner’s term of office came to an end in April 2022 the post of Independent Anti-slavery Commissioner currently still remains vacant.

EU developments

The following is where things currently stand in the EU:

• Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 – in February 2022 the European Commission put forward a draft directive to set up a corporate sustainability due diligence duty on large companies operating in the EU. Under this duty, companies will be required to undertake due diligence checks of their supply chains, along with their own operations and those of their subsidiaries, in order to identify actual and potential adverse impacts of their activities on both human rights and the environment. Identified potential impacts will need to be prevented or mitigated, and identified actual impacts will need to be minimized or stopped. Businesses will have to conduct human rights and environmental due diligence, mainly by carrying out the following actions: (a) integrating due diligence into their policies; (b) identifying actual or potential adverse impacts; (c) preventing and mitigating potential adverse impacts, and bringing actual adverse impacts to an end and minimizing their extent; (d) establishing and maintaining a complaints procedure; and, (e) monitoring the effectiveness of their due diligence policy and measures. Businesses will be liable for damages for compliance failure under certain circumstances and directors will directly have certain duties and responsibilities. In December 2022 the Council of the EU (comprised of national EU country ministers and which negotiates and adopts EU laws) adopted its negotiating position on the proposed directive and also issued a slightly revised version of the proposed directive. This version of the proposed directive now goes before the European Parliament;
• Proposal for a Regulation of the European Parliament and of the Council on prohibiting products made with forced labour on the Union market – in September 2022 the European Commission put forward a draft regulation under which organisations will be prohibited from placing and making available on the EU market or exporting from the EU market products made with forced labour (as defined by the ILO). The aim of the proposed regulation is not to target specific countries, companies or industries, but instead to ban the selling of forced labour goods in the EU, irrespective of the source. The proposed regulation therefore covers all products made available within the EU market, meaning both products made in the EU for domestic consumption and for export, as well as imported goods. A “product” means any product that can be valued in money and is capable of forming the subject of commercial transactions, whether it is extracted, harvested, produced or manufactured, including working or processing related to a product at any stage of its supply chain. All industry sectors are covered under the proposed regulation. Governmental authorities in EU countries will be empowered to undertake investigations to determine whether organisations have flouted the forced labour product ban. The proposed regulation focuses on products, irrespective of the size of the organisations involved, but, the particular situation of SMEs has however been taken into account both in the design and enforcement of the proposed regulation. It is believed that the proposed regulation is currently before the Council of the EU (comprised of national EU country ministers and which negotiates and adopts EU laws).

What are the takeaways?

Organizations are encouraged to continue to watch this space for further developments and start planning resources to deal with the key legislative proposals set out above for when these proposals are eventually adopted.

What can be done in any event?

Even if your business doesn’t meet the annual turnover of £36 million requiring the business to publish annually publish a slavery statement demonstrating what the business is doing to ensure that there is no slavery or human trafficking in the business or the supply chain it should still consider publishing such a statement because modern slavery/forced labour/ESG/supply chain due diligence is now an entrenched feature of the compliance landscape. In addition, there may be other reasons to publish a statement, including the following:

• It could be a requirement of competitive tendering;
• For corporate social responsibility reasons;
• As an employer the business has a responsibility to ensure its employees and colleagues are safeguarded;
• It’s a great way to demonstrate that the business is protecting its workers;
• It can help protect and enhance the business’ reputation and brand;
• It could help protect and grow the business’ customer base – customers are increasingly seek out businesses with higher ethical standards;
• It may improve investor confidence in the business;
• It may lead to greater staff retention and loyalty based on values and respect; and,
• It may help develop more responsive, stable and innovative supply chains.

Compliance teams also need to be on the constant lookout for and train staff to recognise the signs of forced labour or modern slavery, including:

• The vulnerability of some workers;
• Threats, coercion, deception and physical punishment carried out against workers;
• Working and living conditions;
• High recruitment fees;
• Withholding of wages;
• Salary deductions;
• Confiscation of documents;
• Absence of work permits;
• Absence of regular employment contracts; and,
• Limitations to freedom of movement.

See our film about spotting the signs of modern slavery here https://www.corderycompliance.com/spotting-the-signs-of-modern-slavery/.

Cordery’s Modern Slavery Action helps organizations meet their modern slavery reporting requirements for a fixed fee.  There are more details here https://www.corderycompliance.com/solutions/modern-slavery-action/.

Resources

We write about modern slavery/ESG/supply chain due diligence and compliance issues here https://www.corderycompliance.com/category/modern-slavery-supply-chain-management/.

Recent modern slavery articles that we have written include the following:

• Litigation to Impose UK Ban on Xinjiang Products Fails https://www.corderycompliance.com/category/modern-slavery-supply-chain-management/;
• UK Modern Slavery Update – Reforms Finally On The Way? https://www.corderycompliance.com/uk-modern-slavery-update-3-reforms/;
• The Financial Reporting Council/UK Anti-Slavery Commissioner/Lancaster University report to prompt boardrooms to do more to eradicate modern slavery https://www.corderycompliance.com/uk-modern-slavery-update/;
• The proposed EU rules about Human Rights & Environmental Adverse Impacts Supply-Chain Due Diligence https://www.corderycompliance.com/eu-hr-eai-and-supply-chain-dd/;
• Greenwashing https://www.corderycompliance.com/greenwashing-power-modernslavery-esg/;
• The EU Proposed Forced Labour Products Ban https://www.corderycompliance.com/eu-labour-products-ban-1/;
• The EU’s Forced Labour Guidance https://www.corderycompliance.com/eu-modern-slavery-guidance/; and,
• Previous UK plans to overhaul the UK modern slavery compliance regime https://www.corderycompliance.com/uk-modern-slavery-compliance-rules-draft-amends/.

For more information please contact André Bywater or Jonathan Armstrong who are commercial lawyers with Cordery in London where their focus is on compliance issues.

Jonathan Armstrong, Cordery, Lexis House, 30   Farringdon Street, London, EC4A 4HH		André Bywater, Cordery, Lexis House, 30             Farringdon Street, London, EC4A 4HH
Office: +44 (0)207 075 1784		Office: +44 (0)207 075 1785
Jonathan.armstrong@corderycompliance.com		Andre.bywater@corderycompliance.com