Modern Slavery In Company Operation Exploitation: And Supply Chains

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MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSFacilitatingModern Slavery inExploitation:CompanyOperationand Supply Chains:Mandatory transparency, mandatory duediligence and public procurement due diligence2017 UpdateSeptember2017

This report was written by the Business and Human Rights Resource Centre (BHRRC) and commissioned by the International TradeUnion Confederation (ITUC) with support from Friedrich Ebert StiftungTo find out more visit our websites:ITUC: www.ituc-csi.orgBHRRC: www.business-humanrights.orgCover photo: Ezzeldeen Al-Natour, BHRRC Jordan/Lebanon Representative & Researcher

MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSTable of ContentsFOREWORD . 1EXECUTIVE SUMMARY. 3I. INTRODUCTION . 7II. MANDATORY TRANSPARENCY . 8Impacted companies . 9Compliance requirements . 9Substance of disclosures and limitations . 9Annual reporting . 10Monitoring and Enforcement . 10Guidance . 12Extraterritoriality . 12The Laws in Action . 13III. MANDATORY DUE DILIGENCE . 16Due diligence standard . 17Enforcement and sanctions . 18Global Supply Chain and Extraterritoriality . 19IV. PUBLIC PROCUREMENT . 21Disclosures . 21Social clauses . 22Mandatory exclusions . 22Due diligence . 22V. PROCESS FOR DEVELOPMENT OF MODERN SLAVERY PROVISIONS . 24Key recommended elements of a common Modern Slavery law . 24Content of Provisions to Combat Modern Slavery .25CONCLUSION . 26

1MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSFOREWORDSharan Burrow, General SecretaryInternational Trade Union ConfederationModern slavery is everywhere. From the constructionof FIFA World Cup stadiums in Qatar to the cottonfarms of Uzbekistan, from cattle ranches in Paraguay tofisheries in Thailand and the Philippines to agriculturein Italy, from sweatshops in Brazil and Argentina toberry pickers in Sweden. The production chains ofclothes, food and services consumed globally aretainted with forced labour.The world is three times richer in terms of global GDPthan it was 30 years ago yet we have historic levelsof inequality. Eighty percent of the world’s people saythat the minimum wage is not enough to live on, workis more insecure with a predominance of short termcontracts or other non-standard forms of employmentand both informal work and modern slavery are notonly growing but increasingly prevalent in the supplychains of large corporations.In the global private economy, the ILO calculatesforced labour generates 150 billion each year but itcould be even higher. In all countries, unscrupulousemployers and recruiters are increasingly exploitinggaps in international labour and migration law andenforcement. After drugs and arms, human traffickingis now the world’s third biggest crime business.Cleaning it up is possible.No corporation or investor would blindly sign acontract, enter into a merger or risk large sums ofcapital without doing due diligence. Assessing riskis a corner stone of successful business practice andcorporations expect the rule of law to protect theirinterests.Yet when it comes to the very people companies relyon to produce their profits, few respect the rights ofor take responsibility for decent work for workers.Up to 94 percent of the global workforce of 50major corporations is a hidden workforce becauseresponsibility has been simply outsourced manytimes over.Due diligence and transparency is the key to endingmodern slavery in supply chains. Where corporationstake responsibility for due diligence and consequentlymake their supply chains transparent then it is possibleto establish grievance procedures that can facilitateremedy of any violations of rights at work from forcedlabour to paying below the minimum wage.The Business Human Rights Resource Centre report,Modern Slavery in Company Operations and SupplyChains: Mandatory Transparency, Mandatory DueDiligence, and Public Procurement Due Diligence,commissioned by the International Trade UnionConfederation with support from Friedrich EbertStiftung gives an insight into the growing body of lawand practice from international standards to emergingnational legislation.The critical ingredient to end slavery is political will.G20 Labour Ministers accept that the global economycannot be built on oppression and rights violations,now we need government leaders to stare downcorporate greed. Everybody’s sons and daughtersmust be afforded the same rights, wages and decentwork we want for our own.

MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINS2FOREWORDPhil Bloomer, Executive DirectorBusiness and Human Rights Resource CentreWe live in disturbing times. Public trust in globalmarkets is draining away. The vacuum is being filledby alternatives, including chauvinist nationalisms.Mark Carney, Governor of the Bank of England,recently said “Citizens in rich and poorer economiesare facing heightened uncertainty and stalledor declining prosperity, and lamenting a loss ofcontrol Rather than a new golden era, globalisationis associated with low wages, insecure employment,stateless corporations and striking inequalities.”Those conditions are epitomised by the prevalenceof modern slavery in almost every global supplychain. The rise in human trafficking, forced labour,and abusive child labour is a fundamental challengeto the reputation of governments and business. Theirelimination is an essential first step if global marketsare to deliver shared prosperity and shared security,and recover credibility with electorates.A welcome unity may be emerging between diversegovernments that they must come together to takeaction. The G20 leaders in June 2017 committed to“eliminate child labour by 2025, human traffickingand all forms of modern slavery” and emphasised that“fair and decent wages as well as social dialogue areother key components of sustainable and inclusiveglobal supply chains.”No reputable company wants the scurge of forcedlabour in its supply chain. No reputable governmentwants criminals trafficking workers into inhumanconditions in its territory. All working people wantlives of dignity, respect and freedom. And yet theproblem of modern slavery is growing. This paperdemonstrates that this is far from inevitable. The paperhighlights the successful, but disparate, initiatives bygovernments. It shows that, if brought together, andapplied internationally, these initiatives would forma powerful global force to combat modern slavery.The paper sets out a clear pathway for governmentsto deliver harmonised legislation, regulation, andcorporate incentives. Together they would providean international level playing field for business ofmandatory transparency, mandatory due diligence,and public procurement incentives.Responsible governments and businesses are comingto realise they must now act to humanise markets,or expect further public disenchantment. Acting onmodern slavery is an essential start to making marketswork for all.

3 MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSEXECUTIVE SUMMARYThere is no exact data on the prevalence of modernslavery, a term used to encompass exploitative practices including forced labour, bonded labour, humantrafficking and child labour. The 2017 Global Estimates of Modern Slavery and Child Labour foundin the past five years, 89 million people experiencedsome form of modern slavery. Of these, 82.7 millionwere victims of forced labour, including trafficking,largely in the private economy. Modern slavery is pervasive in corporate supply chains in all regions of theworld and amounts to an estimated 150 billion of illicit profits a year. Global conditions exist that help create a workforce that is vulnerable to these exploitativepractices: weak legal frameworks that fail to protectand uphold labour standards; business operationsdriven by the search for ever-lower labour costs; andthe increasingly complex nature of supply chains.This paper sets out what leading governments arealready doing to insist global business does more toeradicate modern slavery. It draws from this experience to set out how these uncoordinated actionscould become a robust, and harmonised internationalstandard for national legislations. Acting in concert,governments would have far greater impact on modern slavery and workers’ rights, and raise the floor ofminimum corporate behaviour. Acting together, governments would also avoid a ‘spaghetti soup’ of incoherent national legislations, and instead create theinternational predictability that global business seeks.The fight to end modern slavery in all its forms hasbecome a diverse global movement with an increasing number of successes. International and regionalorganisations have played an important role in settingstandards. The UN 2030 Agenda for SustainableDevelopment features 17 Sustainable DevelopmentGoals (SDGs), three of which relate to various forms ofmodern slavery: SDG 5.21 SDG 8.72 and SDG 16.23. After the adoption of the SDGs, Alliance 8.7 was formed,a global partnership committed to assist UN member1 It targets the elimination of all forms of violence against all women and girls in the public and privatespheres, including trafficking and sexual and other types of exploitation2 It has as a target to take immediate and effective measures to eradicate forced labour, end modernslavery and human trafficking and secure the prohibition and elimination of the worst forms of childlabour, and to end child labour in all its forms by 20253 It has as a target to end trafficking of childrenstates to achieve SDG 8.7. The ILO functions as thesecretariat.The ILO Protocol to the Forced Labour Conventionof 1930 (No. 29) offers governments specific guidance on measures to be taken against human trafficking for the purposes of forced or compulsory labour.Ratifying the Protocol will bind states under international law to consult with employers and workers todevelop national laws or regulations to prevent andeliminate forced labour, provide victims with protection and access to appropriate and effective remediesand sanction perpetrators. In 2014, ITUC Congress inBerlin confirmed the elimination of modern slavery asone of the three ‘frontline’ campaigns of the globaltrade union movement and promoted broad ratification of the ILO Protocol.4The ILO Forced Labour (Supplementary Measures)Recommendation, 2014 (No. 203), a supplement tothe ILO Protocol, encourages states to ensure thatcompanies address the risk of forced labour beingused in their operations or in operations to whichthey are directly linked (for example, by their suppliers). The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy,(MNE Declaration), like the ILO Protocol, states governments should develop national policies and plansof action to prevent and eliminate forced and child labour in consultation with employers’ and workers’ organizations, and is also aimed at both multi-nationalsand national companies.The Organization for Security and Co-operation inEurope’s (OSCE) established the Office of the Special Representative and Co-ordinator for CombatingTrafficking in Human Beings. This Office is developingflexible model guidelines for governments of OSCEStates on preventing trafficking in human beings insupply chains, with a focus on government procurement and transparency practices. The guidelines promote the harmonization of policies to prevent humantrafficking in supply chains, leveraging efforts alreadyunderway. It is intended that these guidelines serveas the basis for a model law to be taken up at the4 Eighteen countries have ratified the Protocol as of June 2017 – the goal is to have 50 ratificationsby the end of 2018: http://www.ilo.org/dyn/normlex/en/f?p 1000:11300:0::NO:11300:P11300 INSTRUMENT ID:3174672.

MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINS 4global level through the Alliance 8.7.Most recently, the G20 Leader’s Declaration in June2017 states: “We will take immediate and effective measures to eliminate child labour by 2025, forced labour,human trafficking and all forms of modern slavery.”Indeed, new legislation and public policy approaches to eradicate modern slavery in business operations and supply chains are gaining momentum in anumber of countries, including in the US, the UK, theNetherlands, France and Australia. Trade unions, civilsociety organizations and leading companies are encouraging governments to build on this early momentum. The danger is that this uncoordinated approachcould lead to a collection of laws with inconsistentrequirements on companies across jurisdictions. Furthermore, laws are currently divergent on the issuesof access to remedy for victims and the ability to pursue legal action against corporate perpetrators.The ILO Protocol calls on member states to cooperatewith each other to ensure the prevention and elimination of all forms of forced labour. Governments shouldadopt national laws that comply with the provisionsset forth in the Protocol, including access to remedy, and to cooperate and coordinate efforts to setcommon minimum and consistent requirements forcompanies across jurisdictions. The ILO Protocol andthe MNE Declaration provide a robust framework forstates adopting legislation that requires companiesto ensure that their supply chain is free from modernslavery.This report reviews existing or emerging legislationthat addresses modern slavery in companies’ operations and supply chains. It focuses on three relatedareas of legislation: mandatory transparency; mandatory due diligence; and public procurement.Mandatory TransparencyMandatory transparency legislation requires companies to disclose what actions they are taking to address modern slavery in their operations and supplychains. The two leading pieces of mandatory transparency legislation, so far, are the California Transparency in Supply Chains Act and the UK Modern Slavery Act. Both require companies above certain globalrevenues to publicly disclose the actions, if any, theyare taking to address modern slavery in their operations and supply chains. Both pieces of legislationseek to increase transparency around these issues inthe hope that pressure from consumers, investors andadvocates will encourage companies to take more ro-bust action. A criticism of both legislations is that theydo not require companies to take any steps to remedyrisks that have been identified. In fact, companies cancomply by simply stating they have taken no steps toaddress modern slavery in their operations and supply chains.Mandatory Due DiligenceA range of existing international standards emphasise the role of due diligence in identifying and preventing risks to human rights, including the risk ofmodern slavery. The UNGPs state companies shouldhave in place ‘a human rights due diligence processto identify, prevent, mitigate and account for how acompany addresses their impacts on human rights’.5Article 2(e) of the ILO Protocol calls on member statesto take measures ‘supporting due diligence by boththe public and private sectors to prevent and respondto risks of forced or compulsory labour.’ Mandatorydue diligence laws put the onus on companies todemonstrate that they are taking all necessary measures to identify, prevent and mitigate incidences ofmodern slavery in their operations and supply chains.Some laws also include provisions that allow civil andcriminal proceedings to be filed against companiesthat fail to carry out the required due diligence.The French Duty of Vigilance Law, for example, requires companies of a certain size to have in placedue diligence plans identify and mitigate the occurrence of violations of human rights and fundamentalfreedoms. The French law specifies the content ofthe due diligence plan and requires companies mustpublish them annually. The Dutch Child Labour DueDiligence Law is more targeted than the French law inthat it requires companies to examine whether thereis a reasonable suspicion that the goods or serviceshave been produced with the use of child labour. If so,the company must develop and carry out an actionplan to combat the use of child labour. The companymust issue a due diligence statement on the investigation and plan of action. The US Trade Facilitation andTrade Enforcement Act requires companies importingto conduct supply chain due diligence to prove theirproducts were not mined, produced or manufacturedwith forced labour.Pressure is also mounting on European governmentsto develop EU-wide legislation on mandatory due diligence. In 2015, members of the European Parliamentadopted a motion calling for a resolution on mandatory human rights due diligence for companies. In 2016,5 UN Guiding Principles on business and human rights, principle 15(b): gPrinciplesBusinessHR EN.pdf

5 MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSeight national parliaments launched a ‘green card’6initiative at the EU level calling for a human rights dutyof care towards individuals and communities from EUbased companies whose human rights and local environment are affected by their activities.Public ProcurementGiven the scale of public spending in the global economy, public procurement laws can play an importantrole in the prohibition of modern slavery. Public procurement globally accounts for 1000 billion (approximately 910 billion) per year. The UK governmentawards 45 billion (representing approximately 3% ofthe UK’s GDP) worth of central government contractsto private firms each year, some of which operate inhigh-risk sectors. The labour clauses to be insertedin public contracts according to Article 2(1) ILO Convention concerning Labour Clauses in Public Contracts of 1949 (No. 94) impose on the private party acontractual obligation to ensure equal treatment to itsworkers to those doing similar work in the same typeof industry.Some countries have succeeded in integrating modern slavery into public procurement practices, such asthe US with the Federal Acquisition Regulation whichprohibits the government from awarding a contractunless the company certifies that they will not sell aproduct suspected of being produced with forced orchild labour, or that they have made a good-faith effort to determine whether forced or child labour wasused. A recent amendment to the regulation requiresgovernment contractors to certify that they and theirsubcontractors are not engaged in human traffickingactivities.At the EU level, the 2014 Directive on Procurementthe Directive requires member states to adopt measures to ensure that, in the performance of public contracts, suppliers comply with applicable obligations inthe fields of environmental, social, and labour law established by, among others, international labour lawprovisions such as the ILO Core Conventions. The UKPublic Contracts Regulations, which implement theEU Procurement Directive, excludes a bidder from further participation in procurement if it has been foundguilty of any offense under the MSA.Model modern slavery legislationIn 2014, governments overwhelmingly supported theadoption of a new ILO Protocol to fight modern slavery. The ILO Protocol and MNE declaration, togetherwith the UNGPs and the OECD Guidelines, providegovernment with clear international standards to address modern slavery in corporate operations andsupply chains. This global momentum is also a chancefor trade unions, broader civil society, and responsiblebusiness to call on governments to deliver on theirinternational commitments. Governments should nowratify the ILO Protocol and develop strong nationalaction plans to eliminate forced labour in consultation with social partners and other governments. Theresult should be the adoption of national legislationthat incorporates mandatory transparency, mandatorydue diligence and public procurement provisions inharmonised national legislation across key markets.Legislation should also provide victims with accessto remedy and rehabilitation to help end exploitationand abuse. This concerted action will mutually reinforce governments’ drive to eliminate forced labour,empower workers to act, protect victims, and givebusiness the common and predictable regulatory environments they seek.Process for Development of Provisions:Learning lessons from the regulatory experience tocombat modern slavery so far, there is a clear processand structure for effective action which builds on successful initiatives so far.Governments can:-Consultation with employers and workers, aswell as engagement with trade unions and civil society will ensure development of effectivegovernment measures to combat modern slavery.-Cooperate and coordinate with internationalcounterparts:Cooperation and exchange of information between and among governments’ representatives in combating modern slavery is essentialgiven its global and cross-border dimensions.6 The “green card” is a form of enhanced political dialogue through which EU national parliamentscan jointly propose to the European Commission new legislative or non-legislative initiatives, orchanges to existing legislation.Create effective measures through consultationwith key actors:Appoint national focal points:The MNE Declaration encourages governments,employers and workers to appoint national focal points on a tripartite basis to promote the

MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINS 6-use of the Declaration in the national context.Model public procurement provisions:Provide appropriate guidance: Mandatory due diligence reporting obligations for relevant public bodies; Inclusion of modern slavery provisions in social clauses of public procurement; Include mandatory exclusion provisions for certainsuppliers.Governments have the responsibility to givebusinesses clear guidance on how to complywith national laws that establish obligations forcompanies to eliminate modern slavery in theiroperations and supply chains.Content of Provisions to Combat ModernSlavery:The regulatory provisions which model legislationwould include are:Model mandatory transparency provisions: Disclosure of instances of modern slavery in operations and supply chains; Application to large and medium-sized companiesabove a certain revenue threshold; Have extra-territorial reach regardless of whereheadquarters is located; Require appropriate-level approval and sign-offand prominent disclosure of the statement on thecompany’s website; Require annual statements; Provide monitoring and enforcement mechanismsand impose sanctions where appropriate; Provide clear official guidance prior to the law taking effect.Model mandatory due diligence provisions: Refer to the human rights due diligence standards setforth in the ILO Protocol, the UNGPs and the OECDGuidelines; Require large companies to publish an effective duediligence plan; Provide for corporate liability where appropriate; Allow individuals, trade unions and NGOs to file complaints in case of company non-compliance; Apply mandatory due diligence to companies’ activities abroad, sub-contractors and suppliers; Seizure of goods if a company fails to demonstratedue diligence from high-risk regions; Enable victims of modern slavery to access civil andcriminal remedy.

7 MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINSI. INTRODUCTIONThe term modern slavery encompasses various forms of severe human rights abuses, including human trafficking, slavery, servitude,forced and bonded labour, and child labour. Theprinciple that no one shall be held in slavery isembedded in international human rights law.7Slavery, forced labour, and human trafficking are alsocriminal offences under the national laws of mostcountries. The Sustainable Development Goal 8commits the international community to ‘take immediate and effective measures to eradicate forced labour, end modern day slavery and human trafficking’.The 2014 ILO Protocol to the Forced Labour Convention is now the new international legal standard onmodern slavery and offers governments guidance oneffective measures for its elimination. G20 Leadershave also recently committed ‘to take immediate andeffective measures to eliminate child labour by 2025,forced labour, human trafficking and all forms of modern slavery.’States have obligations under international law to respect, protect and fulfil human rights, including theright to be free from slavery. States’ duties includethe obligation to protect people from violations by others, including business enterprises. Global standardssuch as the UN Guiding Principles on Business andHuman Rights (UNGPs) and the OECD Guidelinesfor Multinational Enterprises (OECD Guidelines) setup expectations for businesses to respect all internationally recognised human rights, including rightsenshrined in the ILO Declaration on FundamentalPrinciples and Rights at Work. The UNGPs reinforcethe need for states to enact national laws that effectively protect against business involvement in modernslavery.7 This includes the 1948 Universal Declaration of Human Rights and the 1966 International Covenanton Civil and Political Rights. The 1926 Convention to Suppress the Slave Trade and Slavery and the1930 ILO Forced Labour Convention confirmed the international community’s commitment to abolishall forms of slavery and to suppress the use of forced or compulsory labour. In 2014, the ILO adoptedthe Protocol to the Forced Labour Convention: http://www.ilo.org/dyn/normlex/en/f?p NORMLEXPUB:12100:0::NO::P12100 INSTRUMENT ID:3174672, setting out new obligations to prevent forcedlabour, to protect victims, and to provide access to remedyThe UK, the US, European countries and Australiahave acted on their duty to protect by adopting orproposing legislation to address modern slavery inbusiness operations and supply chains. This legislation falls into three categories: 1) mandatory transparency 2) mandatory due diligence and 3) public procurement.The next sections review and offer recommendationson improving these three areas of law. The reportproposes model modern slavery legislation based onthe stronger elements of the various existing and proposed national laws, within the framework of the ILOProtocol and Recommendation, the MNE Declarationand other global standards.

MODERN SLAVERY IN COMPANY OPERATIONS AND SUPPLY CHAINS 82. MANDATORY TRANSPARENCYKey informationMandatory transparency allows consumers, employees and investors to know what steps a company istaking to tackle

trafficking and child labour. The 2017 Global Esti-mates of Modern Slavery and Child Labour found in the past five years, 89 million people experienced some form of modern slavery. Of these, 82.7 million were victims of forced labour, including trafficking, largely in the private economy. Modern slavery is per-

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