Setting the Stage – Myths and Misunderstandings of Modern Slavery and Business
This is the first in a series of blogs dealing with modern slavery where we explore how companies can get ahead of the curve of the quickly changing legal landscape by educating themselves on their connection to this issue. Seyfarth has been very active internationally in respect of the design of modern slavery transparency legislation since before the UK passed the groundbreaking Section 54 of the Modern Slavery Act. As an understanding of the nexus to basic employment, health and safety, corporate governance and host of other legal issues become clearer, stakeholders within companies will realize that, beyond compliance, they can create a competitive advantage that drives social impact, elevates their reputation, manages their reputational risk, and enhances engagement with employees and business partners.
Modern slavery (which includes human trafficking within its broader ambit) is a concept marching steadily into the mainstream consciousness of global society. However, there are still many misconceptions over what modern slavery is, how it can happen, the sheer scale of the issue and how it can present not only a social risk but a risk to reputation and profit of honorable businesses. In this blog we set the stage by clarifying some of the myths and misunderstandings of modern slavery in the business context.
What is Modern Slavery?
Most people are not sure what “modern slavery” or “human trafficking” fully mean. These terms are often associated with prostitution rings and sex trafficking. People then connect trafficking to stories similar to the movie Taken or to massage parlors that serve as a front for sex trafficking. This actually represents only a minority of the persons affected by this global crime.
While sex trafficking is one form of modern slavery, the term encapsulates the breadth of the many forms in which human trafficking can occur. Under international principles and laws, it covers, among other things, forced or compulsory labor, bonded labor, domestic servitude and child labor. We define it more simply as men, women and children who are either working against their will or working in circumstances that do not meet even minimum legal standards (if those standards exist). Our clients neither want to be associated with it nor want to inadvertently support it.
Modern slavery is a crime and a humanitarian issue that rivals the global arms and drug trades in breadth and profitability. It is illegal everywhere, but growing everywhere as is its detection. The commodity being sold is a human being who is preyed upon often because of vulnerability, which is not easy to identify. It is the fastest growing organized crime in the world and, after drugs, the second most profitable. The estimated illegal profits are upwards of USD $150 billion according to the International Labor Organization. Because this figure was based on a much lower estimate of affected people (21 million), nobody really knows how large the illegal profits actually are.
Of the International Labor Organization’s estimated 40.3 million trafficked human beings in the world, 81% of them are actually victims of labor trafficking, which is agnostic to gender or age, and the predominant aspect of modern slavery. The US Department of Labor has identified 148 goods from 76 countries that have been produced by child labor or forced labor, which information is publicly available.
What Can it Look Like in Business?
How, when and where modern slavery touches a business will vary. For example, the hospitality industry (hotels, restaurants and casinos), agriculture and retail would appear to have a closer and more personal or obvious connection to it than a tech company. However, there are commonalities. Every business sources materials, employs individuals and contracts with other businesses that do the same, creating some level of reputational human rights risk.
What many also do not realize is that modern slavery happens in the United States and other industrial nations. It’s not just a third world issue. Businesses get linked to it because of their supply chains and/or aspects of their own operations that may become complacent about the conditions that can facilitate labor trafficking. Nor do most realize how legal systems are starting to become aligned against it, or how existing US laws may apply to them in relation to this issue.
Labor trafficking can take different forms. These forms include “bonded labor” where employees are essentially working off a debt (including to a recruitment agency) that may not be legitimate; child or underage labor; labor in unsafe working or living conditions; or where the employee is forced to turn over identity papers to the “employer” making it impossible to leave. They all share the element of coercion.
What Should Companies Do or Start to Do?
Because modern slavery is a crime on many levels, responsibility for addressing it has traditionally been left to governments and law enforcement. Non-governmental organizations—local, regional, national and international—have been very active in creating awareness campaigns and developing programs for victim rescue and recovery. Unfortunately, the global landscape and response to this crime has been, and continues to be, fragmented.
Over several years now, there has been a shift in focus on the role and responsibility of business and business leadership to identify, report and remediate modern slavery in their own operations and those of their suppliers (both downstream and upstream). This focus is driven by the United Nations through its “Protect, Respect and Remedy” framework for governments and businesses in its Guiding Principles on Business and Human Rights that came out in 2011, followed by the UN Global Compact in 2011 (updated in 2014) and the UN’s Sustainable Development Goals in 2015.
National and regional governments are slowly starting to pass laws requiring the disclosure of modern slavery avoidance measures in a business’s operations and supply chain. To name a few, in 2012, California led the way with the California Transparency in Supply Chains Act, which the UK Parliament drew upon in passing Section 54 of the Modern Slavery Act in 2015. In addition, both the Australian Commonwealth and the state of New South Wales adopted similar disclosure laws in 2018. France required certain large companies to publish a “vigilance plan” designed to identify and address risks relating to human rights in its Duty of Vigilance Law in 2017. For some time now, the US government has imposed a strict human rights compliance regime for government contractors under the Federal Acquisition Regulations. Federal procurement law has a storied history of influencing the development of the wider American legal system.
Senior management sign-off is typically required under these disclosure regimes, and the public disclosure model is likely to be replicated in other jurisdictions that are looking to pass laws in this area. Even companies who are not subject to a law yet are voluntarily looking at ways to understand modern slavery because they may be asked to meet certain standards by their vendors or suppliers, or they are being rated for sustainability reasons and the ratings are premised, in part, on respect for global human rights.
Identifying and remediating human trafficking in business cannot be done by one department in an organization over a few-month implementation period. It also cannot be done by one company, no matter how big. It requires a different mindset. It requires a mindset that considers actions beyond compliance and a belief that when business can foster positive social impact through its operations and business relationships, profits will always be there.
In addition to a changing legal and conceptual landscape, consumers are demanding an elevated standard of ethics, conduct and transparency, while institutional and private investors are focusing on the impact of corporate ethics on the financial health and investor attractiveness of a company. The link between business and modern slavery is fundamentally about a company’s reputation, how it conducts business, how and when it manages reputational risk, and engagement with its business partners, employees, consumers, investors and local communities. Addressing this area is challenging, but it can also present opportunities for positive engagement with each of these parties. The first step for any business is awareness, education and understanding of its own and its industry’s connection to modern slavery.
There are many vanguard companies that have taken a deep look at developing their human rights position, assessing their human rights impacts and adopting systems for a human rights due diligence process. These companies include the likes of Nestle, GE, Johnson & Johnson, Wal-Mart and many others who are leading the way with elevated standards of commitment. They are demanding a level ethical playing field. Industry associations such as the Responsible Business Alliance, the Consumer Goods Forum, Better Cotton Initiative, and Ethical Trading Initiative, to name just a few, are also driving awareness, particularly of the fact that these issues cannot be effectively addressed in isolation, especially since. Addressing a topic like modern slavery requires coordinated industry and cross-industry responses and actions.
The forces of social media, investor and consumer ethical activism and the growing network of laws oriented to making supply chain transparency the price of market access will make it increasingly difficult for businesses to ignore the issue of modern slavery, whether or not they are subject to a law In their home jurisdiction.
In our next blog post, we will cover how this issue is foremost about engagement and accountability. Stay tuned for our next blog: The Company You Keep - Engagement and Reputational Risk.