Introduction
The following research focuses specifically on the legislation that has been developed in the UK and the European Union [EU] to ensure that companies are meeting minimum labour and human rights standards within their operations and supply chains. Until recently, much of the work done by companies in the UK and the EU on labour and human rights has been based on voluntary codes of practice. Some companies have adopted the Ethical Trading Initiative (ETI) Base Code to audit their suppliers. Others have adopted the United Nations Guiding Principles (UNGP) and tried to embed wider sustainability programmes, but as stand-alone operators, it is difficult for individual companies to have a meaningful impact. The voluntary approach has been uncoordinated and often piecemeal across different sectors. On a global scale companies and governments have been unable to effectively address some of the most challenging issues we face in supply chains around forced labour, labour migration, deforestation and climate change.
Some countries consider that the EU has been too slow to respond to the issues that we see in supply chains and have created their own legislation on these issues (UK, France, Germany and the Netherlands). The report below gives an outline of the labour and human rights legal (or voluntary) approaches that currently exist in the UK and EU for companies to address labour and human rights in their direct operations and their supply chains. At the end, is an outline of the UNGP requirements that companies are adopting.
International Labour Organization [ILO] Labour and Human Rights Standards applied by the food sector
Most UK retailers and food companies have adopted voluntary standards such as the United Nations Guiding Principles (UNGP) on Human Rights. Within this context, the Ethical Trading Initiative (ETI) Base Code is a labour and human rights standard based on ILO principles that are applied around the globe. Social auditors use the ETI base code alongside local legislation to ensure the rights of individuals are respected in the workplace. Any first-tier supplier operating in a high risk industry (such as agriculture) is required to undergo a social (SMETA) audit against the ETI standard. In the same way, any suppliers (second tier) used for the Co-op, Marks & Spencer and Tesco supply chains also have to be audited against this standard. The expectation is that all tiers of the supply chain in high risk areas will be checked. The ETI base code covers the following provisions:
- Employment as freely chosen;
- Freedom of association and the right to collective bargaining (trade union representation);
- Health and safety;
- Child labour and young workers;
- Living wage and benefits;
- Hours of work;
- Discrimination;
- Regular employment;
- Discipline and harsh treatment.
UK Legislation on Labour and Human Rights
In 2015, the introduction of the UK Modern Slavery Act (MSA) made it a requirement for companies to report on what they were doing to address modern slavery (and labour exploitation) in their direct operations and in their supply chains. The legislation applies to all companies with a turnover in excess of £36 million but automatically captures the smaller companies feeding into supply chains. It is not uncommon for smaller fresh food producers to be asked, during an onboarding process, what mechanisms they have in place to ensure compliance with the MSA.
The legislation requires transparency throughout the supply chain as a key requirement. The statement is referred to as Section 54 after the section of the Act that imposes the requirement.
Key elements for initial compliance with the MSA include the annual production of a public slavery and human trafficking statement, requirements to ensure compliance by suppliers and a due diligence process to ensure such compliance and a robust follow-up. Unhelpfully, until recently the government has stated they only propose to issue non-prescriptive guidance on the statement’s contents even though false statements can carry criminal sanctions. Research by the ETI partner, Ergon, has criticised the detail provided by companies in their statements. The key issues raised are that when it comes to reporting:
- The majority of companies do not go much beyond setting out broad commitments to ensure there is no modern slavery in the supply chain, identified as a weakness in compliance.
- Few describe the process of risk assessment related to modern slavery and fewer still mention outcomes, including identifying high risk supply chains or geographies. This is a weakness in the reporting framework.
- Reporting on KPIs to monitor effectiveness is the least well covered area in current statements, again a weakness when nongovernmental organisations [NGOs] review it.
There is currently a Private Members’ Bill, introduced at the House of Lords on 15 June 2021, which proposes various amendments to the MSA, the most significant of which are: to make it a criminal offence to supply a false modern slavery and human trafficking statement; to make it a criminal offence for companies to continue to use supply chains which fail to demonstrate minimum standards of transparency; and to improve standards of transparency in supply chains in relation to modern slavery and human trafficking. This is very much in line with trends across the EU to increase the transparency of organisations on labour and human rights which are now being publicly reported.
Please note that this overview is not comprehensive, and those interested in the detail of any part of the frameworks discussed will need to consult the appropriate regulations and check that they have not changed since the review was completed. Part 2 of Cristina’s review of Labour and Human Rights Regulatory Frameworks, looking at those in the EU, will be available next week.