Ask Nike. One of the biggest threats to a retailer's reputation is an allegation of involvement in slavery, human trafficking, or child labor. In the 1990’s, the Portland-based sportswear giant was plagued with reports that it was employing child labor and sweatshop conditions within its supply chain to that point that it served to tarnish the company's image and effect its bottom line sales. The company was forced to spend the next decade cleaning up its act in order to hold on to consumers.
Nike took these hits for its nefarious labor practices long before consumers were readily connecting with and talking about brands on social media. Fast forward to 2017 and with the rise of digital media and social media, consumers are demanding that fashion brands and retailers be transparent in terms of their supply chains and in many jurisdictions, the law requires it, as well.
In the United Kingdom, the Modern Slavery Act of 2015 requires commercial entities that have a global turnover above £36 million ($47.18 million) to publicly file an annual slavery and trafficking statement, highlighting what steps (if any) they are taking to combat trafficking and slavery in their operations and supply chains.
In the U.S., California passed the Transparency in Supply Chains Act in January 2012, thereby requiring retailers and manufacturers with global revenues that exceed $100 million and do business in California to publicly disclose the degree, if any, to which they are addressing forced labor and human trafficking in their systems of supply.
Two years later, the Federal Business Supply Chain Transparency on Trafficking and Slavery Bill was introduced to the House of Representatives. If passed (and to date it has not), the bill would require all companies with worldwide annual sales exceeding $100 million, and which are currently required to file annual reports with the Securities and Exchange Commission, are to disclose what measures, if any, they have taken to identify and address conditions of forced labor, slavery, human trafficking and child labor within their supply chains, either in the US or abroad.
Laws Aside, It’s Just Good Business
Given consumers’ increasing interest in the supply chains of their favorite brands and with the potential damages that could come about as a result of ties to slavery, human trafficking, or child labor, companies should – regardless of whether they are legally obligated to or not – should constantly be assessing and identifying slavery and trafficking risks in their operations and supply chains, and be prioritizing those risks for further investigation and/or action.
The following are a few practical steps retailers and fashion brands can take to ensure their supply chains are slavery-free.
1. Before entering into a supply agreement or contract, brands/retailers should exercise due diligence and require the supplier to provide information necessary to establish whether or not it (or any of its sub-contractors and sub-suppliers) are involved in misconduct.
2. Use the contract itself to legally require the supplier, in performing its obligations under the agreement, to comply with an anti-slavery policy and with all applicable anti-slavery and human trafficking laws, statutes, regulations and codes in force from time to time (including the Modern Slavery Act), and also require the supplier to include similar provisions in its contracts with its sub-contractors and sub-suppliers.
3. The contract should also include terms to prevent the supplier from sub-contracting or sub-supplying without its written consent, thereby giving the retailer the opportunity to vet the third party and veto the engagement if necessary; and it should require the supplier to maintain documentary evidence of the age of each of its employees to ensure that minimum legal age requirements are being met.
4. Diligent brands/retailers should frequently visit and inspect its suppliers to ensure that it is contracting with responsible entities.
Because brands/retailers may inadvertently become involved if malpractice claims are risen in connection with their supply chain, turning a blind eye or failing to take active steps to prevent slavery will not be sufficient in the eyes of the law (or consumers).
* This article was written by Nicola Conway, a Trainee Solicitor at Bryan Cave in London, with contributions from TFL.