A recent undercover investigation by British publication the Sunday Times shed light on the workings of Boohoo Group, the wildly successful fast fashion company known for the trendy garments and accessories, and inexpensive prices of its namesake brand, as well as PrettyLittleThing and Nasty Gal, which also fall under the Manchester-headquartered company’s ownership umbrella. Reports of subpar working conditions, a lack of personal protective equipment despite the continued spread of COVID-19, and pay that falls far below the national living wage in the United Kingdom has resulted in cries of modern slavery.
The Thomson Reuters Foundation reports that Britain, alone, is “home to at least 100,000 modern slaves, according to a new study, 10 times more than the country’s official estimate, as activists warned that as many as 90 percent of victims may be going undetected.” However, far from an isolated instance, “modern slavery has been found to exist in 167 countries,” with more than 45 million people globally being tied to the practice, which generates an estimated $150 billion annually in illicit profits, according to the International Labor Organization.
In light of the enduring harms tied to modern slavery, including in connection with garment, footwear, and accessories manufacturing, and given the mainstreaming of the movement pushing for sustainability and ethical production across industries, a handful of developed economies – such as the United States, namely, in California, the United Kingdom, France, Australia, and the Netherlands – have enacted legislation mandating certain businesses to ensure the respect of human rights across their entire supply chains. The advent of these relatively novel laws has precipitated an increasing emphasis on modern slavery compliance among a growing number of businesses internationally. Simultaneously, a push for even stricter compliance standard is gaining momentum.
The significance of the emerging modern slavery legislation is threefold. Firstly, it shines the light of public scrutiny on corporate supply chains and, in many instances, highlights the abuses that were previously swept under the carpet of corporate indifference. The legislation requires corporate management to pay specific attention, oftentimes for the very first time, to the risk of modern slavery occurring in their supply chains.
Secondly, enhanced supply chain transparency reduces the demand for products and services tainted with forced labor or human trafficking, and improves the quality of goods and services brought to end consumer. And finally, a growing number of companies will make use of the requirements of modern slavery laws as a springboard into better due diligence, self-regulation and implementation of more exhaustive models of corporate culture and conduct.
Importantly for businesses, human rights violations in corporate supply chains are an expanding area of scrutiny and reputational risk that all companies, not only global corporations, will be facing, if they are not facing them already. Company executives are encouraged to manage this risk proactively. Responding to the focus on modern slavery domestically and abroad, a growing number of companies in the jurisdictions where no supply chain transparency laws apply choose to voluntarily report their efforts in combatting modern slavery. Indeed, modern slavery statements on corporate websites, including on the websites of companies not affected by California, UK, French or Australian laws, are becoming increasingly ubiquitous.
With the foregoing in mind, here is a brief overview of modern slavery legislation in the U.S. (i.e., California), the UK, and France …
The California Transparency in Supply Chains Act
The California Transparency in Supply Chains Act (“TSCA”) was the first legal enactment of its kind designed to combat modern slavery. First signed into law in 2010 and effective beginning in 2012, the TSCA applies to retail sellers and manufacturers that do business in the state of California and whose annual gross revenue exceeds $100 million.
Qualifying companies are required to disclose information regarding their efforts to eradicate human trafficking and slavery within their supply chains on their websites or, if no website is maintained, by making written disclosure within 30 days of receiving consumer request for the information. The required disclosures concern five areas: verification of supply chains, conduct of audits to ensure supplier compliance, certification by suppliers, internal accountability for employees and contractors, provision of employee and management training.
Significantly, no company is required to implement specific measures to ensure that its product supply chains are free from modern slavery. Instead, the law mandates qualifying companies to make the required disclosures, even if they do little or take no action at all to safeguard their supply chains from slavery. If no action is taken, a company would be required to state that it takes no action.
The UK Modern Slavery Act
The UK Modern Slavery Act of 2015 (“MSA”) was broadly modeled after the TSCA. It applies to commercial organizations with an annual global turnover of at least £36 million that do business in the UK. Foreign companies doing business in the UK and foreign subsidiaries of UK companies producing goods and services sold or used in the UK are also required to comply.
In a manner similar to TSCA, MSA requires qualifying companies to prepare an annual statement of the steps taken to ensure slavery and human trafficking are absent from their operations and supply chains. According to guidance contained in the MSA, the type of information that may be included in the annual statement includes: its policies on slavery and human trafficking; details of the due diligence processes it undertakes in relation to its business and supply chains; the effectiveness in ensuring that slavery and human trafficking is not occurring in its business or supply chains; and training provided to staff.
Alternatively, the company must declare that no steps have been taken.
Notably, the requirements of both TSCA and MSA are not backed by any meaningful sanctions. Instead, the UK Government takes the view that the companies that fail to take action would face commercial pressure to do so, as reputational damage and competitive disadvantage could be significant.
At the same time, in creating the role of Independent Anti-Slavery Commissioner, the MSA has taken the effort of ensuring supply chain transparency a step farther. The Commissioner has a UK-wide remit to encourage good practice in the prevention, detection, investigation and prosecution of slavery. A recent public consultation reveals that the UK Government is looking to increase the Commissioner’s enforcement authority in the instances involving failure to comply with MSA. The increase in the enforcement authority could be combined with introduction of civil penalties.
The French Devoir de Vigilance Law
In February 2017, the National Assembly adopted the Law on Due Diligence of Corporations and Main Contractors, which applies to companies headquartered in France that employ at least 5,000 employees in the country, or at least 10,000 employees worldwide. It also applies to non-French companies that employ at least 5,000 employees in France.
Companies are fall within those bounds are required to publish and implement a vigilance plan to prevent serious violations of human rights, fundamental freedoms, the health and safety of people and the environment, and must also publish annual implementation reports.
In the first reading of the law, a penalty of up to €30 million ($34.10 million) was proposed for failure to comply. In a subsequent reading, however, the Constitutional Council rejected the penalty citing legal ambiguity surrounding phrases such as “fundamental freedoms.” Accordingly, the penalty was substituted with a formal notice procedure.
Vadim Chaban is of counsel at Eversheds Sutherland Bitāns, and specializes in commercial law and corporate governance. (Edits/additions courtesy of TFL)