Top companies slammed for “complacency” over slavery reporting

Some of the world’s top brands—including confectioners, jewellers, and cosmetics giants—are failing to disclose slavery and trafficking risks that might be present in their operations and supply chains, according to a report by a U.K.-based human rights campaign group.

The report from the CORE Coalition, called Risk Averse: Company Reporting on raw material and sector-specific risks under the Transparency in Supply Chains clause in the UK Modern Slavery Act 2015, suggests that—based on a sample of 50 statements—top companies are not providing enough detail, and are not being fully transparent, about known risks of modern slavery in their supply chains.

While some 45 of the 50 companies covered in the CORE report have published stand-alone statements, almost two-thirds of them do not make reference to specific risks of slavery and trafficking in their supply chains or sector. The statements were collated by human rights group the Business and Human Rights Resource Centre on its Modern Slavery Registry.

“The level of complacency from major companies, particularly those that trumpet their corporate social responsibility, is startling,” says CORE’s director Marilyn Croser. “Genuine transparency about the problems is needed, not just more PR.”

It is the first year that companies have had to formally report on slavery risks to their businesses and supply chains, and the result is decidedly mixed. The U.K.’s Home Office estimates that between 12,000 and 17,000 companies are covered by the U.K. Modern Slavery Act’s reporting requirement. To date, campaigners have found just over 3,200 statements have been made—meaning that around 14,000 companies have ignored their legal duty.

Under Section 54 of the United Kingdom’s Modern Slavery Act—which concerns transparency in supply chains—all companies with a turnover of over £36m (US$47m) must produce an annual statement outlining what steps they have taken (if any) to identify what slavery risks there could be within their businesses and supply chains, and what measures (if any) they have taken to remedy the problem. The legislation outlines a number of considerations that companies may wish to report, including information about the organisation’s policies and due diligence in relation to slavery and human trafficking (as well as their effectiveness). Companies are not obliged to report on these issues if they do not feel it is relevant, however, and it seems many have taken that approach.

“The level of complacency from major companies, particularly those that trumpet their corporate social responsibility, is startling. Genuine transparency about the problems is needed, not just more PR.”
Marilyn Croser, Director, CORE Coalition

Companies were required to publish a slavery and human trafficking statement by 30 September, and there is a legal duty for them to publish a link to the statement on their websites. Such statements must be approved by the board and signed by a director.

There are no sanctions for non-compliance, but the government, business groups, and human rights campaigners believe that a failure to act appropriately will cause companies greater reputational damage than a punitive fine ever could.

CORE examined statements from 25 companies that source raw materials known to be linked to labour exploitation, such as cocoa from West Africa, mined gold, mica from India, palm oil from Indonesia, and tea from Assam. It also examined statements made by another 25 companies that operate in sectors known to be prone to incidences of modern slavery. These include the hotels sector, clothing, footwear, and construction industries, service outsourcing, and even soccer’s Premier League.

The report found that several top cosmetics companies made no mention in their statements of child labour in mica supply chains. Mica is a mineral used to create a shimmer in make-up. A quarter of the world’s supply comes from Northeast India where around 20,000 children are estimated to work in hundreds of mica mines.

L’Ore´al, one of those companies named, has subsequently qualified its position, saying that it has “zero tolerance” for forced labour in its supply chain and that it keeps a close eye on its mineral mica sources. The company adds that it has a “limited number of suppliers” from India that supply it with mica, and that this constitutes an “extremely small percentage” of the mica used by L’Ore´al, which gets most of the mineral it uses from North and South America instead.

Top tips to improve slavery risk reporting

Modern slavery is abhorrent and illegal, so it has no place in any business or its supply chains. The only way to stamp it out of working practices is for companies to improve their due diligence and have more visibility over their own operations and those of their suppliers.
Experts have some sound advice that compliance professionals and their organisations may benefit from. Chris Stanley, director at Anthesis Group, a sustainability consultancy, says that “the best reporters demonstrate engagement in three key areas: understanding what data you need, and how to collect and analyse it; understanding what information your stakeholders require; and demonstrating continual progress and proving it.”
Brian Alster, global head of compliance & supply at credit ratings firm Dun & Bradstreet, says that companies should create a holistic view to identify risky suppliers, and that they should examine and check each supplier’s corporate structure, including the parent company and subsidiaries. And he also advises companies to join forces with others in their sectors to share knowledge.
“Collaborate with other organisations that are facing similar challenges. By pooling knowledge, resources and best practices with shared industries, you’ll become part of the solution and prove there is strength in numbers,” he says. Some industries have already taken steps to do this, such as the Automotive Industry Action Group (AIAG).
Companies should also consider updating their whistleblowing policies, says Mike Hibbs, head of employment at law firm Shakespeare Martineau. “While not currently a requirement, increasing numbers of organisations are recognising the value of offering protection to those able to expose modern slavery,” says Hibbs. “While board-level personnel may not know where supplies are coming from, someone else will and protecting those who blow the whistle is important.”
Meanwhile, Professor Matt Gitsham of Hult International Business School recommends four key steps that companies should follow as part of best practice. These are:
1. Create due diligence processes. You need to know your supply chain, and work out where the high-risk areas are for modern slavery—which countries, which commodities, which services, and so on. This will likely mean going beyond first tier suppliers to look at tiers three, four or five. Create processes to consider slavery risk as part of supplier selection.
2. Recognise and champion workers’ rights. The risk of modern slavery dramatically decreases in workplaces where trade unions are encouraged to operate. Be vocal in your support for this, and follow through with action.
3. Partner with others to tackle modern slavery in supply chains. Slavery is a criminal activity and driven by complex global forces, and trying to curb/stop it will require collaboration. It will require a partnership approach with your first-tier suppliers, partnerships with specialist NGOs, unions, and working in multi-stakeholder initiatives.
4. Call for more action from government. Good public policy is a key part of reducing the risk of modern slavery, so companies should call for better regulation and improved enforcement.
—Neil Hodge

Meanwhile, a number of chocolate companies surveyed had not provided information in their statements on their cocoa supply chains, despite the fact that all of them have acknowledged in other publicly available documents that they source from West Africa, where child labour and forced labour are endemic in cocoa production. Lindt, one of those named, has since said that it will improve its reporting and disclosure to ensure better transparency on slavery, trafficking and child labour risks. Elsewhere, none of the jewellery firms surveyed in the sample had included any detail on the risks of slavery and trafficking associated with gold mining in their statements, and only one company that purchases tea—Betty and Taylors—made specific reference to India’s north-eastern Assam region in its statement, a tea-growing area renowned for human trafficking. Some companies in the sample had not published statements at the time of the report’s publication.

Companies criticised in the report (and elsewhere) have said that they do report on such issues, but they add that the information may be on their Websites rather than specifically or explicitly in their Modern Slavery Act statements. As a result, they say, such information should be read in conjunction with its public reporting. Hilton, the hotel group, sent CORE a letter (which has been published) complaining about the group’s analysis. CORE has rebuffed the criticism.

More positively, the report also found examples of good practice reporting, from which other companies and compliance professionals can learn. For example, confectioner Mars specifically acknowledges that severe human rights risks (including forced labour) may be present in its cocoa supply chain, while supermarket chain Lidl has published a list of tier-one factories for all its own-brand textiles and footwear.

Meanwhile, Nestle´ reports on 11 key human rights risks in its business (seven relating to labour rights) and Unilever’s 2015 Human Rights Report notes that low minimum wages are an issue in many tea-producing countries. Three construction companies—Barratt, Bovis, and Unite Students—acknowledge specific risks of modern slavery in the construction sector and in their own businesses.

Croser believes that part of the problem is that the legislation is not prescriptive enough regarding what information should be disclosed in the Modern Slavery Act statements. She also believes that another problem may be that companies are wary of disclosing too comprehensively the slavery risks in their supply chains when their competitors and peers have not done so.

“There is probably an element of companies deciding to wait and see how other companies in their industry sectors have reported on slavery risks. However, we expect businesses to step up to the mark in the second year of reporting under the Act,” she says.