Eradicating modern slavery: humanity’s imperative

November 2019  |  FEATURE  |  LABOUR & EMPLOYMENT

Financier Worldwide Magazine

November 2019 Issue

Modern slavery is a global problem and a stain on humanity. Hence, its eradication is a task of truly herculean proportions requiring an urgent and collaborative response by governments, non-governmental organisations (NGOs) and big business, among others.

Among the forms of modern slavery are debt bondage – the world’s most widespread form of slavery – where a person is forced to work for free to pay off a debt, child slavery, forced marriage, human trafficking and prostitution, domestic servitude and forced labour, where victims are made to work through violence and intimidation, and descent-based slavery, where people are born into slavery because their ancestors were captured and enslaved.

“Slavery did not end with abolition in the 19th century,” states Anti-Slavery International. “Instead, it changed its forms and continues to harm people in every country in the world. Today, slavery is less about people literally owning other people – although that still exists – but more about being exploited and completely controlled by someone else, without being able to leave.”

Although its true extent is unknown, the 2017 International Labour Organization (ILO) and the Minderoo Foundation’s Walk Free Initiative report ‘Global Estimates of Modern Slavery: Forced Labour and Forced Marriage’ estimates that on any day in 2016, there were 40 million men, women and children who were victims of modern slavery across the globe. Of that total, 25 million were in forced labour and 15 million in forced marriage. Overall, this means there were 5.9 adult victims of modern slavery for every 1000 adults in the world and 4.4 child victims for every 1000 children in the world.

Further ILO and Walk Free estimates include: (i) 2.1 million people are in slavery in the Americas; (ii) 9.1 million people are in slavery in Africa; (iii) 30.4 million people are in slavery in the Asia-Pacific region, mostly in bonded labour; (iv) 1.5 million people are in slavery in developed economies; (v) 16 million slavery victims are exploited in economic activities; (vi) 4.1 million people in slavery are exploited by governments; and (vii) forced labour in the private economy generates $150bn in illegal profits per year.

“Awareness of what constitutes modern slavery is on the rise, although it is still difficult to identify where it exists, as by its very nature it is hidden,” says Helen Farr, a partner at Fox Williams LLP. “Also, modern slavery is largely a female issue, with women and girls accounting for 71 percent of victims.”

Taking up the point that females are disproportionately affected by modern slavery, as well as slavery’s prevalence within the private sector, is Jenn Morris, chief executive of Walk Free. “Nearly 40 percent of all victims were forced to work in the private sector,” she explains. “That means they were being forced to work under threat or coercion as domestic workers, on construction sites, in clandestine factories, or on farms and fishing boats. Most victims of forced labour in the private sector are female. Male victims outnumber females in the agricultural, construction and manufacturing sectors but the largest overall group of victims is found in domestic work, which is dominated by women.”

While clearly a major issue, in the view of Stuart Bell, director of Ergon Associates, it is important to recognise that there is a grey area between exploitative employment conditions and forced labour. “Proving menace or coercion is not easy,” he says. “Forced labour and human trafficking are crimes and, as such, are largely hidden. Attempts to quantify the number of people subject to modern slavery are useful but must always be viewed as estimates.

“Conditions can be fluid and factors can be cumulative,” he continues. “It is equally important not to focus solely on modern slavery, but to see it as the extreme end of labour exploitation, and to seek to address all exploitative practices. Nevertheless, as more resources are put into raising awareness, it is becoming clearer that conditions amounting to modern slavery are widespread geographically and across many sectors.”

An economic imperative

Along with the moral imperative to act, there is also an economic case for businesses to address forced labour in their supply chains.

“From a total system cost perspective, forced labour negatively impacts efficiency, cost, effectiveness, and value of operations by introducing risks to quality, safety and security of manufacturing,” says Dr Jean Baderschneider, chief executive of the Global Fund to End Modern Slavery. “As consumer awareness grows, businesses also face risks to their international brand perception. Finally, the increasing regulatory environment means businesses with forced labour in their supply chains face increasing reporting requirements and potential penalties.”

Also driving the economic agenda is the huge reputational risks an association with modern slavery poses. “This may lead to customer boycotts, divestment from investors and long-term brand damage where exploitation is exposed,” suggests Ms Morris. “We are now seeing that companies need to not only avoid scandals, but be able to show that they are proactively managing the issue in order to attract investment. The rise of ‘ethical investing’ based on environmental, social and governance (ESG) criteria means that large institutional investors and retail investors alike are demanding that companies outline their approach to managing modern slavery risk.”

This is essential, says Michael Asner, an independent public procurement consultant, on account of the multiple risks associated with having an ‘unclean’ or ‘slavery tainted’ supply chain. “In the US, for example, the penalty under the law for an individual violating the 13th Amendment, which abolishes slavery and prohibits holding persons in peonage, is imprisonment for up to 25 years.

“And organisations which inadvertently hire and exploit people through their supply chain purchases are not off the hook,” he continues. “Victims of modern slavery have, in recent years, filed suits against corporations. It is only a matter of time before corporate boards, investors, shareholders and senior management are ultimately held accountable and subject to paying out massive financial damages.”

Legislative impacts

Intended to aid the eradication of modern slavery is legislation such as the UK Modern Slavery Act 2015, California’s Transparency in Supply Chain Act (2010) and France’s 2017 Corporate Duty of Vigilance Law. However, at present, companies that ignore such laws generally do so without sanction.

“The UK has been hailed as a leader on tackling modern slavery, being the second country, after

Canada, to introduce legislation to protect victims,” says Ms Farr. “The rationale behind the Act is to create transparency around the ethical practices of organisations, allowing customers, potential investors and the wider public to be informed about what organisations are doing to tackle modern slavery.

“The requirement in the UK is that businesses supplying goods or services in the UK with a turnover of £36m or more per year must publish anti-slavery and human trafficking statements on their websites,” she continues. “This has spurred business to take action to eradicate modern slavery from their supply chains.”

That said, this action is not always robust. According to the final report of the Independent Review of the Modern Slavery Act 2015, published in May 2019, many companies view their reporting obligations as a “ticking the box” exercise.

“This may be because the Act is light on detail of what needs to be included in their website statement,” adds Ms Farr. “The UK government has relied on published guidance of those areas that should be reported rather than detailed legislation. More worryingly, the report estimates that around 40 percent of companies are not complying with this part of the legislation at all.”

Therein lies the rub. The uncomfortable truth for those wrestling with the slavery issue is that much of the available legislation is toothless. “Legislation on modern slavery, and on human rights due diligence more generally, has so far not created the risk of criminal sanction for directors or significant liability for companies,” observes Mr Bell. “The reporting elements have been easy for companies to comply with in minimal ways. So, smaller and less consumer-facing companies have not felt too much pressure to take action.

“Larger companies, however, are very aware of the drift of legislation toward mandatory human rights due diligence, and legislation is becoming tougher,” he continues. “For example, criticism of the UK Modern Slavery Act has led to the government proposing various ways of making reporting more detailed and comprehensive. In the medium term, human rights requirements will follow the trajectory of anti-corruption legislation: legal requirements will get more stringent and penalties for non-compliance more severe.”

Collaboration is key

Ultimately, collaboration is key. Supply chains are never static and new challenges are likely to emerge whenever production or sourcing shifts to new countries or regions. Companies cannot eradicate modern slavery on their own. They can only do so by addressing underlying factors in collaboration with governments, civil society and their peers.

“The moral drivers to combat slavery will always be there,” says Ms Morris. “But as awareness of modern slavery rises, so does society’s expectations of business. Investors, shareholders and consumers now expect business to get this right because it is their responsibility. The economic consequences of this range from customer boycotts to divestment from investors and shareholders, or the refusal of insurers to underwrite a project due to the risk of modern slavery.”

In the view of Dr Baderschneider, the best way forward is to incentivise, socialise and normalise the modern slavery issue to the point that companies, investors and financial institutions can confidently do the right thing with the support of governments and civil society. “We will be more effective if we work together,” she concludes, “to foster an environment and a culture in which companies are protected when they speak up, in good faith, about suspected modern slavery in their supply chains and then take meaningful, sustainable action to address it.”

© Financier Worldwide

BY

Fraser Tennant