Regulating modern slavery in supply chains

What viable but principled regulatory model is best suited to regulating business supply-chains to ensure that they do not tolerate or promote forced labour, human trafficking, etc ('modern slavery')?

Does legislation that requires corporate reporting on measures taken within one's supply-chain to address these risks -- but which does not imposes statutory consequences for not complying -- have a place here?

Many activists argue 'Not'.

I would disagree. One can be highly motivated about addressing modern slavery in business supply-chains, yet support legislative models that others dismiss as 'undemanding'.

Australia is proposing a legislative model on this issue, drawing on s. 54 of the UK's 2015 Modern Slavery Act. The consultation on the proposed approach closed last week. (See the Consultation Paper here).

Last week I made a lengthy submission to that consultation.

Here is the gist...:

• If the aim is to foster business engagement in preventing and solving the underlying problems, a model that give businesses space to address its operations and supply chains (which they know better than any regulator could), that is not prescriptive about reporting, and that does not impose penalties for non-compliance is defensible ... 

... but only ....

• If the model clearly signals to business that more demanding / intrusive regulation is conditionally being held in reserve for a period, and will be implemented if the uptake by business is merely perfunctory and the reporting patterns do not indicate proper engagement in due diligence and other processes to identify, prevent, resolve and remedy human rights risks...

The current proposed model does not include penalties for non-compliance with the reporting requirement. Yet it makes no overt or explicit signal to business that there may be more demanding legislation in future if business uptake and response is weak.

This is from the intro to that submission, making the above points:

"... The point of all this is not the adoption of ‘tough’ regulatory postures for their own sake (even if these were politically viable): instead the point is to find ways to incentivise and support Australian entities to systematically identify and to prevent or address the underlying human rights risks...

... many features [of the proposed legislation] which this submission supports (such as refraining from any statutory consequences for non-reporting) are ultimately only justifiable, or likely to be received as legitimate by civil society, on a certain condition. This is that there ought to be a clear, signalled government message to business that government ... is prepared in future to consider more intrusive, demanding legislative measures if it is found that the proposed approach is not engendering meaningful engagement with the problem..."

JF

See previous posts on 'modern slavery' and its regulation (in Australia and generally), most recently here.

Responsible business in a Trump era (III)

Just how compelling is the 'business case' for firms and funds to adopt and implement human rights policies?

Here I mean planning, self-assessment and reporting policies and systems that are explicitly framed in human rights terms -- not the wider idea of a 'business case' for being socially responsible.

Among the outgoing Obama administration's last actions in December 2016 was to shepherd in a US 'National Action Plan' on 'Business and Human Rights' (BHR).

The evidence so far shows clearly that a Trump-led US federal government will not lead, in policy, messaging and regulatory terms, in the BHR area. Indeed it will evidently not do so on the responsible or even sustainable business agendas more broadly.

If that is so, it may nevertheless happen that in the US and beyond, big business and the financial and insurance worlds drive parts of this broad agenda itself, not waiting for a national government lead.*

With important caveats, I have recently blogged on this possibility.** These blog-posts were offered in the search for a 'silver lining', from a BHR perspective, to Trump's election. Of course European governments + the EU (and others) might lead in America's stead. But the US matters.

If it happens that business does not wait for such a lead, it may be because there is a perceived 'business case' for it (even if part of that case is just longer-term anticipation by business of a degree of reversion in regulatory trends in a post-Trump presidency).

The 'business case' concept in the BHR field derives from the wider corporate accountability / responsibility field. It is a familiar feature of the CSR field, in particular. 

'Business case' is of course shorthand for the idea that whatever the ethical, moral or legal reasons for mitigating a business's social, enviro and governance impact, it makes good commercial sense, especially in the longer term, to embrace this agenda.

We need to be cautious about a 'business case' at the broad level: business sectors and sub-sectors -- and individual firms within these -- may have very different incentive structures (etc.) in responding to or anticipating social impact issues. The 'business case' concept is a more sound one when describing how those incentives etc might be approached in particular contexts, making a case each time.

For years the CSR and then emerging BHR fields spent considerable energy on articulating a general 'business case'. Yet in recent years BHR advocacy has sometimes appeared to proceed on the basis not only that the business case for acting on human rights risks is self-evident, but that it is or will go further and become an important driver of uptake by business of the BHR implementation agenda.

The thrust of the current post is to suggest that the Trump era will now put to the test claims made in recent years about the strength and obviousness and appeal of the business case for self-starting action on human rights risk.

Put another way (and partly for provocation's sake), it is easy to assert the existence of an obvious business case for business to be pro-active about addressing human rights impacts, but we need to be careful about assuming that this has some sort of self-executing logic to it.

At very least, it seems unlikely that all aspects of BHR will advance at equal pace and degree. Parts of some sectors in business may go with some aspects of the BHR agenda (eg 'modern slavery' in supply chains), while not on others; we may see uptake on some measures (eg human rights due diligence in larger listed firms and financial houses), but little movement in areas such as access to remedy.

Of course many would argue that because human rights are universal non-negotiable normative imperatives, emphasising the commercial advantages of investing in a human rights-consistent business is a wrong starting-place to 'motivate and justify' corporate engagement in human rights implementation.*** This is partly the thrust of a recent Harvard Business Review article entitled 'We shouldn't always need a business case to do the right thing'.

I think there is unarguably a business case for some kinds and sizes of firms to take the BHR agenda seriously. Demonstrating empirically that such action protects or creates commercial value is more difficult.

Jo

* This comment relates to the federal government: the same reactionary approach to promoting sustainable and responsible business conduct is not necessarily true of state-level governments in the US, some of them major economies in their own right, such as California.
** My previous posts on 'responsible business in a Trump era' are here (February 2017) and here (November 2016).

*** See Posner and Baumann-Pauly, 'Making the Business Case for Human Rights', in Baumann-Pauly and Nolan 2016, section 1.2.