This post is by Tom Wills, project manager – corporate accountability and trade at the Business & Human Rights Resource Centre.
Last month, the European Union took a major step towards passing a new law to stop businesses from abusing human rights and destroying the environment around the world. The EU’s proposed ‘corporate due diligence’ law would help to tackle the widespread abuse of workers and the environment in the supply chains of European companies. This progress in Europe accentuates the failure of the UK government to take similar action.
Companies have been turning a blind eye for too long
The supply chains of European companies extend around the world, bringing food, electronics and clothing to consumers. They often source from countries with low labour costs and weak regulation, affording them free rein to maximise profits without needing to worry about upholding human rights, the conditions faced by workers or protecting the environment. Unsurprisingly, abuses within European supply chains are a huge and well documented problem. They include use of child labour in cocoa supply chains, dumping of toxic waste by oil companies and withholding wages in garment factories that supply some of the biggest European fashion brands.
Companies have been allowed to turn a blind eye for too long, ignoring their own complicity in human rights abuses while amassing profits for directors and shareholders. Often companies will maintain deliberate ignorance about practices, buying from suppliers at rock bottom prices without asking any uncomfortable questions about how goods were harvested or produced. Meanwhile, governments in the global North have stood on the sidelines, their failure to legislate demonstrating that they have been content to allow abuses to continue.
The EU’s proposed due diligence law aims to change this by making companies publish a ‘due diligence’ report each year, describing their human rights and environmental risks, and the steps they are taking to mitigate those risks; and by sanctioning companies when environmental destruction or human rights abuses happen.
On 10 March, the European Parliament voted by a huge majority for this law to go forward. The initiative has strong support, including from a range of business groups. All eyes now turn to the European Commission, which will outline its draft law in the middle of 2021. However, proposals may still be diluted by a powerful business lobby with privileged access to the commission; civil society groups will continue to push for a strong law that covers all businesses and is properly enforced, including with criminal sanctions for company executives who knowingly violate human rights.
The UK shouldn’t be standing by
The UK should be in the vanguard of these initiatives, rather than standing by as the EU breaks new ground. This is why UK civil society organisations are campaigning for a new law to make companies operating in the UK take action to prevent adverse human rights and environmental impacts.
The EU’s proposal covers all companies operating in the European Union, so many UK based companies that do business in Europe will have to comply with this law anyway. The EU’s progress leaves the UK with questions to answer: post-Brexit, does it want to be a poorly regulated haven for businesses that profit at the expense of people and the planet? Or does it want to act now to regain its place at the forefront of this agenda?
The UK’s Modern Slavery Act was hailed as groundbreaking in 2015 when it was first introduced, encouraging companies to report on the modern slavery risks in their operations. But the lack of enforcement and consequent level of compliance, and the low quality of reporting by businesses, has been shocking. A business can publish a statement that says it has taken no steps to address modern slavery and still be compliant with the law.
So it’s no surprise that, after five years of hosting the only publicly available registry of Modern Slavery statements, the Business & Human Rights Resource Centre has concluded that this act has failed in its aims. Partly, this is because a transparency first approach to regulating business is fundamentally insufficient. This has recently been demonstrated by reports of abusive practices in the garment sector, both before and during the Covid-19 crisis. The UK government clearly sees strengthening the Modern Slavery Act as the appropriate response. But transparency is of little use here, doing nothing to oblige companies to stop profiting off the back of labour rights abuses. It’s clearly time to move on from a focus on transparency alone to something much more effective.
The UK has made limited progress in one narrow area: deforestation. The much delayed Environment Bill will require companies to conduct due diligence to ensure that production of the goods they import, such as cocoa or soy, was not responsible for illegal deforestation. But why stop there? The UK should also be passing laws requiring companies and financial institutions to take responsibility and make sure they aren’t complicit in other forms of environmental destruction, or human rights violations.
Today, businesses in the UK are profiting from abuse in their overseas supply chains with impunity. ‘Due diligence’ laws seek to reverse this situation and hold companies liable when abuses happen. As these laws gather momentum, the government should be stepping up to ensure UK based companies respect human rights and the environment around the world.