Published 3 years ago.
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As many G20 nations work to curb modern slavery, organizations must be prepared for the residual impacts of the evolving legislation landscape.
Supply chain globalization is creating economic opportunity for parts of the
world previously left out of global trade, but the same forces that have
provided greater access to jobs and cheaper goods for consumers have also fueled
the deplorable and prevalent issues of modern slavery around the globe.
According to the International Labour Organization, 16 million of the
estimated 40 million
modern slavery worldwide are in forced labor conditions within the private
sector. Legislation has risen over the years to address this persistent scourge,
starting with the California Supply Chain Transparency
Act, the UK Modern Slavery
and France’s Devoir de
The growth in due diligence legislation makes the legal and operating
environment more complex for businesses than ever before, making robust
management practices essential.
As we discussed in this updated report on modern
which examines the legislative landscape worldwide, legislation can be grouped
into two main categories: Mandatory disclosure and mandatory due diligence
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Mandatory disclosure laws require companies to disclose information on their
activities relating to modern slavery. They are entirely dependent upon public
scrutiny, and the spectre of damaging brand reputation is what holds parties
accountable for their actions. Mandatory due diligence laws are generally more
prescriptive — there is a liability aspect that makes the due diligence law
landscape even more urgent, which drives companies to really act and change.
New rules in the
expected this month will require companies to assess supply chains to identify
any child labor risks, and then develop due diligence plans to address and
mitigate risk beyond only direct suppliers. Switzerland is considering
with a call for investors to back the proposed due diligence rules and move them
closer to approvals.
While these laws are instrumental in creating more ethical, sustainable supply
chains, any new law heightens the risk environment. Global organizations may
face several operational impacts as a result of complying with new rules:
More stringent requirements mean a greater chance of lawsuits, which take
considerable time and money to settle, regardless of whether they end up in
With brand reputation risk at an all-time
violating due diligence laws can be even more severe for some companies than
civil and criminal consequences.
Drastic measures to comply with laws or deal with violations — such as
selling off shares or entire subsidiaries, or delocalizing part of a
company’s activities — could affect operations.
Departments may need to be restructured to comply with new rules — including
compliance, procurement, CSR, HR, health and safety, and security.
Leading organizations will likely take on a more strategic approach to
addressing due diligence regulations. By turning their focus beyond compliance
alone and proactively seeking and engaging with suppliers who leverage better
workforce and employment conditions to drive quality, speed, innovation and
more, these organizations will inherently minimize liability and many of these
Given due diligence obligation are mixed in with a broad range of concerns
including environmental, safety, labor, and corruption risks, assessment and
monitoring may be spread across silos in risk, compliance, sustainability,
procurement, legal, and other teams. Companies are responding by looking for
ways to connect those silos and get a centralized, holistic view of supplier
risk data in one place.
Most large multinationals can look to their compliance departments for guidance
in developing due diligence capacity, as compliance professionals have deployed
similar systems for several decades to address anti-corruption legal
requirements. Another great resource is the** US Customs and Border
Protection**, which issues reports on products and
locations prone to forced
and recommends that companies refer to them when performing their due diligence.
There are also studies and measures available — such as the Corporate Human
Rights Benchmark — which assesses 101 of the largest publicly traded companies
in the world on a set of human rights indicators. Another resource is Business
Companies should leverage resources such as these in their due diligence
Many companies are turning to sustainability ratings and intelligence, which can
be a foundational element of a due diligence framework. A comprehensive solution
should enable organizations to identify, map and screen risks across the entire
supply chain, get a holistic assessment and rating of a partner’s sustainability
management system (including human rights topics), and create corrective action
and improvement plans for low-scoring suppliers. With a country-, category- and
spend-specific view of risk; and the ability to consistently monitor and drive
better supplier performance, it’s much easier to keep up with the evolving due
Although it will require adaptability and attention, the growing legislative
landscape is positive progress in addressing critical sustainability risks; and
should be seen as an opportunity for organizations across all industries,
sectors and sizes to drive real, tangible change. With the right tools and
approaches that create a solid due diligence foundation, companies can not only
meet these new standards but go farther, moving beyond compliance to drive
performance and thus value and lasting impact.
Get the modern slavery and new legislative landscape paper
Published Jan 29, 2020 7am EST / 4am PST / 12pm GMT / 1pm CET
This article, produced in cooperation with the Sustainable Brands editorial team, has been paid for by one of our sponsors.