Many people and companies remain oblivious to the extent of modern day slavery. For some, seeing a film like ‘12 years a slave’ might leave them feeling enraged, saddened, or perhaps resigned to seeing the ‘issue’ as something that belongs to the past. Surprisingly, there are still countries where chattel slavery prevails. Mauritania , a country that is rich in mining, has the highest proportion of enslaved people in the world. This is the condition where adults and children are still the full property of their masters. [1]

The US Trafficking in Persons report (see our previous blog here) identifies that the profits generated by forced labour is $150 billion annually.

Many organisations and industries are affected by human trafficking and forced labour. Whilst the terminology may be used interchangeably, there are different definitions that apply legally.

Particularly vulnerable companies will be those relying on labour from migrant workers and having complex supply chains with multiple tiers. However, every company has a role to play- the power or leverage they have as buyers and suppliers can drive change. For example, is the canteen stocked with fairtrade chocolate? Where the cleaners are subcontracted, does your company know if they are free to leave their employment at their will? [2]

The increase in the global buying power of companies has had a major impact on human trafficking over the past few years. It is recognised that many companies, known as multinational corporations or MNCs , have more influence and money than some of the countries in which they operate.  These powerful MNCs have raised questions on the role of governments and the importance of the rule of law in such countries. The development of the UN Guiding Principles on Business and Human Rights has tried to address some of these key issues through the ‘protect, respect and remedy ‘framework. Countries are still expected to exercise their duty to protect human rights and business is expected to demonstrate their respect to human rights.

For MNCs , the growth of internationally recognised brands has given rise to both opportunity and increasing need to manage their reputational and legal risks when it comes to global supply chains. They do not want to be slighted with ‘dirty supply chains’. For those companies that want to behave in a manner that demonstrates best practice, that is going beyond compliance and demonstrating leadership, the growth in global purchasing presents an opportunity.

A critical emerging component of supply chain management is the development of procurement procedures and contracts that reflect a company’s objectives. Many companies have a code of conduct in place.  However, it has been researched that only a small proportion of companies have codes of conduct that set specific ethical and sustainable procurement objectives. We would recommend that companies, as a starting point, review their codes of conduct and also check the standards that they have signed up to.

Through their purchasing decisions companies have an opportunity to improve the working conditions of their suppliers’ workforces. Organisations should consider building rewards and penalties into their supplier programmes.
What should companies be doing in relation to their contracts? To ensure that key ethical and sustainable standards flow through their sourcing, companies should be ensuring that they take four key steps. These are:[3]

1. review their supplier contracts
2. review their tender and purchasing processes
3. review auditing and compliance action
4. review the performance standards of procurement staff

Contracts also allow companies an opportunity to set out expectations for the future performance on human rights issues. Parties can allocate responsibility for human rights risks specific to a transaction for a business. This does, however, presuppose a certain level of due diligence. Companies in the extractives sector are also increasingly likely to consider the use of human rights clauses in contracts, particularly in relation to joint ventures. There are also requirements through the International Finance Corporation (IFC) and international financial institutions that adhere to the Equator Principles that require their borrowers, in certain contracts to provide covenants on how they will manage adverse social and environmental impacts. This has supply chain connotations as lenders may have a contractual right to conduct periodic audits. Following the revisions to these standards and the endorsement of the UNGPs it is likely that lenders may require borrowers to establish grievance mechanisms for certain high risk projects.

There are clearly a number of issues that companies and their legal advisors should be considering when drafting contracts that include human rights provisions. We will consider these in our next blog.

[1] Walk Free Foundation; ‘Tackling Modern Slavery in Supply Chains’

[2] See ChainChecker by Finance Against Trafficking

[3] Walkfree guide, page 12