Hiding in plain sight – ending the outrage of modern slavery

Modern slavery is a huge issue and one business should be doing more to address.

Described by former US president Barack Obama as an “outrage”, one in 150 people around the world, or 50m in total, are trapped in a state of modern slavery, data from the Global Slavery Index suggests. What’s more, the number of people snared in labour trafficking, forced servitude or forced marriage has risen by 10m over five years due to the poverty and disruption-inducing impacts of the Covid-19 pandemic, war and climate breakdown.

Because it is prevalent and global, with forced labour entwined in businesses, modern slavery is a huge issue. An estimated annual $468bn of G20 imports are tainted by use of forced labour.  Even in the UK alone the numbers are staggering, with forced labour used to produce an estimated $26.1bn of imported products.

Indeed, governments the world over recognise businesses should be doing more to ensure their operations and supply chains are free of modern slavery. We have seen a wave of legislation designed to tackle it. Companies are asked how they address modern slavery and whether they conduct human rights due diligence. Border police should also be given powers to block imports suspected of being made with forced labour. Businesses that have failed to tackle this scourge effectively are open to having lawsuits filed against them.

This dire and globalised situation is a material concern for all businesses – and investors – presenting significant risks but, most importantly, offering huge potential for action. This is why at CCLA, we have just launched our Modern Slavery Benchmark, assessing the largest listed UK companies’ modern slavery performance – aligned with statutory requirements, government guidance and international voluntary standards on business and human rights.

Tackling slavery with measurable standards

The benchmark allows the gathering of data, based on companies’ public disclosures, for meaningful and targeted discussions between investors and companies making it a practical tool with which to tackle modern slavery head on – both within a company’s operations and more widely in its supply chain.

The benchmark assigns companies to one of five performance tiers, the uppermost one showing a highly developed approach to tackling modern slavery. This was seen in extensive discussion of the risks, case studies on systemic modern slavery and activity to find, fix and prevent forced labour.

Those who actively manage human rights risks were clearly demarcated from those who don’t. Consumer discretionary and consumer staples were the best performers, as they are at greatest risk of modern slavery and are more answerable to consumers. Those in the top tier included Kingfisher, Marks & Spencer, Next, Reckitt Benckiser, Tesco and Unilever.

Those in the bottom tiers, however, largely relied upon risk assessment processes which were primarily desk-based and compliance focused, that is, policies which were relevant but with little evidence of assessing and identifying risks. Across the tiers, there was significant difference in the most active and least active in addressing modern slavery.

Overall, companies were focused on policy compliance rather than implementing policies and taking action when they find modern slavery. Moreover, efforts to fix the problem and provide remedy for victims are two important areas where clear improvements can be made. Of all those assessed, less than one-third of companies disclosed the steps taken to end ongoing risks where a violation was found and only nine reported outcomes of the remedy process for victims. Only one company disclosed providing remediation that was satisfactory to victims.

CCLA is committed to updating the benchmark on an annual basis and to engaging, not just with the companies, but also with fellow investors and policy-makers to build the momentum to drive real-world change. We very much hope to see companies take on board our findings and recommendations. For those companies in the lowest tiers, if they don’t engage and improve, we will take a firm stand and vote against their financial statements and annual reports. We encourage other investors to follow suit.

The benchmark will provide an accountability mechanism through regular repeated assessments of companies on their modern slavery commitments and practices. Importantly, it also has the potential to provide a vehicle for companies to learn and to share examples of good practices and create a mechanism to leverage business competition to drive improvement. And, as the visibility and momentum of the initiative swells, it can also provide hope that investors and companies can work together to stamp out modern slavery once and for all.

Dr Martin Buttle is better work lead at CCLA Investment Management