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Asset Management

The “Find It, Fix It, Prevent It” initiative, which extends to some 56 large investors including M & G, Fidelity International, Schroeder’s and Edentree, seeks to increase the effectiveness of corporate action against modern slavery.

Initially, the “Find It, Fix It, Prevent It” initiative was focused on the hospitality sector, with investors seeking to engage with the largest UK-listed hospitality firms to encourage companies to develop better policies, processes and procedures for tackling modern slavery–and better disclosure. This year, “Find It, Fix It, Prevent It” will look to broaden its engagement with companies to include the construction and materials sector, with plans to commence engagement with targeted companies from the third quarter: the initiative’s activities and future focus are set out in its first annual report. The CCLA estimates that “the construction industry is estimated to contain 18% of the world’s victims of forced labor”. The term “modern slavery” extends to slavery, servitude, human trafficking and forced or compulsory labor (read more on the key indicators of modern slavery here).Continue Reading Business and Human Rights: Investors Call Out “Modern Slavery” and Focus on Hospitality, Construction and Materials Sectors

This month, the American Bar Association (the “ABA“) published a Report on its suggested Model Contract Clauses to Protect Workers in International Supply Chains (the “MCCs“).

While the MCCs are not put forward as a binding standard, they do provide food for thought for companies who are seeking to align their supply chain contracts with the UN Guiding Principles on Business and Human Rights (the “UNGPs“), and the increasing tide of mandatory human rights due diligence legislation (see more on this impending legislation here).

Key takeaways:

  1. The aim of the MCCs is to align drafting in international supply chain contracts with existing human rights due diligence standards and obligations, with a view to providing “operational guidance for mapping, identifying and addressing human rights risks at every tier of the supply chain” and seeking to help companies “implement healthy corporate policies in their supply chains in a way that is both legally effective and operationally likely.”
  2. In aligning supply chain contracts with existing obligations and requiring reasonable due diligence by both contract parties, the MCCs seek to address what could be considered an imbalance in the typical negotiation of supply chain contracts where, traditionally, a buyer has tended to shift all responsibility for human rights issues to the supplier.
  3. The publication of the MCCs pose some interesting considerations for buyers negotiating supply chain contracts. For example, to what extent is it reasonable for the supply chain contract to reflect the stance that abuses of workers’ rights occurring in global supply chains is a shared responsibility of both buyers and suppliers? The cooperative approach submitted is very different to the traditional oppositional relationship between buyer and supplier, where buyers seek to ensure that any and all responsibility for adherence to prescribed human rights standards falls to suppliers by requiring representations and warranties from suppliers on a “strict liability” basis.

Continue Reading Human Rights Due Diligence in Supply Chain Contracts: A Shared Responsibility of Buyer and Supplier?

Social

Camellia plc and certain of its subsidiary companies have recently settled legal claims in the United Kingdom based on allegations against two businesses in Camellia plc’s African operations, namely Kakuzi in Kenya and EPM in Malawi. The claimants – supported by the Kenyan Human Rights Commission, the Centre for Research on Multinational Corporations (SOMO) and the Ndula Resources Centre – had alleged personal injuries suffered by local residents in Kenya allegedly carried out by security guards employed by Kakuzi in Kenya and sexual harassment and gender-based violence suffered by EPM’s female employees in Malawi. These claims have now been resolved at settlements costing up to £4.6m in relation to the Kenyan claims, and £2.3m in relation to the Malawian claims (see Camellia’s trading statement here).

The settlement highlights the role and importance of remedial community measures and Operational-level Grievance Mechanisms, as well as the increased exposure to litigation of parent companies for human rights related failures by their subsidiaries (for further examples, see our coverage here and here).Continue Reading Business and Human Rights: Operational-level Grievance Mechanisms Form Part of Camellia plc’s Settlement of Claims in Connection with Operations in Kenya and Malawi

Governance

With the advancing wave of mandatory human rights laws (see our previous Blog Posts here and here) and the increasing focus from investors and other stakeholders on human rights (see our previous Blog Post), it is ever more incumbent on companies to take demonstrable steps to identify, assess and mitigate actual or potential human rights harms.  This includes taking steps to ensure that no forced labor takes place within an organization or, increasingly, its supply chain.

Indeed, the Sustainable Development Goals (SDGs) include specific targets relating to forced labor.  In particular, the SDGs call for (i) the elimination of all forms of violence against all women and girls in public and private spheres, including trafficking and sexual and other types of exploitation (SDG 5.2) and (ii) immediate and effective measures to eradicate inter alia forced labor (SDG 8.7).

But what indicators of forced labor should companies look out for?Continue Reading Business and Human Rights: What Are The Key Indicators of Forced Labor?

United Kingdom - London

On March 11, 2021, the UK Government launched an online modern slavery statement registry. The announcement follows a commitment from the UK Government to strengthen the reporting requirements under section 54 of the Modern Slavery Act 2015 following its Transparency in Supply Chains Consultation.

The registry is intended to enhance transparency and accessibility…

Governance

On March 3, 2021, the German government adopted a draft bill which obliges companies to ensure that human rights are observed throughout their entire supply chain. The aim of the “draft legislation on corporate due diligence in supply chains” (“Draft Bill”) (“Sorgfaltspflichtengesetz”) is to require companies to take steps to prevent human rights violations in their supply chains. This builds on the growing momentum for mandatory human rights due diligence (see our previous Blog Post).

Under the Draft Bill:

  • companies must ensure that human rights are being respected throughout their entire supply chain;
  • companies must establish complaint mechanisms and report on their due diligence activities;
  • companies with more than 3,000 employees must meet their due diligence obligations as of January 1, 2023 (and companies with more than 1,000 employees as of 2024);
  • violations of the obligations set forth in the Draft Bill will be sanctioned with fines, which can amount to up to 2% of the average annual turnover for large companies with more than 400 million euros annual turnover.

Continue Reading Business and Human Rights – Germany Adopts Draft Mandatory Human Rights Due Diligence Law

Asset Management

How will EU Member States enforce the new EU mandatory human rights and environmental due diligence laws? What disclosure will be expected of companies and what steps will be deemed adequate?

Shift, the highly influential centre of expertise on the UN Guiding Principles on Business and Human Rights, has released a discussion draft seeking to inform the development and enforcement of these new laws. The draft provides valuable insight into the criteria that national regulators could use in assessing the quality of a company’s diligence practices by proposing six “signals of seriousness” for human rights due diligence:

  1. Governance of Human Rights;
  2. Meaningful engagement with affected stakeholders;
  3. Risk identification and prioritisation;
  4. Taking action on identified risks;
  5. Monitoring and evaluating progress in addressing risks; and
  6. Providing and enabling remedy.

How many companies can confidently assert that they currently exhibit these six signals? We highlight Shift’s helpful criteria in this Blog Post.Continue Reading Human Rights Due Diligence: Six Signals of Seriousness

Companies are increasingly exploring how they can introduce third party expert input in order to promote constructive exchange on ESG issues, including human rights.

Third party experts can help companies better understand different perspectives, address conflicting goals and better integrate human rights into their policies, corporate strategy, risk management and reporting. As investors continue to…

Governance

The NYU Stern Center for Sustainable Business published a report in January 2021 finding that US corporate Boards suffer from inadequate expertise in financially material ESG matters such as human rights.

In a survey of 1,188 Fortune 100 Board directors, only 18 (or 1.5%) had any experience or credentials relating to human rights. Findings amongst Board directors outside the US are unlikely to be very different. The Stern report found limited expertise across the full range of ESG risks (beyond human rights to climate change, water scarcity, pollution, #metoo, #blacklivesmatter, employee diversity, cybersecurity and bribery and corruption) and questioned whether “today’s Boards [are] fit for today’s challenges and opportunities“.

In this Blog Post, we discuss what Boards should do to address this capacity deficit.Continue Reading Business and Human Rights – Are Boards Equipped to Address Emerging Risks?

Governance

The European Commission has committed to tabling an EU-wide human rights due diligence law by June 2021.

There are strong indications that the proposed law will have a wide scope (with the potential to apply to non-EU domiciled companies) and contain sanctions for non-compliance.

But what is human rights due diligence, and how can companies prepare for the proposed EU law?Continue Reading The EU’s Proposed Mandatory Human Rights Due Diligence Law – What You Need to Know