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Regulating supply chains – reclaiming our rights

THE structuring of contemporary production methods, often complex and global in scope, creates an environment that is conducive to worker exploitation. 

The tragic events of the Rana Plaza collapse in 2013 that resulted in the deaths of more than 1,000 textile workers in Bangladesh laid bare the limitations of traditional approaches to regulating labour standards in supply chains. 

In Britain, the disclosure model of the Modern Slavery Act 2015 has not led to greater corporate accountability. The high threshold for the application of the legislation — the Act is only applicable in respect of businesses with a total annual turnover of £36 million — the sole focus of the legislation on disclosure regarding a narrowly defined set of human rights violations and the lack of a robust liability regime help explain its limited effectiveness. 

Policy-makers and stakeholders are increasingly realising that what is needed instead is a comprehensive and intentional approach to promote decent work. 

Such an approach would be of benefit to workers in developing economies, where workers are facing significant risks due to the global demand for cheap goods. 

But it would also have positive effects for British-based workers, as it would help establish a level playing field and eliminate the scope for a race to the bottom. 

At the Institute of Employment Rights, we propose domestic legislation that will seek to enforce corporate due diligence by creating a duty of care between British corporations and their subsidiaries, suppliers and subcontractors. 

Firms at the apex of the chain already regulate their domestic and global supply chains for their own commercial interests. 

For instance, in the British retail clothing industry an oligopoly of major retailers are effective business controllers of supply chains. Public regulation should harness the contracting practices of these firms for employment policy purposes. 

There are very good reasons for the introduction of legislation that integrates three approaches to business and human rights — the UN guiding principles on business and human rights, the UK Modern Slavery Act and the recently enacted French legislation on the duty of care. 

The type of proactive model of supply chain regulation we propose is distilled into four actions — identify, prevent, mitigate and account for human rights abuses. 

Under this model, companies will not only be required to account, as is the case with the 2015 Modern Slavery Act, but also identify and address the presence of risks within their supply chain and ultimately be accountable to implement systems to mitigate actual and potential adverse human rights impacts with which they may be involved. 

Central to this will be the elaboration, disclosure and effective implementation of a vigilance plan. 

The plan, which will be drafted in association with stakeholders such as trade unions, will include “reasonable measures to adequately identify risks and prevent serious violations of human rights and fundamental freedoms, risks and serious harms to health and safety and the environment.” 

In order to ensure that companies establish such plans and effectively implement them, remedies in the form of fines for companies that are out of compliance with the creation and publication of vigilance plans and damages for human rights abuses that materialise will be available. 

Crucially, the legislation will provide for the reversal of the burden of proof from victims to companies. Legislation could go as far as providing for mandatory additions to arrangements between firms at the apex of supply chains and their affiliates or suppliers, detailing action that the former will take if they become aware of exploitation, including termination of contract. 

And in recognising that it is not only the legal framework that is the problem in developing economies but the lack of capacity of governments to enforce those laws, our proposal includes the extension of the duty of care to the importation and processing of goods produced through supply chains. 

This, in conjunction with the use of verification and certification schemes that verify that the imported goods have been sourced responsibly and are respecting environmental, economic and social standards, will act as a complementary risk management exercise aimed at minimising the risk of placing illegally produced goods on the British market and strengthening further the foreign regulation of supply chains. 

Labour standards in supply chains can be understood as a productive factor in terms of human development, socio-economic cohesion and business growth, but they do not only have an instrumental role in shaping such outcomes but also a constitutive role in the development of a stable and cohesive society in the world we live. 

Our proposals would go towards significant improvements in the current legislation in order to go beyond pure reporting requirements and promote instead more proactive approaches to tackling labour issues. 

In the longer term, the exploitation of supply chains needs to be addressed by strengthening regulation at the international level. 

A progressive Westminster government can be a pioneer in supporting labour policy mechanisms that individually and in combination ensure that supply chain products and services are not made at the expense of protecting human rights. 

Dr Aristea Koukiadaki is senior lecturer at University of Manchester School of Law and a member of IER Manifesto for Labour Law Group of Experts. She will be discussing trade deals and supply chains at a forthcoming IER event, Future of Labour Law: Progressive Rights Under a Progressive Government, on Thursday June 14 at Unite the Union, London from 9.30am-3pm. For more information visit www.ier.org.uk.

 

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