Why do we need a new law?
Negative human rights and environmental impacts are embedded in the supply chains of UK businesses in multiple sectors: from food to electronics, construction to cars; from modern slavery. This includes impacts on workers – including dangerous working conditions and repression of trade unions – and impacts on communities and the environment close to company operation – such as toxic pollution, land-grabs and attacks on human rights defenders.
People affected by corporate abuse often face long and difficult struggles for justice, exacerbated by the power yielded by power wielded by corporations and the complex corporate structures that enable companies to evade responsibility.
Voluntary “CSR” initiatives are failing to prevent harm – without strong laws, only a minority of very well-intentioned companies, or those facing consumer scrutiny, decide to invest in improving their performance. There are no laws in the UK to hold companies accountable for their supply chain impacts (both in the UK and overseas) – which disproportionally affect people in the Global South.
What are we calling for?
We are calling for UK legislation to create a “failure to prevent” mechanism for corporate human rights abuses, modelled on the duties to prevent tax evasion and bribery found in the Criminal Finances Act 2017 and the Bribery Act 2010. This model has been found legally feasible by the British Institute of International and Comparative Law.
A “failure to prevent” law would incentivise companies to take action to prevent abuse from happening, and hold companies accountable if they failed to do so.
What would companies have to do to prevent harm?
Under this law, companies would have to take action to prevent human rights abuses and environmental harm in, or arising from, their global products, services, operations, investments, and value chain – through carrying out human rights and environmental due diligence.
This would include identifying and assessing risks, putting in place measures to prevent and mitigate them (including remedy for victims) and being transparent about their actions and their effectiveness.
The due diligence would need to be tailored to how severe the impact is, and account for specific impacts on particular groups, including women, children and indigenous peoples.
What would happen if a company failed to prevent abuse?
Companies could be held liable in a UK court for harm, loss and damage arising from their failure to prevent harmful impacts. Evidence that they’d put in place due diligence to mitigate and prevent harm could form part of their defence.
The law would help to alleviate some of the obstacles faced by victims when they seek remedy (such as compensation), as it would make it more straightforward to establish a UK company’s liability for human rights abuses and environmental damage which it has caused or is linked to its subsidiaries; or, in certain circumstances, suppliers.
There could also be criminal penalties for corporate involvement in gross human rights abuses.
Who would it apply to?
The law should cover companies in all sectors and of all sizes carrying out business in the UK. SMEs would be included, though the the scope of a company’s actions would determined by its size, sector, activities and the scale of its impacts.
Those who actively receive material benefit from abuses should be captured by the legislation. The law could include financial institutions who facilitate human rights abuses as well as investors.
The requirement to conduct due diligence should include public sector bodies (including government departments, local authorities, and bodies such as export credit agencies).
We already have the Modern Slavery Act – do we need a new law?
The Transparency in Supply Chains (TISC) provision of the Modern Slavery Act is limited to “modern slavery” and doesn’t require businesses to take action to address risks and impacts; nor does it hold businesses accountable when they fail to prevent abuse from happening. While many companies report on their risks and impacts on human rights, few are actually taking action to address them.
UK company Boohoo had abusive working conditions in their supply chain, but the company was fully compliant with the Modern Slavery Act – even though they may have breached the UNGPs. Under our proposed law, Boohoo could have been found liable for the abusive working conditions in their supply chain. This would give the UNGPs “force of law” in the UK.
The law would build on the TISC but provide a stronger approach and would cover all human rights abuses, and negative environmental impacts – which are strongly interlinked.
The Government is planning to introduce mandatory due diligence for deforestation linked commodities – why do we still need a new law?
The Government’s new proposal for mandatory due diligence to tackle deforestation is a welcome step, but it won’t be effective unless it covers a wider spectrum of environmental impacts and human rights, which are inextricable from one another.
Local communities and indigenous communities are often at the forefront of protecting the environment and climate against corporate harm – their rights must be protected.
We are calling for a stronger law which covers all negative human rights impacts – including “modern slavery” and “deforestation” – which makes clear business responsibilities across all sectors, and enables the companies to focus on the most salient risks for human rights and the environment in their own business.
Who supports legislation in the UK?
The UK’s Joint Committee on Human Rights called for this legislation several years ago. Both the Labour Party and the Liberal Democrats supported provisions on mandatory due diligence in their 2019 election manifestos.
The Global Resource Initiative Taskforce (a group of businesses and NGOs convened by Government) recommends the urgent introduction of a mandatory due diligence obligation covering both human rights and environmental risks and impacts.
Many businesses support new legislation due to anticipated benefits including legal certainty and a level playing field. Businesses, including those operating in the UK (e.g. Nestle, ASOS, Primark) also support the introduction of human rights and environmental due diligence legislation in Europe. And international investors worth more than $100 trillion under assets that have called for mandatory due diligence legislation.
Similar legislation has been introduced in France, and is now on the agenda in several other countries – including Switzerland, the Netherlands and Germany – and in the EU itself.
The EU is planning to table similar legislation next year – what does this mean for the UK after Brexit?
The EU’s legislative proposal is expected to apply directly to all companies operating in the single market – which would include UK businesses, regardless of whether there is a trade agreement in place.
Failure to keep step with the EU on this issue would put some UK business at a competitive disadvantage, and create confusion – as not all UK companies will be covered by the EU law.
Failure to keep step would also put the UK on the back foot on business and human rights. But by moving ahead with a new law, the UK could help to shape global requirements for companies.