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Combating modern slavery in global value chains post-COVID

The presence of modern slavery in global value chains (GVCs) governed by multinational corporations (MNCs) is an accepted fact. It exists in all stages of the supply chain, with an estimated 45.8 million people trapped in forced labour or in some form of modern slavery. The complexity of GVCs makes it almost impossible to keep records of instances of modern slavery and without such information, it is difficult to understand it’s true extent and impact. Lack of proper regulations or the ineffectiveness of voluntary corporate social responsibility norms, and the push for MNCs to lower prices in the global economy, have contributed to the spread of modern slavery, particularly in low-income countries.

 

Laws requiring corporations to combat modern slavery

The obligation to end modern slavery as part of the United Nations Sustainable Development Goals and the corporate responsibility to protect and respect human rights (which includes the duty to prevent modern slavery) is explicitly recognized in the United Nations Guiding Principles. However, since these documents are not binding upon MNCs, obligations can be enforced solely through domestic laws, and due to the lack of such laws worldwide, modern slavery has continued unchecked. In recent years, countries have sought to remedy this. The United Kingdom’s 2015 Modern Slavery Act, for instance, has obligated corporations to publish an annual modern slavery statement on actions taken to prevent modern slavery in their supply chains and their own operations. The Act has addressed modern slavery uniformly across GVCs. However, major flaws in the Act include the lack of content to be included in the annual statement and lack of penalties. Stakeholders and organizations have raised concerns about poor compliance with the Act, defeating its purpose. In sharp contrast to this, the Australian 2018 Modern Slavery Act mentions the topics that must be included in the statement, including how companies assess the effectiveness of their measures. These statements must be submitted to the Government for publication on a central online registry. Even then, experts have criticised Australia’s legislation for being slow towards addressing modern slavery in GVCs. Similar laws have been enacted in the Netherlands, France and US states, requiring companies to produce due diligence reports, but are not entirely obligatory or strict in nature. In the absence of strong laws and regulations, modern slavery has continued to flourish, its impact more clearly seen during the COVID-19 pandemic.

 

Modern slavery in the COVID-19 pandemic

Workers engaged in GVCs felt a disproportionate impact of the pandemic and the disruptions in supply chains. Workers have lost their jobs or been subject to even more strenuous conditions by companies, who have been able to exploit vulnerable workers due to the lack of regulations. The full impact of COVID-19 and the accompanying lockdowns and economic crises on modern slavery in GVCs has not yet been fully identified, but it has been estimated that the impact has been detrimental to workers. The voluntary and/or ambiguous nature of domestic due diligence requirements has made it easier for MNCs to exploit workers at a greater scale, with women, children and migrant workers facing increasing obstacles. Further, the uncertain nature of the pandemic has led to continuous shocks to GVCs, leading to further deterioration in compliance.

 

Viable solutions

The exacerbation of modern slavery in GVCs by the pandemic has also presented as an opportunity for governments to strengthen the framework for corporate accountability worldwide. Understanding the limited resources available to companies and the disruptions faced in GVCs, government regulators must use this time to not relax the existing obligations, but incentivise reporting by companies. The increased emphasis on local production has made it easier to identify and prevent abuses, which authorities must use to their advantage. This time must also be utilized by legislators to put in place more effective and comprehensive policies that take into account the global nature of modern slavery.

The pandemic also presents an opportunity for MNCs themselves to take part in the global effort in eliminating modern slavery. Corporations not only benefit from adopting due diligence frameworks and putting in place policies that prohibit human rights abuses, but also avoid reputational risks associated with engaging in modern slavery practices. The incorporation of best practices by companies, such as putting out a detailed statement on modern slavery within the business, could send a strong message to investors and stakeholders, in an economy where ESG is regarded as a major potential driver. Businesses must also review all existing and future relationships to prevent human rights abuses in supply chains across borders.