European Sustainability Reporting Standards and Indigenous Rights
At the start of this month the European Commission adopted the first set of European Sustainability Reporting standards (ESRS), which will be applicable to all companies subject to the Corporate Sustainability Reporting Directive (CSRD). Whilst these come into effect in 2024, businesses need to start preparing to report on the 12 standards covering issues such as climate, pollution, workers in the value chain and affected communities.
In January 2023, the EU introduced the Corporate Sustainability Reporting Directive, this directive intends to modernise and strengthen the rules concerning social and environmental information companies must report, amending the existing Non-Financial Reporting Directive. The adopted ESRS intend to help companies communicate and manage their sustainability performance and will be mandatory for businesses that fall under scope of the Directive. The CSRD applies to large undertakings based in the EU, parent of large EU groups, SMEs and large non-EU groups, depending on their eligibility against the relevant criteria. Businesses will be required to report metrics on the following areas: climate, pollution, water & marine resources, biodiversity, own workforce, workers in the value chain, affected communities, consumers & end users and business conduct. The introduction of the ESRS under the CSRD is another reason to ensure your organisation is acting responsibly and investing in continuous improvement of its modern slavery and human trafficking prevention efforts.
The ESRS ensure businesses assess if they are causing or contributing to human rights abuses in their operations or supply chains, to hold them accountable for their actions. However, the legislation only provides for civil liability and may not be enough to stop businesses from engaging in harmful activities, and currently only applies to 1% of European companies.
What can your organisation do?
- Review the Corporate Sustainability Reporting Directive and establish if you organisation meets the criteria for reporting or is expected to in the coming years.
- Assign an individual or team the responsibility of monitoring and reporting the progress against the ESRS annually.
- Review current activities and reporting to ensure these align with the requirements of the ESRS reporting metrics for the reporting deadlines in 2024 and 2026.
GERMAN SUPPLY CHAIN DUE DILIGENCE ACT
The German Supply Chain Due Diligence Act, which came into effect from 1st January 2023, places mandatory due diligence obligations on businesses operating in Germany to ensure they are protecting human rights and the environment within their business operations and supply chains. Businesses falling within scope will be expected to implement a variety of measures, including risk management and analysis, a complaints procedure if one isn’t in place already, and a policy statement on their human rights strategy.
The German Supply Chain Due Diligence Act (SCDDA) come into effect in Germany on 1st January 2023, placing certain due diligence obligations on businesses to protect human rights and the environment in, as well as responsibly manage, their supply chains.
Companies based in Germany or with a branch located in Germany, with over 3,000 employees (or over 1,000 from 1st January 2024), will be subject to the scope of this act. Administrative fines of up to EUR 8 million or 2% of a company’s global revenue will be imposed for non-compliance, with market access restrictions for any business found not complying, as well as lawsuits for the worst offenders.
What does this mean for your organisation?
STOP THE TRAFFIK recommends that companies looking to comply with the SCDDA should implement extensive due diligence compliance measures. This can include:
- Implementing a human rights focussed risk management system which considers and prevents risk within the business’s operations and direct suppliers.
o This system should also be applied to beyond tier 1 (fourth party) suppliers indirect suppliers as this is often where much of the risk lies.
- Establish robust policies and procedures that outline the company’s approach to the protection of human rights and the environment within their supply chain (i.e. their due diligence approach).
o These policies and procedures need to be implemented effectively, with training provided for relevant, new procedures to ensure all staff and suppliers understand their obligations.
- Focus on transparency. Businesses need to publicly disclose their activities annually and should report how they are fulfilling their due diligence obligations, including risks identified and mitigated and any measures taken in response to complaints.
JANUARY PUBLICATION OF THE UNODC GLOBAL REPORT ON TRAFFICKING IN PERSONS
The United Nations Office on Drugs and Crime (UNODC) released its January publication of its Global Report on Trafficking in Persons, the seventh release of the report to date. This edition of the report explores the trafficking patterns and flows identified during the Covid-19 pandemic and uncovers 11 Special Points of Interest that highlight the link between trafficking, the pandemic, climate change, war, conflict, and more.
11 Special Points of Interest have been identified from data across 141 countries, analysing trafficking cases between 2018 and 2021. This includes an additional analysis of 800 court cases adjudicated between 2012 and 2020 to provide a deeper understanding of the crime, its victims, and perpetrators. This data presents an opportunity to detect trends and significant changes in convictions and incident reporting since the data was first collected by the UNODC in 2003. The report in full can be found here where each of the 11 Special Points of Interest has a set of Possible Responses which outline practical actions that can be taken in response to each finding.
In addition to the report, the latest dataset has been added to the UNODC data portal. This contains data on global human trafficking collected since 2009 and contains data on more than 450,000 victims and 300,000 (suspected) offenders detected between 2003 and 2021.
What can your organisation do?
- Understand the UNODC’s Possible Responses linked to the Special Points of Interest and build a framework to identify these responses as they relate to your company’s operations and supply chain.
- Explore the UNODC data portal to highlight the modern slavery and human trafficking risk associated with your business operations and supply chain.
- Adopt a transparent anti-modern slavery and human trafficking approach. Implement this by sharing due diligence actions with other businesses to set a standard across your sector.
WORLD WATER DAY, 22ND MARCH 2023
World Water Day 2023, held annually on 22nd March, focused on the cooperation and collaboration of stakeholders to accelerate actions in solving the global water and sanitation crisis. Lack of access to safe water negatively impacts communities and their livelihoods, leaving them vulnerable to exploitation.
For the past 30 years, annual World Water Day has been used to advocate the importance of freshwater and the sustainable management of freshwater resources, in line with Sustainable Development Goal (SDG) 6. Globally, it is unlikely to meet SDG 6 by 2030, and the launch of the 2023 UN Water Conference, which includes World Water Day 2023, intends to introduce the Water Action Agenda for cooperation and collaboration to try to better reach this goal. The agenda will “create clear commitments, pledges and actions” to unify stakeholders, nations, and professionals.
Over 2.2 billion people are currently living without access to safe water, denying their human right to fresh water and a decent standard of sanitation. The UN Water Conference 2023 has 5 themes for the Water Action Agenda that intend to support SDG 6: Water for Health, Water for Sustainable Development, Water for Climate, Resilience and Environment, Water for Cooperation and Water Action Decade. Water for Cooperation will drive initiatives for international and cross sectoral collaboration, to ensure water management is addressed globally at local, national, regional and international levels. Commitment from businesses to cooperate in this action is vital in driving the success of water actions for the 2030 Agenda for Sustainable Development. All business operations and supply chains will impact freshwater, from water extraction for methods of cooling to the disposal of wastewater.
Access to clean water and adequate sanitation is a fundamental human right and the 2023 World Water day highlighted that “water affects everyone, so we need everyone to take action”. The current crisis in the water cycle will continue to undermine global issues, such as health, hunger, gender equality, jobs, education, industry and natural disasters.
What can your organisation do?
- Commit to voluntary national and global commitments and implement them, such as the Global Wastewater Initiative, to accelerate the progress of SDG 6.
- Follow up with the commitments made during the UN Water Conference, published on the official Conference website, and build a framework to commit to one of these actions in your operations. Submit your initiative to the UN to show your commitment to clean water.
- Take part in, facilitate or lead forums that allow for human-centred, cross-sectoral collaboration that seeks to find solutions to the pollution of water by your operations, and limit the water-related risk drivers increasing vulnerable to exploitation.
LEGISLATIVE UPDATES: THE NORWEGIAN TRANSPARENCY ACT AND THE UYGHUR FORCED LABOUR PREVENTION ACT
The deadline for businesses to publish their first reporting obligations under the new Norway Transparency Act is fast approaching, and there are new developments around the Uyghur Forced Labour Prevention Act. Whether businesses fall within the legislation’s current scope or not, it is vital for all businesses to understand their reporting and due diligence obligations as well as the penalties and civil action risks under each Act due to the rapidly-evolving nature of Modern Slavery and Human Trafficking legislation.
The Norway Transparency Act, enacted 1st July 2022 and the Uyghur Forced Labour Prevention Act (UFLPA), enacted 23rd December 2021, are two key pieces of due diligence legislation which recently came into effect.
The UFLPA is U.S. legislation designed to ensure American entities are not funding forced labour among ethnic minorities in the Xinjiang region by banning these goods from entering U.S. markets. Among the new developments is the scope of enforcement. It has now expanded beyond the existing high-priority goods list including cotton, tomatoes, polysilicon, and silica-based products. It is now expected to include products and materials such as aluminium, steel, car parts and PVC, with the updated list planned to be finalised in summer 2023. There is also an expanded list of UFLPA FAQs to help importers gain a better sense of how U.S. Customs and Border Protection is enforcing the UFLPA.
The purpose of Norway’s Transparency Act is to promote good working conditions and respect for human rights in businesses and to ensure the public has access to information on how businesses address their impact in these areas. There are three main obligations around conducting supplier due diligence, publicly reporting on due diligence, and cooperating with information requests from the public. Organisations within the legislation’s scope have until the 30th of June to publish their first reports.
What can your organisation do?
- Global legislation of this nature is evolving. Be prepared by ensuring your business is compliant now, in case you find your organisation is suddenly in scope of legislation.
- Stay ahead by engaging with experts to be the first to receive legislative updates and how to respond.
- Continuously scrutinise the quality of your social audits and due diligence processes – businesses must remain alert to procuring goods that have been ‘laundered’ through other countries to bypass the Uyghur Forced Labour Act.
THE CANADIAN BILL S-211, THE FIGHTING AGAINST FORCED LABOUR AND CHILD LABOUR IN SUPPLY CHAINS ACT
Canada joins growing global legislation efforts with its own forced and child labour supply chain act, coming into force in 2024. Even if businesses fall within the legislation’s scope or not, it is vital for all businesses to understand their reporting and due diligence obligations and penalties and civil action risks under each Act in the rapidly evolving nature of Modern Slavery and Human Trafficking due diligence legislation.
Global legislation on modern slavery is on the rise, and with it, stricter regulations and enforcement. With this expanding legislative landscape, communities are also increasingly engaging with and empowered by this legislation to enact change. Only 3 months after the German Supply Chain Due Diligence Act came into effect, the first formal complaint has been issued by NGOs against 3 companies operating with unsafe conditions in factories in Bangladesh.
Most recently, Canada passed Bill S-211, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Bill), which comes into force 1st January 2024, if Royal assent is given. Similar to other legislation, it has a focus on transparent reporting and the monitoring of progress in actions taken to prevent exploitation. It applies to governments and businesses selling, producing or importing goods in Canada meeting specific operational and financial thresholds. Reporting requirements are similar to other acts, with additional transparency required on remediation and loss of income to vulnerable communities. Fines are in place for non-compliance, but there is currently no clear monitoring process for how this will be determined and enforced.
The latest in a long list of new legislation, Canada’s bill is another reason to ensure your organisation is acting responsibly and investing in continuous improvement of its modern slavery and human trafficking prevention efforts.
What can your organisation do?
- Review the Bill and establish if your organisation meets the criteria for reporting or is expected to in the next year, and if it is not currently in scope businesses should still be preparing with the global rise of modern slavery legislation.
- Assign responsibility to an individual or group of individuals for the monitoring and reporting of progress against the Bill annually.
- Review current activities and reporting to ensure these align with requirements in preparation for the first reporting deadline in May 2024.
NEW LEGAL CHANGES INTRODUCED BY AUSTRALIAN GOVERNMENT TO PROTECT MIGRANT WORKERS
New legal changes, including jail terms, are set to be introduced for Australian employers exploiting migrant workers. These legal changes are fast approaching and are designed to protect Australia’s low-skilled temporary migrant workers, on which the country’s economy heavily relies.
Australia has introduced legal changes which are set to be implemented within the coming weeks, designed to protect low-skilled temporary workers and eradicate exploitation. The changes include making it a criminal offence to coerce someone into breaching their visa conditions, with penalties of up to two years in jail. The changes also include a new ban which will prohibit employers who have previously exploited migrants from hiring other temporary visa holders along with tripling existing financial penalties.
There will also be further protections for migrants including increasing number of days allowed for migrants to move between jobs from 60 and 90 days to 180. Australia’s Migration Act will also have a section repealed that states it is an offence for visa holders to violate conditions regarding the work they are allowed to do. This section has actively undermined people reporting incidents of exploitative behaviour and practices in the past. To ensure the successful enforcement of these changes, the Australian Border Force will also receive $50m in funding.
The ultimate aim of these changes is to ease pressure faced by migrants to remain in poor working conditions and encourage workers to report abuse which in the current system they are deterred from doing so. Whilst these legal changes will only apply to Australian employers, it is possible, given the growing legal landscape, that similar legislation will be introduced in other countries.
What can your organisation do?
- Proactively engage with experts to strengthen supplier engagement and ensure effective procedures are in place should a case of exploitation be linked to a supplier in Australia.
- Continuously review the quality of your social audits and due diligence processes. It is important to remain aware of where critical goods and commodities are sourced, as similar legislation could continue to be introduced globally.
CHINA’S ANTI-ESPIONAGE LAWS AND HUMAN RIGHTS DUE DILIGENCE
China is a critically high-risk country for human rights abuses in many supply chains, meaning it’s often a focus for social auditing and closer monitoring. Newly expanded anti-espionage laws are expected to make this even more difficult and dangerous to undertake.
Human rights due diligence, including conducting audits, is a fundamental aspect of managing risk in supply chains and is required by both the German and upcoming EU due diligence acts. It is one of the only ways to monitor whether a supplier is, in practice, respecting codes of conduct and international human rights laws. It is particularly important in high-risk countries such as China where exploitation is state-run. Conducting audits in the region has already been difficult due to bribery, corruption and complex systems of fake shadow factories for audits, and is becoming increasingly more so under new anti-espionage laws.
In March, Chinese authorities raided and closed a US-based due diligence firm claiming the office was collecting and selling confidential information that was in violation of new anti-espionage laws. Authorities have since carried out more raids on other auditing firms and even arrested a citizen for investigation into Xinjiang. All of this raises concerns for the safety and future of ethical audits in China.
Businesses are now met with a difficult decision as to whether they can continue business in the region. Conducting business in China without the ability to safely and accurately audit is not an option if companies aim to uphold recent ESG legislation, yet it remains a critical sourcing country for many raw materials and a major manufacturing hub. It is a time for businesses to come together to consider a way forward which priorities the safety of auditors and workers affected.
What can your organisation do?
- Monitor the legal situation and political environment to prioritise the safety and security of staff or auditors working in the area;
- Explore alternative approaches to due diligence, such as blockchain technology, which does not require as much physical presence on site;
- Continue to actively avoid sourcing from the Xinjiang Uyghur Autonomous Region and other high-risk areas to remain in alignment with the Uyghur Forced Labor Prevention Act in the US and to lower the risk of involvement with forced labour.