Mandatory Human Rights Due Diligence in the UK: To Be or Not to Be?
This blog is part of a series 'Towards Mandatory Human Rights Due Diligence'.
The UK has a number of specific laws aimed at reducing businesses’ negative impact on human rights (i.e. the Gangmasters (Licensing) Act 2004; the Companies Act 2006; the Modern Slavery Act 2015 (‘MSA’), etc). Despite these important initiatives, the UK business and human rights regulatory landscape is far from perfect. Dr Anil Yilmaz Vastardis (University of Essex) observed that there is currently no single piece of legislation covering human rights responsibilities of businesses. As a result, there are serious gaps in the extraterritorial coverage of the cross-border business operations and access to remedy for victims of human rights violations. The UK was the first state to launch, in 2013, a National Action Plan implementing the UNGPs, which was useful at the time as a policy statement. Yet, Marilyn Croser (CORE) noted that the document proved to be limited in terms of actual regulatory measures. Since then, a number of Parliamentary committees undertook several inquiries looking into challenges and opportunities for encouraging responsible business practices. The Joint Committee on Human Rights published a report ‘Human Rights and Business 2017: Promoting responsibility and ensuring accountability’ with many valuable suggestions including putting in place effective HRDD processes, but the UK Government’s response was modest and unenthusiastic (‘2017 JCHR Report’). More recently, the Environmental Audit Committee released a report ‘Fixing Fashion: Clothing Consumption and Sustainability’ suggesting a new mandatory HRDD provision under the MSA, but again the Government refrained from any firm commitment in its response.
MSA: A toothless tiger?
The MSA certainly a landmark law at the time and a positive move in the right direction. It helped raise awareness about transparency in the supply chains. But has it been successful in bringing about meaningful change in corporate practice? This remains an open question. The MSA requires companies with a turnover of GBP 36 million a year to publish an annual statement setting out the steps they take to prevent modern slavery in their businesses and their supply chains. The obligation is not particularly burdensome. The statement needs to be approved by the board, signed by the director and published on the company’s website with a link to the statement placed on the homepage. But a recent review of the reporting in the hotel industry demonstrated that only 25% of the 71 statements assessed met even these minimum requirements. There is currently no requirement to conduct any level of due diligence or to provide remedy to victims. It is, therefore, possible to comply with the MSA by simply stating that no steps have been taken by the company to ensure that its supply chain is free from slavery and human trafficking. Matthew Waller (Ergon Associates) explained that the MSA is essentially backwards facing, as it does not require or incentivise business to set out any public commitment and implement actual measures.
Analysis of the modern slavery statements conducted by Ergon Associates in 2018 suggests that many companies fail to update their statements and instead publish the same document each year. Matthew further clarified that only a relatively small number of companies goes beyond the compliance requirements of the MSA and tries to map their supply chains and take steps to better understand and address the risks. ‘Good’ reporting comes (more often than not) from large businesses driven by pressure from consumers, investors and civil society. Anna Triponel (Triponel Consulting) explained that implementation of the MSA can be confusing for corporate lawyers who are generally not trained to view human rights as a business risk. In effect, what MSA has failed to achieve is the culture of responsible behaviour where companies commit to changing their business structures to demonstrate respect for human rights.
‘Failure to prevent’ mechanism as a UK HRDD model
The 2017 JCHR Report proposed framing the UK HRDD model using a ‘failure to prevent’ mechanism along the same lines as section 7 of the 2010 UK Bribery Act. The latter introduced a new criminal offence of failure by a commercial organisation to prevent a bribe being paid at home and abroad to obtain or retain business or a business advantage. In February 2020, the British Institute of International and Comparative Law and Quinn Emanuel launched a thoughtful report with a coherent and comprehensive analysis of how ‘a failure to prevent’ mechanism could be adopted in the business and human rights field (see also this blog by Prof Robert McCorquodale discussing the study). The report suggests establishing a duty to prevent human rights harms in the company’s own activities and the activities of its business relationships. A failure to prevent such harms would result in possible civil liability for damages. The company nevertheless can benefit from a defence provision allowing it to demonstrate that it has conducted ‘reasonable’ HRDD. Such a mechanism effectively shifts the burden of proof onto the company to demonstrate that it has taken steps to prevent human rights harm and at the same time incentivises businesses to avoid a ‘tick-box’ approach.
In 2019, civil society organisations called for a UK law on mandatory HRDD. The current political environment is difficult in light of Brexit implications and Covid-19 complications. Yet, Marilyn Croser (CORE) highlighted a ‘few glimmers of light’. The Financial Reporting Council responsible for the regulation of the auditors, accountants and actuaries will undergo reform following its failure in the Carillion case, opening some space for a change in the UK corporate governance framework. The Online Harms White Paper published by the UK Government proposed a new statutory duty of care on a wide range of companies to improve online safety. There is also an ongoing debate around the purpose of the corporation in contemporary society. In 2019, the Business Roundtable (an association of CEOs of leading US companies) released a statement redefining the purpose of the corporation for the benefit of all stakeholders, and the British Academy is leading a major research programme examining the future of the corporation. It is yet to be seen whether we are finally approaching a paradigm shift in the understanding of corporate accountability for human rights violations.