How to Spur Corporate Accountability with Modern Slavery Legislation
Following the example of the 2015 UK Modern Slavery Act, several countries are now passing anti-slavery legislation. As John McKay recently wrote about in a recent article on this site, Canada is considering a new law, as is Norway.
Few would disagree that government action and legislation are needed to address forced labour. The problem is that this legislation is widely recognized to fall short in relation to one of its key goals: spurring greater corporate responsibility for forced labour in global supply chains. Indeed, as part of a broader turn towards government-mandated transparency, most modern slavery legislation contains a provision requiring companies to report on steps they have taken to ensure supply chains are free of modern slavery. However, to date, both rates of compliance and evidence that the legislation is spurring meaningful change towards solving the problem of forced labour in global supply chains have been disappointingly low. For instance, one recent study of reporting under the UK Modern Slavery Act found low compliance and little improvement in the generally low quality of company reporting.
As new governments consider modern slavery law as a tool to spur accountability for forced labour in global supply chains, it is a good time to reflect on what could be done to make this legislation better and more effective. I’ve recently conducted two studies on the effectiveness of this legislation that shed light into this question, and want to briefly summarize some key insights from this research.
In a study recently published as working paper for the ILO that I undertook with colleagues Nicola Phillips (Kings College London) and Sara Wallin (UK Department for Business, Energy and Industrial Strategy), we analysed the institutional design of 17 pieces of disclosure legislation specific to labour standards. We found that the scope and stringency of such legislation varies significantly across jurisdictions, and we evaluated the institutional effectiveness of different models of legislation. Looking across the legislation as a whole, we recommended two changes that could improve the quality of company reporting:
- Companies should be required to report on a standardized set of indicators year-on-year, including around the specific risks of forced labour within their supply chains; and
- Companies should be required not only to report on the efforts they are making, but also to report on the effectiveness of those efforts. These changes would significantly improve the institutional design of disclosure and transparency legislation, by requiring companies to report relevant and consistent information.
The second study, recently published in Global Policy, investigated and compared the impact of two corporate social responsibility-focused government interventions—the 2010 UK Bribery Act and the 2015 UK Modern Slavery Act—on the behaviour of 25 FTSE 100 companies. For this research, I teamed up with my colleague Andreas Rümkorf, a corporate lawyer and expert on company law. We thought that the Bribery Act and Modern Slavery Act would be interesting to compare because they have similar goals—deepening corporate accountability in global supply chains—but use two very different legislative models to do so. The Bribery Act is a more stringent form of legislation, which establishes extraterritorial corporate criminal liability, specifies binding public standards and includes sanctions for non-compliance. The Modern Slavery Act is a less stringent form of legislation, which increases companies’ obligations to report on and disclose voluntary efforts to address and prevent forced labour in supply chains. Unlike the Bribery Act, the Modern Slavery Act does not establish extraterritorial liability, specify binding public standards or impose sanctions for non-compliance. We studied how company purchasing practices, supplier policies and reporting evolved in the wake of each Act, to gauge how the institutional design and quality of legislation impacts influence company behaviour.
We found that the Bribery Act appears to have resulted in much more significant changes to corporate policies and practices than the Modern Slavery Act. As we document in the article, all of the companies in our study proactively engaged with the issue of bribery in their policy, as well as private contracts with suppliers. Compared to forced labour, they used stricter language to express their bribery policies, had stricter requirements for bribery in their supplier-related documents and codes of conduct, and had higher-quality reporting on bribery within their sustainability reports.
This finding is important because it suggests that more stringent forms of legislation are potentially more likely to be effective in steering corporate behaviour. However, there is a need for more in-depth, comparative and field-based research to further investigate and confirm this finding.
If governments want to spur meaningful changes in corporate behaviour through modern slavery legislation, they need to ensure that the provisions dealing with companies and their supply chains are robust. There is a growing body of academic research that sheds light into effective institutional design for this legislation. It is not a lack of data that prevents the implementation of more effective policy. The challenge, of course, is political.
This article has been prepared by Genevieve LeBaron as a contributor to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the author and do not necessarily reflect those of UNU or its partners.