Shell is being taken to court over oil spills; the UK is trying to tighten transparency rules on Modern Slavery at the same time as they water down protections. Multinationals are set to fall into the gulf of laws keeping supply chains free of abuses and slavery, writes Richard Reichman.
Earlier this month, more than 11,000 Nigerian residents filed a claim at the High Court in London. Their fight was with Shell, the oil giant. Two communities of locals claim the multinational spilled oil and contaminated drinking water, harmed air quality and destroyed farmland and fishing stocks.
But the case is also a significant test of how far responsibility for multinationals reaches. There is also a separate claim against Shell's board of directors, which alleges failure to manage climate change risks to the company. In the UK, there is a gap in laws governing the due diligence which must be done along supply chains.
Shell is not alone. Other recent high-profile supply chain problems include a rape in a Thailand factory supplying Tesco, allegations of labour abuses at a Malaysian supplier of Dyson and 1,700 instances of child labour in Tony's Chocolonely's supply chain. There has also been a significant, albeit unsuccessful, crowdfunded claim for judicial review by the World Uyghur Congress over the failure to commence a criminal investigation into imported cotton produced in Xinjiang under alleged forced labour conditions.
The UK has historically been a world-leader on ESG compliance, and the recent spate of concerns over greenwashing shows the government is alive to future problems at hand. But there is a dearth of due diligence requirements in place for major UK companies. There is work underway to strengthen transparency rules in the current Modern Slavery Act and deal with deforestation risks, but we are failing to keep pace with international movements.
France and Germany, for example, have both gone further than our laws, and the rest of the European Union is set to follow suit to close the gap with due diligence requirements on supply chains. The UK government's current position is that it would create an overly burdensome environment for businesses. It's easy to sympathise with this position, and there does need to be a balance between regulation and costs to firms. But it can also lead to tragedy. If you need evidence of the potential dangers posed by a deregulatory agenda, you need only look at how the Grenfell Tower brought the issue of building rules into sharp relief.
And while it's taking some steps to address these concerns, the government has also watered down protections in the Modern Slavery Act to try and address their concerns over immigration across the Channel. Talk about cognitive dissonance. Higher hurdles for these protections have been criticised as damaging our standing globally, and open us up to the risk of harming the very people we're trying to help as we strengthen transparency rules in supply chains. For example, a victim of forced labour abroad (who may be making clothes unknowingly worn by UK consumers) could find it harder to escape harm to the UK.
A supply chain due diligence offence could apply tohuman rights abuses and environmental harms ina company's own operations, its subsidiaries and supply chains. It would put the onus on the firm to understand where their products are coming from, and the potential risks at play, even where they occur overseas.
Harmsto lives and livelihoodswould be less likely to be passed on rather than prevented, with large penalties and reputational damage acting as a greater deterrent, rather than sporadic claims.
Far from overburdensome, it would provide clarity on duties on multinationals and creategreater consistency with our global trading partners. Household name companies such as Tesco, ASOS, Primark and John Lewis have thrown their weight behind this approach.
No matter how diligent a company is, it is always possible that unacceptable practices will occur in its complex supply chains across the world. However, where the UK once helped to guide in this field, there is a gap at risk of turning into a gulf.
This article was first published by City AM on 17 February 2023.
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