In mid-January Amnesty International, the human rights organization, accused 16 multinationals of failing to do checks to ensure that cobalt in the batteries in their digital and electronic products had not come from mines in the Democratic Republic of the Congo where children as young as seven are working long hours in dangerous conditions. UNICEF has estimated that about 40,000 children are working at all types of mines throughout the DRC.
The joint Amnesty and African Resources Watch (Afrewatch) report traces supply chains from the cobalt mines, to traders who sell the mineral to a subsidiary of a Chinese firm, to battery manufacturers. Four of the multinationals told Amnesty they were uncertain of where their cobalt came from and six said they were investigating the claims. Five denied a connection to the supply chain, despite being listed as customers in company documents. The story made headlines around the world and spread quickly on social media. Some of the multinationals were widely named, and no matter what their responses or lines of defence were, potentially damaging brand association was inevitable.
Detailed annual statements
The Modern Slavery Act, which came into effect in October, creates new criminal offenses of slavery and human trafficking. It also imposes an obligation on businesses with annual turnovers exceeding £36 million a year to make annual statements setting out what steps they have taken to ensure that their own business, and any part of their supply chains, are free from slavery and human trafficking. Businesses must include information about what due diligence they have undertaken and what they have done to mitigate the risks of these crimes being committed. Companies must prominently display the statements on their website and, if requested, provide a full copy within 30 days.
Alternatively, they can state that they have taken no steps in these respects. Failure to make any statement at all can result in the Secretary of State issuing an injunction to force compliance.
The legislation doesn't make non-compliance a criminal offence or introduce monetary penalties. The penalty is reputational – bad publicity and public shaming.
Civil actions – increased risk
While the Act doesn't create a right for victims of slavery and human trafficking to bring civil actions, it may increase the likelihood of allegations that companies have been involved in tortious unlawful act conspiracies if they have made no statements, or made statements that indicate insufficient, negligent or a complete absence of monitoring and steps to mitigate the risks of a crime being committed. A class actions involving groups of claimants could lead to an even more damaging public relations crisis.
The Act makes it critical that any company carrying out any part of its business in the UK starts now in preparing its first statement (if it hasn't done so already). It needs to instigate enhanced due diligence on its supply chain, identifying the parts of its business that constitute a risk and documenting the steps it has taken to assess and manage them. Monitoring needs to be ongoing, with built-in measures to ensure high standards are maintained in the long term.
Lexis Diligence is proven to help companies conduct checks on their suppliers, agents, distributors and other third-parties to mitigate reputational, financial, regulatory and strategic risks.
p.s. 3 ways you can apply this information right now to better understand your responsibility in Human Trafficking awareness