Environmental, social, and governance risks and opportunities

Modern Slavery a Key ESG Factor

Today there are more than 40 million people in slavery
ESG law

Slavery exists today. The British government recently reported there are more enslaved people today than there have been at any time in history!

And if you doubt that modern slavery is here and now, 20 days ago, on March 1st, U.S. Customs and Border Protection officers seized four shipments of palm oil at the port of Baltimore because the palm oil was produced at the Sime Darby Plantation Berhad in Malaysia by forced or indentured labor, a form of modern slavery.

“There is no place for forced labor in today’s world, and Customs and Border Protection stands firm against foreign companies that exploit vulnerable workers,” said Marc Calixte, CBP’s Acting Area Port Director in Baltimore. “CBP will continue to ensure that goods made with forced labor do not enter our nation’s commerce and we will help to root out this inhumane practice from the U.S. supply chain.”

Modern slavery is broadly defined to cover all forms of forced labour. This exploitation involves a lack of consent, with victims unable to refuse or leave because of threats, violence, coercion, deception or abuse of power.

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There are more than 40 million people in modern slavery.”

UK Independent Anti Slavery Commissioner

One in four victims of modern slavery are children. 

And less than two tenths of one percent of victims of modern slavery are rescued each year.

The UK Independent Anti Slavery Commissioner describes that modern “slavery exists in every industry, in every country in the world,” yet in the United States where slave labour valued at more than $150 Billion annually exists, there is a low level of awareness of the prevalence of slavery.

A business having a statement on its website that it is concerned about human rights or slavery may sound nice, but in 2022 when so many are talking about ESG, that mere averment will not resonate and quite frankly falls short of decency and what a private enterprise should be doing to protect this most basic human right.

Claims by businesses about human rights including that no slaves or indentured servants are involved in manufacturing a product or its supply chain are not new, and have been prevalent in some form since at least the 1660s when the Quakers in England included those representations in promoting their confectionary businesses.

But today more is expected of business.

We work with companies giving them the tools to “stop slavery in our lifetime” from initial baseline risk assessments to confidential business audits including supply chain roadmapping and drafting written policies and modern slavery statements as well as to trainings and a broad breadth of other services to support antislavery processes.

But those tools are little utilized in the U.S. even as ESG is a cause celebre. The “S” (social) factors in ESG are among least measured factors in corporate sustainability despite being among the most impactful.

Widely cited as a checklist for Social factors are the first six of the ten principles of the UN Global Compact with human rights and labour rights being key. For example, among the Compact principles is “the elimination of all forms of forced and compulsory labour.”

That sounds simple enough, but how then are there more enslaved people today than there have been at any time in history?

Moreover, the widely accepted definitions of modern slavery expressly exclude “state imposed forced labour”, one of the issues most impactful and widely discussed ESG factors this year:  As companies look to their supply chains for violations of human rights and slavery, companies are including express language overcoming the presumption under the new Federal Uyghur Forced Labor Prevention Act (still being phased in) under which all “products produced in the Xinjiang region of China [where more than 80% of the world’s solar panels are sourced] are barred from importation into the United States” and concerned about the S (social) in ESG where China’s repression of the Uyghur minority is such that it amounts to genocide according to the U.S. government and The Group of Seven.

There are few laws in the ESG space, but we have for years worked with businesses in their disclosures required by the California Transparency in Supply Chains Act of 2010 describing their “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.”

Despite that the California law is more than a decade old it is only in 2022 that modern slavery is becoming a litmus test for investors, consumers and other stakeholders in the U.S.

The British and the EU currently lead the world in these concerns and the EU Parliament voted a year ago this week, on March 10, 2021, to adopt mandatory legislation requiring  human rights due diligence including for many U.S. companies selling in the EU.

On the day this blog was drafted, the state of Maryland adopted the requirement that all public funded construction,

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be designed and constructed to not include goods made with forced labor in supply chains. The project must seek to address human rights, protecting against social justice abuses (the “S” in ESG) at every stage, from extraction of raw materials to building erection.”

Maryland High Performance Green Building Program

And human rights and ethical labor are becoming widely considered and articulated in ESG disclosures in 2022 by clients of this firm.

But today’s ESG statements are only a quick dopamine hit for the individual business, and quite frankly are not doing enough as is clear that there are more slaves than at any time in history. The ideal of social equity can be traced back to the works of Aristotle and while definitions vary and have evolved over thousands of years, nearly all would agree humanity has not done enough, including purporting to address Social as one of the three component parts of ESG.

Slavery has existed since ancient times and despite having been outlawed in every country in the world, contemporary slavery exists. At a time when ESG has become synonymous with sustainability and companies are coming to recognize that investors and stakeholders want to buy into businesses that protect the environment, those companies must aggressively consider not only the legal risk, reputational risk, but also the financial risk that people also want to buy into companies that protect people. Additionally, it is suggested in the U.S. it is better to do the right thing, now, rather than be forced to do so by impending ESG laws.

There is no morally defensible reason for not doing everything in our power to end modern slavery and human trafficking. All businesses, whether in pursuit of the S in ESG or in striving to repair the world, must examine and assess their business practices now.

About the Author

Nancy Hudes and Stuart Kaplow, two Maryland attorneys who are among the principals at ESG Legal Solutions have combined forces, joining together to publish this blog leveraging their focused experience and legal knowledge for business interests in the ESG space.

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