In his press briefing on Iraq’s WMD in 2002, Donald Rumsfeld, the former US secretary of defence, famously stated: “There are known knowns. There are known unknowns”. For businesses trying to balance the need to comply with modern slavery laws against the potential damage that full disclosure on forced labour might have with their consumers and shareholders, ensuring the ‘known unknowns’ remain just that can seem like an appealing option. However, the dilemma this raises isn’t that straightforward.
If companies fail to provide adequate details on their efforts to eradicate modern slavery from their supply chains, they may be accused of not being committed to tackling labour exploitation. If, on the other hand, they disclose the risks they know about, companies may actually increase, rather than decrease, their legal and reputational risks.
Herein lies the problem: companies that actively seek out modern slavery in their supply chain must do so in the knowledge that the more they know, the more they are bound to reveal.
To disclose or not to disclose, that is the question
Regulations such as the 2015 UK Modern Slavery Act and the pending US Business in Supply Chains Transparency on Trafficking Act require companies to publicly disclose what actions they are taking to eradicate modern slavery from their business and supply chains – and therefore make their supply chain practices more open to public scrutiny. Consumers are becoming an increasingly powerful force, demanding that businesses prevent the exploitation of workers in both their direct operations and global supply chains.
In 2015, three California consumers filed class action lawsuits against three major confectionery brands, claiming that the companies knew that child slavery in Ghana and Côte d’Ivoire was used to manufacture their products. Despite long-standing reports of child labour and child slavery in West Africa’s cocoa industry, many confectionery brands are heavily dependent on the region for supplies. Child slavery is a deeply rooted practice in West Africa and, as one accused company rightly pointed out, the problem won’t go away following a single lawsuit in California.
The judges in California eventually dismissed the lawsuits earlier this year, stating that existing laws do not require them to disclose labour risks – potential or actual – to shoppers. Though unsuccessful, the lawsuits have caused some businesses to reconsider how much they truly want to uncover in their supply chains, fearing that the more they know and publicly disclose, the more they will ultimately be liable for.
How to know when enough is enough
Companies are, understandably, questioning how much they should reasonably know. Public scrutiny of child slavery entering the cocoa supply chain in West Africa, or of bonded labour in South-East Asia’s fishing industry, have served to entrench the assumption that brands are ultimately responsible for all workers that help to manufacture their end product, no matter how far down the supply chain. Brand reputation is therefore tied to a broadening perception of responsibility that exposes businesses to increased risks – especially if, like many, they have not yet managed to map supply chains or assess modern slavery risks beyond their first tier suppliers.
Given the complexity of most production processes, it can be hard for companies just to identify suppliers in the lower tiers of their supply chain, let alone ensure that no human rights violations are taking place. So what action can companies take? After all, multinational businesses will be unable to eliminate modern slavery from their global supply chains without the collaboration of governments and civil society around the world.
What is clear is that claiming ignorance is no longer a realistic defence. On the other hand, how much companies should reasonably know is both a legal and moral question. At present, companies would only need to make moderate efforts to meet shareholder expectations and satisfy immediate legal requirements. The UK Modern Slavery Act, while requiring companies to publish an annual statement outlining the steps it has taken to ensure their operations and supply chains are slave-free, doesn’t actually prescribe the steps companies need to take to achieve this. Thus, the law enables companies to determine the parameters of their statement and, therefore, their responsibility.
In terms of business’s moral responsibility, it is consumers who will define the parameters. As the legal cases against the US confectionery companies demonstrate, consumers increasingly expect companies to be responsible for the protection of workers throughout their business, whether subcontracted or not. Consumer-facing companies should expect to be held to higher moral standards than their non-consumer-facing peers. If companies fail to meet the expectations of their customers, then they can expect to be a target for litigation.
Businesses will ultimately need to determine themselves how much they are able to reasonably know and how much they choose to disclose. Given the emergence of new supply chain laws, alongside strengthening consumer demands for transparency, businesses should seek to exceed the basic legal requirements and also strive to meet the expectations of their customers. The cost of failing to do so could be severe.