CCLA Investment Management launches Modern Slavery Benchmark

Date: 22 Nov 2023

Ashleigh John

The benchmark is designed to assess the UK’s largest companies by market capitalisation on how they are taking steps to eradicate modern slavery in their operations and supply chains. According to the report, 26% of companies identified modern slavery in their supply chain and disclosed it publicly.

By creating an assessment of corporate modern slavery performance and disclosures, the benchmark provides an invaluable tool for investors to support engagement efforts and to help investors understand which companies are active in the fight against modern slavery. It is aligned with statutory requirements, government guidance and international voluntary standards on business and human rights.

Recent data published by the International Labor Organization and the Walk Free Foundation in their Global Slavery Index estimates that 50 million people worldwide are in a state of modern slavery.  Nearly two-thirds of all forced labour cases are associated with global supply chains with most forced labour occurring in the lowest tiers of supply chains, such as the extraction of raw materials and in production stages. The UK annually imports $26.1 billion products at-risk of being made using forced labour including $15 billion of electronics and $10 billion in garments and textiles.

The benchmark report is based on companies’ public disclosures (additional information provided by the companies that was not in the public domain was not included) and the assessment assigns them to one of five tiers. Companies in Tier 1 will have displayed an evolved and mature approach to human rights due diligence, with extensive discussion on the risks, case studies on systemic modern slavery risks in the sector, and discussion on meaningful activity to find, fix and prevent modern slavery. Performance tiers three and four were dominated by financials, industrials and materials. The results showed that, across the tiers, there was significant difference between the most and least active in addressing modern slavery in their operations and supply chains.

Results indicate that while all companies have policies in place, companies now need to focus on implementing the policies and taking action when they find modern slavery. Just under a third of companies assessed disclosed the steps taken to end ongoing risks where a violation was found and only nine reported outcomes of the remedy process for victims. Only one company disclosed evidence of providing remedy that was satisfactory to the victims.

The benchmark report outlines recommendations for companies, investors and policy makers urging all parties to closely monitor developments in legislation on corporate sustainability due diligence in Europe and the introduction of import bans in the United States and Europe.

Specifically CCLA urges companies to:

• ensure there is board level responsibility for governance on modern slavery
• conduct and disclose operational and supply chain risk assessments which include assessment of forced labour risks in direct operations and across supply chain locations, going beyond tier one
• disclose and provide details of suspected cases of modern slavery and the steps taken to provide remedy for victims and the outcomes
• adopt and disclose responsible procurement practices in line with international best practice

Dr Martin Buttle, Better Work Lead, CCLA, said:

“As investors we are in a strong position to contribute to ending modern slavery in businesses. We recognise that human rights, and specifically modern slavery, is a material risk for companies and that they need to do more to find, fix and prevent it on a global scale. While benchmarks may be a crude measure, the gathering of such data is important and enables more meaningful, targeted and potentially fruitful discussions between investors and companies to tackle modern slavery within a company’s own operations as well as its supply chain.

“Our intention is that the benchmark, through regular repeated assessments of companies on their modern slavery commitments and practices, will provide an accountability mechanism by allowing investors and other stakeholders to assess whether companies are effectively managing the business risks associated with modern slavery. We also believe it will provide a vehicle for companies to learn and to share examples of good practices and create a mechanism to leverage business competition to drive improvement.”

Peter Hugh Smith, Chief Executive, CCLA, said:

“At CCLA, we believe there is huge potential for action by businesses to reduce modern slavery around the world and we believe that all businesses have some exposure to modern slavery. Large, listed companies are in an influential position to set standards, implement policies and find, fix and prevent modern slavery and we will use this benchmark to engage and to push for improvements. In the event that companies in Tiers four and five do not engage, we will vote against their financial statement and annual accounts.”

“We believe that investors have special responsibilities. Although not currently required to undertake due diligence on their portfolios, we believe that investment portfolios should fall within the scope of modern slavery legislation and we encourage investors to join Find it, Fix it, Prevent it and to engage with portfolio holdings around what is not only an important human rights issue but a material risk to investors.”

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