Where Next For Human Rights Reporting Obligations?

The reporting requirements introduced by the California Transparency in Supply Chains Act (TISCA) and the UK Modern Slavery Act 2015 (MSA), both the subject of previous blog posts, represent a ground-breaking step forward for global business and human rights law. This post explores the impact of this legislation internationally and jurisdictions where similar laws are being discussed.

In the United States, Congress is currently considering the Business Supply Chain Transparency on Trafficking and Slavery Act (2015), a bill amending the Securities Exchange Act of 1934. It proposes that the Securities and Exchange Commission issue regulations requiring certain listed companies to disclose in their annual reports measures taken during the year to identify and address conditions of forced labour, slavery, human trafficking, and the worst forms of child labour within their supply chains. The legislation is modelled on the TISCA, although unlike the latter, if enacted it would not be limited to companies in the manufacturing and retail sectors.  The bill has been before Congress several times and currently it is not clear when, or indeed if, it will be passed, but repeated consideration is indicative of the close attention US legislators are paying to these issues. 

Australia is another jurisdiction to keep an eye on. The Australian government has established a supply chains working group as part of its National Action Plan on Slavery and Human Trafficking, which is tasked with examining options to address serious labour exploitation in supply chains. Interestingly, both the MSA and TISCA were cited in a paper published by the Australian Human Rights Commission at the end of last year that discusses possible strategies for addressing modern slavery.  

In Germany, there is currently no equivalent to the TISCA or the MSA, and it is unclear whether such legislation is being considered or pursued. However, forced labour issues in supply chains already play a part in German law: various procurement rules state that public authorities should in principle not procure services which are provided using goods produced in violation of the ILO Fundamental Principles on Rights at Work.

Looking beyond modern slavery to human rights issues more generally, in France, draft legislation has been presented to the legislature that would  require companies to plan and implement reasonable measures to identify and address human rights issues in their businesses and supply chains, with various civil and criminal penalties (including fines of up to €10 million) for non-compliance. The MSA was expressly referred to in a report proposing the new law to the Assemblée Nationale, which passed the bill last month, but the draft legislation is more ambitious than that of either the MSA or TISCA, both in terms of scope and available sanctions. France’s second chamber (the Sénat) has yet to vote on the bill and it is currently unclear when the vote will take place.  

Additional initiatives to tackle modern slavery and broader human rights issues appear to be on the agenda in other jurisdictions, in particular the Netherlands and Switzerland. Further hardening of human rights reporting requirements throughout the EU is also anticipated as Member States begin to implement the EU non-financial reporting directive (Directive 2014/95/EU). This legislation amends the EU Accounting Directive, mandating that companies of a certain size prepare, as part of their annual reporting requirements, a report containing information regarding “the group’s development, performance, position and impact of its activity” relating to social and human rights issues. It remains to be seen how EU Member States will choose to implement this Directive, but its recitals cite the UN Guiding Principles on Business and Human Rights, and there is clearly scope for certain countries to introduce far-reaching reporting requirements in the image of the UNGPS.

This is a crucial time for the evolution of hard-law human rights reporting requirements, and it is clear that legislators around the world are tracking the impact of measures such as TISCA and the MSA (and indeed the evolution of the wider “universe” of international business and human rights standards) closely.  

On a final note, the pressure on states to take action will likely be fuelled by growing calls for information on corporate human rights impacts from sections of the global business community. Last week, Freshfields’ London office hosted the launch of the Corporate Human Rights Benchmark, a collaboration between institutional investors, government, and civil society organisations which will publish the first comprehensive ranking of the human rights performance of the world’s top 100 companies in the extractives, agriculture and apparel industries (see our 28 March 2016 blog post). The pilot methodology for the calculation of each company’s “score” has been published, and the first pilot ranking of the relevant companies is expected later this year.