ESG Insights: Modern Slavery and Deforestation - two sides of the same coin?

This article was writen by Camila Gomez WIlls, of recent SLR acqusition Corporate Citizenship. Corporate Citizenship provides ESG strategy, reporting, social and environmental impact and other sustainability consulting services to multi-national companies. Visit the Corporate Citizenship website to learn more.

What connects a French supermarket with deforestation in the Amazon? The answer is global supply chains. COVID-19 has shed light on longstanding inequalities and the interconnectedness of our current system: what happens in one region can reverberate across the world. This applies not only to how the virus spreads, but also to how our supply chains operate. For example, when the Ever Given ran aground on the Suez Canal a while back, $9 billion worth of goods were affected every day by the stalled global trade.

Another example of the tight connections that underlie the way products are made is the increased attention and onslaught of cases regarding Modern Slavery and environmental degradation in global supply chains. For example, Casino, the French retailer, is facing the first claim for $3.7M in damages under French law due to their alleged involvement with deforestation in the Amazon rainforest conducted by their meat suppliers. Notice that the case is brought in France, against a company headquartered in France, due to the alleged actions (or inactions) of their suppliers in Brazil and Colombia.

A key takeaway from this case and other recent reports is the undeniable linkage between environmental degradation and worsening human rights conditions. In other words, the ‘E’ and the ‘S’ of ESG are inextricably linked. This has long been the rallying cry of the environmental justice movement in the US and abroad. With growing awareness of the disproportionate impacts of climate change on certain populations, the examples of these linkages are becoming clearer every day.

There are three ways in which Modern Slavery and climate change interact:

• The cycle between Modern Slavery and environmental degradation/climate change begins when we consider the destabilising effects of changing temperatures and rising oceans in vulnerable communities that already rely on natural resources. Climate migration is on the rise and migrant workers have long been recognised as a group that is at particularly high risk for modern slavery.
• Regions of the world with rapid environmental degradation (including, but not limited to deforestation) overlap with regions that have higher incidence of Modern Slavery risk factors. For example, both tend to occur in areas with low state capacity to enforce regulations due to their remote location – think of international waters or the Amazon basin – or presence of armed conflict, and both tend to occur in areas that already had high poverty rates and unmet needs.
• Of the approximately 40 million people working under Modern Slavery, 12.3 million are involved in environmentally degrading activities, including illegal mining, fishing, large-scale agriculture, among others.

Overall, environmental adverse impacts caused by climate change make it harder to enjoy human rights, particularly the right to health, food, water, and a clean and safe environment.

Although the California Transparency in Supply Chain Act (2012), UK (2015) and Australia (2018) Modern Slavery Acts, and France’s Duty of Vigilance law (2017) are not new, the past year has catalyzed efforts in the EU and abroad to bring forth more stringent regulation and move towards mandatory human rights due diligence (mHRDD) in global supply chains. This would mean transitioning towards a system with continuous engagement with stakeholders, and more effective implementation of policies and programs that curtail Modern Slavery and inhibit its drivers. Such moves go beyond the United Nations Guiding Principles (UNGP) on Business and Human Rights, which lay out a voluntary framework for businesses to develop and implement HRDD. Increasingly, these efforts are including both the environmental and the social aspects that make up our human rights framework. An integrated approach to climate and human rights is a pathway to achieving the Sustainable Development Goals and is a core part of mandatory Human Rights Due Diligence (mHRDD) proposals that are being considered at a EU level, within EU member countries, and abroad.

There are several drivers for corporate action on human rights: a) compliance with a growing body of local and international regulations (see examples of Withhold Release Orders in the US, legislation in France, Netherlands, EU, and otherwise), b) investors are increasingly scrutinising human rights performance, c) consumer awareness is growing and there are reputational impacts when scandals emerge, and d) the need for long-term relationships with suppliers built on trust in an increasingly competitive environment. Companies with mature ESG programs recognise that mitigating Modern Slavery is part of a robust risk management strategy and have been implementing programmes and initiatives for several years. For other companies, that are only at the beginning of their journey, the path ahead may seem daunting. A few initial steps to start off with include:

• Have a policy in place in which you commit to respecting all internationally recognised human rights, recognise the negative impact of climate change, deforestation and environmental degradation, and commit to developing a plan to address both issues. Include executive sign off.
• Develop and disclose a plan to identify, address, and remediate your human rights risks as described in the UNGP.
  • For example, map your value chain (tier 1 and tier 2 suppliers must be identified) and then identify and assess where there are increased risks for potential or actual harm to human rights or the environment
• Develop and disclose a plan to identify, address, and remediate your contributions to deforestation across your supply chain.
• Disclose progress against your goals. The UNGPs and the recent EU Guidance on this matter allow companies to prioritise the order in which they will address these risks by considering severity, likelihood, and urgency.
• Maintain stakeholder engagement, particularly those that can be adversely affected by your operations.
• Join industry groups or initiatives to learn best practices and share progress. You can also review the Corporate Human Rights Benchmark to review their methodology and how companies have been assessed.
• Act on the policies that you have set up and demonstrate that your remediation programs are put in place when violations are found.

Contact us to learn more about how you can start your human rights due diligence journey and join leading peers in this space.