Posted by Stuart Bell

Trends for 2017

A happy and peaceful New Year from the Ergon team. This special Update contains our thoughts on issues, trends, developments and significant events in the human rights and business space for 2017.

Migration remains the key issue

We can expect that migration – and the impacts of both voluntary and involuntary migration on labour markets and labour rights – will continue to be a key issue for 2017. However, the effects and experience of migration play out differently in various regions – see below in relation to the UK and Turkey for example. The multiple dimensions of labour migration will also be a central theme of the annual ILO Conference in June 2017.

Recruitment fees and practices

The vulnerability of migrant workers is often compounded by the recruitment practices through which they find work, including the charging of fees. There are a number of emerging initiatives which seek to shine a light on this and drive change. Key amongst these are the ILO convened Fair Recruitment Initiative and the IHRB convened Leadership Group on Responsible Recruitment. The latter has launched the Employer Pays Principle, aimed at eliminating recruitment fees paid by workers, which is likely to gain some momentum in the coming year.

Focus on migrant labour standards in the Gulf

In the Gulf, various reforms to the kafala system have been enacted from January 2017 in Qatar and UAE which loosen some of the restrictions on migrant workers leaving or moving jobs. However, while the UAE’s reforms have been welcomed, those in Qatar are wide of what campaigners are looking for in terms of guaranteeing free movement of labour. The ILO will be discussing whether to make a special enquiry into Qatar in March and we will see escalating campaigning from trade unions around this. This focus on conditions in the Gulf is has been reflected in our recent portfolio of work.

Addressing insecure and non-traditional work

There will be increasing scrutiny of non-standard forms of employment that result in job insecurity and exclusion from employment rights regimes based on a conventional ‘employment relationship’. In the post-industrial economy, the impact of self-employed workers in the ‘gig-economy’ (Uber, Deliveroo etc.) is being much debated and resulting in legal challenges related to their status. But more widespread in both developed countries and emerging economies  is the prevalence of agency work and the increasing use of zero hours and  temporary fixed term contracts along with various nominal ‘self-employment’ structures designed to provide employers – and sometimes workers – with flexibility in labour mobilisation, but which also sometimes have the effect of avoiding employment obligations and taxes. For companies, pressures will grow to identify and understand the terms and conditions of agency and contractor workers and the means by which they are recruited, both in their own operations and in their supply chains. This is becoming a reputational issue as well as a source of higher risk of modern slavery and other human rights abuses. For governments there is an incentive to gain better visibility and potentially control over self-employment in order to boost tax revenues. In one response, the UK government has launched an enquiry into ‘Employment Practices on the Modern Economy’ charged with looking at the complex relationships between labour market flexibility, rights, security and regulation. This is due to report in 2017.

World Bank Standards coming into force

The World Bank will start the process of implementing its new Environment and Social Standards (ESS), finally agreed in August 2016. These include ESS2 on Labor and Working Conditions. As an institution with more than $100 billion in commitments and disbursements, this has the potential to extend labour safeguards through a variety of projects in poorer countries. A key difference between existing sustainability standards for ‘development finance’ is that the World Bank lends to sovereign governments, and hence its standards are primarily to addressed to public authorities. ESS2 requires borrowers (governments and government agencies) to establish labour management procedures, and covers provision of information to workers (including contractors’ workers), non-discrimination, child and forced labour, respect for freedom of association, OHS, and access to grievance mechanisms.

Shorter supply chains bring labour risks nearer to home

Rising labour costs in some emerging economies, the need for greater control over supply chains and quicker delivery cycles are all factors bringing some low-cost manufacturing back to Europe and North America. Donald Trump’s election rhetoric also suggests the next US President will try and promote jobs in the USA. But without stronger regulation in low wage sectors, this trend, combined with a continuing  supply of migrant workers, will also increase the risk of poor standards. There are regular significant reports of gross exploitation such as in the UK garment sector and the Italian leather industry after jobs ‘returned’ to those countries. Conditions in the garment and footwear sectors in Eastern Europe and Turkey have also been under scrutiny. And there are ongoing issues in agriculture in many OECD countries as migrant workers are employed in poor conditions. We can expect more such revelations as the realities of poor working conditions for many workers in developed countries come to the fore.

New requirements on non-financial reporting – including human rights

December 2016 was the deadline for transposition into law for the European Directive on disclosure of non-financial and diversity information by certain large undertakings and groups. This will require large companies (defined as having more than 500 employees) to report on ESG issues, including for the first time respect for human rights. Information should cover policies, due diligence processes, the outcome of those policies, the principal risks, the business relationships, products and services which are likely to cause adverse impacts in those areas of risks, and a description of how it manages the principal risks, and non-financial key performance indicators.
These disclosure requirements are very much in line with the reporting elements of the UK’s Modern Slavery Act which, while more narrowly focussed on slavery, forced labour and trafficking, extends to smaller companies. It seems the drive towards greater mandatory reporting requirements is set to continue. In France, if the Senate approves, there could be new due diligence obligations for large French companies regarding their subsidiaries’ and supply chain members’ labour practices. The Bill requires companies to create and implement a ‘vigilance’ plan to identify and prevent ‘serious violations of human rights’.

Modern Slavery deeper dives

In our experience, while many companies still have a long way to go, the existing UK Modern Slavery legislation is already driving innovative human rights due diligence and reporting by leading companies, which is revealing previously overlooked risks in parts of their supply chains and operations (e.g. logistics). For 2017, we can expect these deeper dives by some companies to produce new issues of concern, Alongside this, there will be greater pressure from civil society on companies perceived to be under-reporting their modern slavery risks. Building on our reports in 2016, we will continue to monitor the content and quality of Modern Slavery reports.

More corporate human rights rankings

To add to the growing array of benchmarks ranking companies on a variety of CSR issues ( e.g. food supply chains, access to medicines, forced labour), the first broad-based Corporate Human Rights Benchmark (CHRB) will be published in March. Covering leading global companies in the agriculture, apparel and extractives sectors, the CHRB is backed by a coalition of asset managers, research organisations and human rights institutes, and will rank companies on their policies, processes and activities on human rights. The mining sector will also come under scrutiny with the development  of the Responsible Mining Index.

Post-Brexit labour markets

In the post-Brexit UK, migrant workers are already voting with their feet and the labour market is tightening for certain industries such as agriculture that are dependent on eastern European seasonal labour.  We can expect lobbying from various sectors to maintain their access to labour, both skilled and unskilled. Labour shortages should of course mean higher wages, but our own research suggests a more likely result may be increased automation where this is feasible.

New UK labour abuse regime

In the institutional and legal spheres, 2017 sees the inauguration of UK’s new post of Director of Labour Market Enforcement to provide co-ordination between existing agencies charged with enforcing various existing labour regulations, such as the Gangmasters and Labour Abuse Authority (now with a wider remit covering the whole economy, not just agriculture and food processing). An innovative legal regime is also being introduced. Authorities will be able to issue businesses with a  Labour Market Enforcement Undertaking where  they have a reasonable belief that the business has committed a serious labour rights abuse (to be known as a ‘ labour market offence’). The employer will be required to enter into an undertaking to take steps to prevent future abuses. Breach of the order would be a criminal offence.

Peace and human rights in Colombia

According to the Economist, Colombia is the most improved country in the World in 2016. As Anne-Marie Lévesque has blogged, the end of such a long-standing conflict will bring a lot of opportunities – including for businesses. Colombia has already issued a National Action Plan on Business and Human Rights. Increased foreign investment and business activity will be an interesting test case for the UNGP framework. In Latin America, Argentina, Chile, Guatemala and Mexico are also said to be working on a NAP on business & human rights.

Focus on Turkey – migrants, trade unions, supply chains

Turkey is likely to continue to attract attention, largely for the wrong reasons. There will be continuing coverage of poor working conditions for migrants and refugees from Syria in spite of the fact that more brands are conducting due diligence and collaborative projects are underway (e.g by ETI). International trade unions are likely to respond to post-coup repression by the Erdogan government by enhancing pressure on international brands and institutions.

Continuing progress on national action plans

The national implementation of the UNGPs will be an area of increasing focus in 2017. At the end of 2016 several countries produced national action plans for the implementation of the UNGPs, including Germany, the USA, Switzerland and Italy. While civil society have criticised these action plans for a failure to introduce legal liability on companies, there is no suggestion in the UNGPs that this is an expected approach. Various proposals for better information, guidance to companies and support for multi-stakeholder initiatives are contained in the US and German plans. The German plan also encourages all German companies with more than 500 workers to carry out human rights due diligence and states that if a review in 2018 demonstrates low take-up, the government will consider legislative measures. The Italian plan is also heavily dependent on a review in the coming years to determine whether concrete government action will be forthcoming. While 2017 will see the adoption of a number of new action plans, the real test will be in whether there is genuine government-led progress under the existing action plans. This could either come through financial and political support for business and multi-stakeholder initiatives or through the placing of direct requirements on business via legislation (see above).

Extension of Dutch sectoral CSR covenants

2016 saw the first fruit of an innovative process initiated by the Dutch Ministries of Foreign Affairs and Economic Affairs to develop sector-based covenants to address “international CSR” (ICSR) risks. Two agreements have now been signed for the garment and textile sector and the banking sector. Both of these have included significant content relating to human rights, and specifically labour rights in global supply chains.The ‘ICSR covenants’ are sector-based agreements resulting from multi-stakeholder dialogue, through which ‘ICSR risks’ are identified and collaborative approaches developed. The original government target was for ten covenants to be signed by the end of 2016. However, (sometimes difficult) discussions will continue through 2017 in a remaining 11 identified sectors: agriculture, chemicals, construction, electronics, energy, food, metals, oil and gas, retail, wholesale and wood and paper products. Alongside this, the Ministry of Economic Affairs is developing draft legislation that would enable the government to ‘extend’ these voluntary CSR / sustainability agreements to an entire sector. This is intended to address (perceived) tensions between anti-trust rules and sustainability initiatives in the Netherlands; the Dutch competition authority has on several occasions found that sustainability initiatives are in potential breach of the law.

Addressing the UK’s gender pay gap

New requirements for UK companies to report on their gender pay gaps will come into force in April this year (with first reports to be published within 12 months) obliging all private sector companies with 250+ employees to measure and report on the differences between the mean and median hourly pay rates and bonuses of male and female employees. While there is no obligation for companies to address any identified gender pay gaps we expect that many organisations will take a more proactive approach by combining reporting with concrete measures and action plans to improve gender equality in their workplaces.

Technology and the future of work

2016 saw a raft of new research – including by the ILO, McKinsey and ODI –  on the potential consequences of automation and technological advancement for the world of work. Important developments are also happening on the ground, not least the announcement by Adidas that it will launch a “robot shoe factory” in Germany next year. We expect continued prominence for this issue through 2017, as well as an increased focus on how to support labour rights and protect vulnerable workers in this context.