Posted by Stuart Bell

What to look out for in 2019

A Happy and Peaceful New Year from all at Ergon. This Update includes our analysis of the key trends and issues we see emerging in 2019 in our areas of work.

Tightening legislation on business and human rights

There will be continuing moves towards hard law on business and human rights (and the toughening of existing laws). A private member’s Bill was introduced in Canada in mid-December that would introduce company reporting on child labour and modern slavery along the lines of the UK and Australian Acts. It will need government support to pass.

The Australian Modern Slavery Act (passed in December 2018) will come into effect during 2019 with the first company statements expected in 2020. The Australian Act sets up a central registry for company statements that must have mandatory content.

Criticisms of the lack of enforcement mechanisms in the 2015 UK Modern Slavery Act partly contributed to the tougher Australian measure. The UK government has responded by setting up a review of the UK Act, including the transparency requirements, which is due to report by March 2019. Additionally, in an effort to boost compliance levels, the Home Office has already written to the chief executives of around 17,000 businesses, warning them it intends to publicly name non-compliant companies after March 2019. The UK government is also inviting businesses to voluntarily register on a central database. According to some estimates, only a half of eligible companies have made a modern slavery statement, and according to Ergon’s research, only around half of companies that have made a statement (in a sample of 150) had written a follow-up modern slavery statement within 18 months of the last one.

While modern slavery remains the touchstone human rights issue, other jurisdictions are looking at human rights in the round. Binding legislation on companies and human rights may be a step closer in Germany. More than 7,000 companies received a letter in December signed by five German ministers encouraging them to take part in the upcoming monitoring of the German National Action Plan (NAP) on Business and Human Rights. In 2019, the government will carry out the first of two representative surveys of German businesses with more than 500 staff to see whether they have met the expectations set out in the NAP – that is, implement and report on human rights due diligence. If it is found that by 2020 less than half of the companies have done so, the government has committed to considering legislation on business and human rights.

The Swiss Parliament is also considering a proposal that would require mandatory human rights and environmental due diligence by large companies and would impose liabilities for violations. The Parliamentary proposal is more restricted than a separate popular initiativeput forward by a coalition of Swiss non-governmental organisations (the Responsible Business Initiative – RBI). The RBI aims at modifying the Swiss Constitution by including a specific provision on the responsibility of companies to respect human rights and the environment. If the Parliamentary ‘counter-proposal’ is not passed the organisations behind the original initiative have underlined their intention to pursue a public vote on the issue. Either way, mandatory due diligence could be on the way in Switzerland. There is a good summary of this slightly complicated situation here.

SDGs becoming central organising principle for corporate sustainability work

The Sustainable Development Goals (SDGs) were agreed more than three years ago, but it has taken a while for them to permeate through to the corporate sector. However, there are now clear signs that corporate responsibility and sustainability programmes are starting to be aligned and organised in terms of their contribution to the SDGs. One challenge is the range of the SDGs themselves; another is categorising company policies and processes in terms of SDG outcomes which have been criticised as too expansive. However, we see from our own practice that corporate clients are wanting to use the SDGs as an organising principle for their work, and an increasing number of guides and tools are being produced to help them do so.  One area of focus for Ergon is establishing practical indicators to gauge contribution to SDG goals at the level of workplaces and enterprises, rather than at the macro level where governments and the UN see their results. Of particular significance is the contribution of companies – as well as investors and other actors – to the Decent Work objectives under SDG8.



Impetus building for gender-focused investing

The 2 x Challenge was launched in 2018 as a call by Development Finance Institutions (DFIs) from the G7 to mobilise $3 billion by 2020 to provide women in developing country markets with improved access to leadership opportunities, quality employment, finance, and enterprise support to enhance economic participation. Gender-oriented investments has been an emerging theme for some years but the 2 x Challenge should be enhanced driver for DFIs to scale up such investments, especially those that meet the Challenge’s criteria. IDH has also just published a brief that looks at integrating a gender lens into financial inclusion programmes with a specific focus on women and men employed by large scale farms in Kenya’s flower and tea sectors.



ILO centenary year: Major report on future of work and possible Convention on gender-based violence

In late January 2019, the ILO’s  Global Commission on the Future of Work  will publish its ‘landmark’ report outlining the steps needed to achieve a future of work based on decent and sustainable work opportunities for all, against the background of rapid transformational change in the world of work.

Led by its co-chairs, South African President, Cyril Ramaphosa, and Swedish Prime Minister, Stefan Löfven, the Commission’s report will include a number of concrete proposals for an inclusive approach to economic growth and development that the ILO hopes will shift priorities in global and national economic policymaking. Issues to be covered will include youth employment, skills mismatch, income inequality, informality, the rural economy, the digital divide and gender equality.  The report is also likely to outline some recommendations for new roles for the ILO in what is the organisation’s Centenary  year.

Separately, following discussions in 2018, the ILO will hold further debates on a new Convention on Violence and Harassment in the World of Work in mid-2019. Development Finance Institutions and private sector actors have already begun to place greater emphasis on gender-based violence in the workplace in terms of working on strategies to better identify and address the issue in their investments.



Human rights considerations in sport becoming mainstream

There has been a great deal of attention in relation to the human rights impacts of major sporting events over recent years, notably the most recent (Russia 2018) and next (Qatar 2022) FIFA Men’s World Cup tournaments. Last year also saw the first FIFA World Cup bidding process which was subject to specific human rights conditionality – see Ergon’s human rights report for the winning bid from Canada, Mexico and USA.

We anticipate that the focus on sport and human rights will deepen and broaden in 2019. There are many significant issues to be addressed, ranging from improved safeguarding for young athletes and players, addressing racism and gender discrimination in both elite and grassroots sport, and ensuring that the supply chain for sporting events is free of labour exploitation. This process will increasingly start to be a sports-led approach, rather than driven by outside stakeholders. The establishment of the new Centre for Sport and Human Rights, under the leadership of a CEO who is an Olympic gold medal winner and a senior sports administrator, should help this process.

There is an added dimension that will emerge more during the coming years. Sport, alongside music, film and other major cultural activities, has an immense power to stimulate debate and change. There are a number of opportunities to harness this influence in the coming years. These include the FIFA Women’s World Cup in France in 2019 and the process that leads to the Commonwealth Games in Birmingham, UK in 2022, which has already adopted significant human rights commitments.



International initiatives to manage migration and promote fair recruitment gearing up

After much wrangling, the end of 2018 saw agreement on the ‘Global Compact for Safe, Orderly and Regular Migration’, which aims to be ‘the first, inter-governmentally negotiated agreement, to cover all dimensions of international migration in a holistic and comprehensive manner’. The text was  approved by 164 countries in December 2018, although major ‘receiving’ economies such as the USA, Italy, Australia and some central and eastern European countries have withdrawn from the process. The Compact, which is not legally binding, sets out a framework for international co-operation on managing migration, including sharing data, facilitating fair recruitment and decent work, eliminating discrimination, and reducing the use of detention centres. It remains to be seen how quickly the Compact will affect migration policies.

Also at the end of 2018, and at a regional level, the Colombo Process agreed the ‘Kathmandu Declaration’ which, amongst other things, commits the members to fostering ethical recruitment, including ‘joint efforts towards no recruitment cost to migrant workers’ and enhancing grievance processes. The Colombo Process is a regional consultative process on the management of overseas employment and contractual labour for countries of origins in Asia.

As more organisations make commitments on fair recruitment of migrant workers and to the ‘employer pays’ principle, the ILO is set to produce a definition of recruitment fees and costs, which will enable organisations to determine any acceptable charges for job-seekers to bear. The ILO held an expert meeting on the subject in November 2018. More guidance and tools are being produced on exactly how to eliminate fees – not an easy matter when the practice is embedded in many recruitment models, as we discussed in a blog back in October.



Renewed focus on purchasing practices and fast fashion

Understanding how purchasing practices impact on working conditions at suppliers and how they can be changed to improve the situation has been a holy grail issue for many years without making much progress. However, various initiatives may force the issue more centre-stage in 2019. The corporate members of ACT adopted commitments on purchasing practices in late 2018, with a target for full implementation within five years. The Better Buying platform (which is supported by ETI) is gathering momentum and has published the results of its second survey of purchasing practices. The resulting index uses data submitted anonymously by suppliers based on their business experiences with specific retail and brand customers to measure their performance against seven categories of purchasing practices. The index is thus a way of empowering suppliers and exposing poor buying practices.

The back end of 2018 saw Human Rights Watch convene an expert meeting on purchasing practices, and UK Parliamentarians take an interest in the environmental and social impacts of fast fashion. The Parliamentary Inquiry into Sustainability of the fashion industry called various retail and brand representatives to question them about environmental impact and social issues.

Separately, the German government-backed Partnership for Sustainable Textiles and the Dutch Fair Wear Foundation have joined forces to promote fair working conditions in the garment industry, including delivering training on purchasing practices.

Divergence between company leaders and laggards

Increasingly, corporate benchmarks, rankings and indices on aspects of human rights are reporting disappointing progress across the broad universe of companies they cover, with the exception of a limited number of leading companies. This is true for the recent Corporate Human Rights Benchmark, for our own analysis of modern slavery reporting, and the various Know the Chain benchmarks. There is a danger that the ‘leaders’ become decoupled from the ‘laggards’ with this division apparent in the corporate attendance at the UN Forum on Business and Human Rights as set out in our blog. This situation creates  a challenge to create a level playing field so that less publicly visible and smaller companies take their human rights responsibilities seriously.

Signs of enhanced investor activity on responsible business?

Tighter regulation may be one way to create a level playing field, and one reason for companies to take action (see above). Investor pressure is another, though until recently the institutional investor community (with some notable exceptions) has tended to mirror the corporate sector in the small proportion of its members that actually act on paper commitments to human rights. It is to be hoped that 2019 will see greater numbers of portfolio investors seeing the value in promoting responsible business practices among their investee companies. Certainly other financial actors such as DFIs and private equity are increasingly performing due diligence on modern slavery and human rights issues. See our recent good practice note for the sector here.

The advent of the Liechtenstein Initiative is the most recent sign that understanding is growing about the links between financial services, investment and leverage on dynamics that facilitate the worst forms of labour exploitatio. For example, it recognises that ‘money laundering is human trafficking’s silent partner’.

Elsewhere in the financial sector, the Equator Principles – focused on standards in project finance – remain under review. Draft proposals including on the issue of human rights are scheduled for public consultation in Spring 2019.



How to define a worker: Tightening legislation on the gig economy 

There will be continuing speculation and angst in 2019 on the role of technology in employment, both from the perspective of how many jobs may be lost (or gained), and in terms of how technological developments will affect labour rights. As we set out in a recent blog, the gig economy has thrown up a series of dilemmas on defining the status of such workers. Governments will have to consider legislation that strikes a balance between security and flexibility, with better ways of defining who is considered an employee, and mechanisms for better protecting the casual workforce. The UK government has just published its proposals for addressing some of these dilemmas and we can expect further legislation elsewhere.

Pressure for effective remedy and grievance

While there have been some significant steps in improving human rights due diligence over the last few years, there are still few clearly documented examples of the development of non-judicial grievance mechanisms or the specific provision of a remedy for negative human rights impacts. This is not to say that remedy does not happen; rather that the structures and safeguards are not always there. We wrote a paper on this for the ETI just over a year ago.

We anticipate that there will be growing pressure on a range of companies to move forward in this respect. It may also be that the pressure comes from unexpected sources. Ensuring that complex, underlying human rights issues are identified and fixed has significant benefits for companies. As such, adopting high-impact and responsive systems to identify and deal with grievances should be a ‘no-brainer’.

We also think that there will be increased efforts to seek a technological solution to receive and address worker grievances for workers across extended supply chains, although we are not convinced that there is an approach – blockchain led or otherwise – to bring about significant change here, yet (see below).



Worker voices to get heard or blurred?

Enhancing ‘worker voice’ has been a significant trend in supply chain labour standards activities for some time, with a number of retailers and brands piloting various platforms.  A number of initiatives have sought to harness technology – (smart)phone, internet, tablet – in order to provide a direct channel of communication for workers seeking to raise concerns or grievances. Providers include Laborlink (Elevate), LaborVoices and Ulula.
These technology platforms typically serve a dual function: to provide information to workers on their rights, and to enable workers to report their concerns. On the plus side, such platforms can create access to the concerns of workers in lower tiers and can help to verify audit findings. Additionally, the technology involved markedly reduces costs by eliminating data entry and checking – most platforms use IVR (interactive voice response) – and can serve to increase sample size (mobile platforms typically use toll-free numbers).

However, there are a number of associated challenges. There appears to be a high – and growing – degree of ‘worker fatigue’. Unless workers can see a purpose for – and direct results from –their feedback, they are unlikely to take the time to provide it. The need for volume in worker responses raises the risk of worker ‘incentivisation’ techniques introducing potential bias into the results. Further, ‘worker voice’ tools are sometimes perceived to risk circumventing – or even undermining – established worker representation structures.

Also of relevance are the WEST (Worker Engagement Supported by Technology) Principles – a set of guidelines developed to maximise the impact of technology-driven efforts to engage workers in global supply chains. Similar to the Principles of Digital Development, they give guidance on how to design and implement technological solutions that identify and address worker abuse and exploitation.