Due Diligence and Transparency Legislation

Due Diligence and Transparency Legislation

Due Diligence and Transparency Legislation


This work is part of a series of Forced Labour Evidence Briefs that seek to bring academic research to bear on calls to address the root causes of the phenomenon in global supply chains and catalyse systemic change. To do so, the briefs consolidate evidence from recent academic research across several disciplines, including political science, law, sociology, business, and management, identified through literature reviews in Web of Science and other academic databases. At a critical moment when COVID-19 has led to increased focus on conditions in global supply chains and growing calls for systemic change, these briefs seek to inject new knowledge from academic research into ongoing debates about how practical reforms can be achieved. They focus on six themes: mandatory human rights due diligence and transparency legislation; commercial contracts and sourcing; investment patterns and leverage; the labour share and value redistribution; ethical certification and social auditing; and worker debt. Each brief presents new ideas and examples of how business models and supply chains can be restructured to promote fair, equitable labour standards and worker rights.

Executive Summary

Forced Labour Evidence Brief: Due Diligence and Transparency Legislation

Forced labour and human rights abuses of workers are endemic across several sectors of the global economy. Recognising this, governments around the world have introduced legal frameworks designed to encourage corporations to take responsibility for tackling this abuse in global supply chains.

Transparency legislation, a dominant mode of regulation, is not working. Academic research has highlighted major weaknesses in the effectiveness of transparency legislation to influence corporate behaviour. Corporations can comply with transparency legislation without altering the commercial practices that lead to forced labour and exploitation. Strong sanctions for non-compliance are lacking, as are paths for remedy and redress for victims. Briefly put, to date, transparency has sparked disclosure without actually changing things. Early efforts towards human rights due diligence to date have similarly focused on mapping with little action towards meaningful change.

Fortunately, there are potential solutions. Transparency legislation should be reformed and strengthened. In addition, mandatory human rights due diligence legislation (mHRDD) should be passed requiring companies to address adverse human rights impacts, including forced labour, linked to their supply chains. mHRDD introduces a new duty on corporations to carry out robust human rights due diligence across their entire supply chains and it can be combined with strong sanctions such as civil liability and supervision by a public oversight body that can impose a fine on those not carrying out the duty.

Whilst governments should focus efforts on introducing mHRDD laws, work should also be taken to reform transparency legislation where it is in place, through the addition of criminal, civil, and administrative accountability measures for false reporting or failure to report. Introducing mHRDD laws and upgrading transparency laws is not a binary choice. Action is needed on both fronts. Governments should collaborate to harmonize a proven, effective model of mHRDD across jurisdictions.

These measures will contribute to, and can be complemented by, broader legal reforms and initiatives to effectively regulate 21st century corporations and their supply chains to ensure they are no longer hard-wired to produce exploitation. These may include, for instance, enforcing labour rights through trade laws, antitrust reform, innovative labour law enforcement, and reorienting corporate purpose and duties towards stakeholder value.

Implementing effective mHRDD legislation and practices will necessarily disrupt the status quo of how business is currently done in global supply chains, including value distribution and the role of workers within governance. These issues are explored within other briefs in this series.

Read full report here.