Prof Muhammad Azizul Islam, PhD, CA University of Aberdeen- Written evidence (MSA0047)

It is a great pleasure to make a submission to your Call for evidence launched into the impact of the Modern Slavery Act 2015. I welcome The House of Lords Committee’s (The Committee’s) call for written evidence for its inquiry into the impact and effectiveness of the Act. I have limited my comments to areas where my knowledge and experience may assist The Committee. Therefore, my comments are limited to the following topics applicable to fashion retailers and any other retailers (in general) operating in the UK utilizing global supply chains.

The efficacy of the provisions of the Act relating to supply chains

The efficacy of the other key provisions of the Act, including definitions, sanctions, reporting, enforcement, and the statutory defence for victims

Suggestions for improvements that could be made to the Act to help it to better achieve its aims

My comments and recommendations are based on collaborative research specifically focused on the contents of the UK Modern Slavery Act 2015 (Section 54) (Islam and Van Staden, 2022) and documented evidence from Bangladeshi garment factories (on the ground) for fashion retailers operating in the UK market (Islam et al., 2022, 2023).

Brief Background

I am Chair of Accountancy and Professor in Sustainability Accounting and Transparency at the University of Aberdeen Business School. I investigate some of the specific sustainability accounting and transparency issues, including (but not limited to) corporate human rights measures, modern slavery-related corporate transparency and accountability, climate change accounting, social audits and corporate anti-bribery measures. Over the past 18 years, I have been investigating the use of social audits and Corporate Social Responsibility (CSR) disclosures in relation to the lives of those who work in garment factories in Bangladesh that supply goods to big multinational companies (retailers) based in North America, Europe and Australia. In fact, I completed my PhD in CSR disclosures and accountability focusing on global clothing chains. At the moment, I am the recipient of two prestigious grants (UK AHRC and GCRF-Scottish Funding Council) for two projects on corporate accountability in relation to modern slavery. My research collaborations are underway with international institutions and researchers based in Australia, Bangladesh, Canada, Egypt, New Zealand, Nigeria, Portugal, and the USA. I am actively engaged in doctoral and postdoctoral supervision. On the issue of modern slavery and sustainable development, I made submissions to the Australian Parliamentary Inquiries into establishing a Modern Slavery Act in Australia (submission made in 2017), and on the United Nations Sustainable Development Goals (SDG) (March 2018). I also made a joint submission and provided feedback on the New Zealand Government’s proposed legislation to address modern slavery and worker exploitation (2022).

Growing up in Dhaka, the capital of Bangladesh, in the 1980s and ’90s, as a boy, I witnessed the daily lives of workers in garment factories that supplied products to foreign companies. Such a witness gradually motivated me to engage in research documenting the working conditions and voices of garment workers. My research, teaching, and campaigning give a voice to millions of unheard and underprivileged workers and strive for policy change and civic awareness to ensure that profits are not made at the expense of underprivileged communities including workers in the Global South. In recognition of this work, I was honoured with a prestigious Scottish Fair Trade Award in 2022. I have also been a finalist for the Times Higher Research Project of the Year (2023).

Highlights of Key Findings from Recently Completed Research

Key findings from research focusing on the contents of the UK Modern Slavery Act 2015

Based on a series of interviews with anti-slavery activists and experts in the UK and a review of media articles, NGOs’ reports and existing regulations (including the UK Modern Slavery Act), Islam and Van Staden (2022) investigated the Act within the context of the global supply chains and provided the following key findings:

The call for supply chain transparency within the Act is restricted by the limited disclosure requirements.

The numerous organisations are now not subject to the Act. The Act implies that those with ‘an annual turnover below £36 [million] do not need to care about human rights’ (Islam and Van Staden, 2022, p.467). The £36 million cap was rather strange, and many people wonder where this figure came from.

The public sector entities, despite their significant presence in procurements and sourcing garments from overseas suppliers, are not yet subject to this Act.

While traceability of overseas factory locations and suppliers’ addresses is critical to transparency, the Act lacks provision/s for companies to disclose their factory locations and conditions.

Non-compliant retailers, if any, face no penalties, and there is limited (or no) legal recourse for holding retailers accountable for perpetuating slavery and exploitation in the factories located in the global South.

There is no specific requirement for a third party or independent audit or verification of working conditions in supply chains operating overseas.

Regulators and policymakers seem to prioritise corporate interests over protecting the global supply chains' real victims (workers). The Act’s risk management provision focuses more on retailers' business risk management than on the workers' risk of becoming the victims of slavery.  Along the line, the existing anti-slavery commission is weak in protecting workers.

The final remark is that the Act fails to provide the means to hold regulated organisations responsible for contributing to or driving modern slavery in their supply chains or production operations located in the Global South.

Key research evidence from the ground (factories): British fashion retailers’ supply chains operating in Bangladesh

Two studies (Islam et al., 2022, 2023) were conducted during Covid 19 pandemic time (2020-2021) to understand how fashion retailers’ (mainly for the UK and EU markets) behaviour (or unfair purchasing practices) impacted the workers’ vulnerability and slavery. The key findings from the two studies are below:

Vulnerability and exploitation of (women) workers in Bangladeshi garment factories supplying goods to the UK market

A research project led by the University of Aberdeen, in collaboration with the University of Dhaka and Transform Trade and funded by the UK Arts and Humanities Research Council (AHRC) via a research call by the Modern Slavery and Human Rights Policy and Evidence Centre (Modern Slavery PEC), explored the impact of the Covid-19 disruptions on women working in Bangladesh's clothing factories supplying garments to UK and EU markets. The research team carried out 87 face-to-face interviews with workers (primarily female), three focus group discussions (37 participants), 12 short video case studies and a series of interviews with NGOs/trade union bodies, government officials, industry officials and development agencies (ILO, UN Women) in Bangladesh. Key findings of this research are below:

There were heightened levels of interrelated vulnerabilities in economic security, job security, food security, housing security and health and wellbeing, leading to women workers struggling to support themselves and their families.

There were devastating impacts on workers that were exacerbated and, in some cases, directly caused by retailers and brands selling into the UK and other markets in the Global North.

There was an increase in forced labour and exploitation.

There was an increase in abuse and symbolic violence, mainly from line supervisors pushing women to work faster to meet unrealistic production targets.

Compliance or factory auditors do not always include women’s equal rights issues in their audits, and 40% of auditors surveyed did not audit the right to trade union recognition.

Reflecting on such findings (see our short video here: https://youtu.be/6Dlf4T4BUCY), I argue that the UK Moder Slavery Act fails to tackle slavery and exploitation on the ground (at the factory level). While we found from this qualitative research that the increased levels of forced labour and exploitations during Covid time, in some cases, were directly caused by retailers selling into the UK and other markets in the Global North, this motivated us to investigate further to explore whether and how retailers’ trading (purchasing) practices impacted on workers. Accordingly, we surveyed garment suppliers/factories in Bangladesh to understand retailers’ unfair purchasing practices and their impact on workers. The survey research findings are produced next.

Unfair purchasing practices by retailers for the UK market: inherent reasons for the exploitation of workers

Research (Islam et al., 2023) funded by the University of Aberdeen through the Global Challenges Research Fund (GCRF) conducted a field survey of 1,000 factories/suppliers in Bangladesh producing clothes for global fashion brands/retailers in December 2021. The survey was considered one of the most extensive surveys in the field that examined unfair purchasing practices by fashion retailers, including cancellation of orders, price reduction, refusal to pay for goods dispatched/in production, and delaying payment of invoices. Our survey participants (1,000 factories/suppliers) named 1,138 brands they were contracted to produce for in 2020-2021. The key findings are provided below:

51% of factories reported at least one of four unfair purchasing practices by retailers: cancellation of orders, price reduction, refusal to pay for goods dispatched/in production, and delaying payment of invoices.

Factories surveyed reported that at least 25% of workers lost their jobs during March/April 2020 (during the Covid-19 lockdown time in Bangladesh).

Survey participants mentioned major brands/retailers operating in the UK as having the highest proportion of unfair practices.

Not a single factory/supplier reported that they had taken their brand/retail customer to court (or sought legal action) for cancellations of orders or refusal to pay for goods dispatched/in production.

Nearly one in five factories supplying goods to UK and EU markets reported that they had been struggling to pay the Bangladeshi legal minimum wage for garment workers.

76% of factories/suppliers said they paid audit fees to third-party auditors either appointed by suppliers or buyers/retailers. So, most brands/retailers did not pay audit fees, which placed an extra financial strain on suppliers.

As a final note on findings, our research exposed large numbers of high street fashion brands in the UK engaged in unfair purchasing practices, with factories struggling to pay workers the Bangladeshi minimum wage of £2.30 per day (Dec 2021). We found that over 50% of suppliers/factories experienced unfair purchasing practices, which led to forced overtime, harassment of workers and inability to pay legal minimum wages.

This research and my review of other studies on the issue suggest that retailers' unfair practices are also common in different countries in the Global South. Based on the findings, our research recommended that the UK Government consider introducing a fair purchasing regulator, an independent watchdog (i.e., a Fashion Watchdog; see the campaign run by Transform Trade on this link: https://www.transform-trade.org/fashion-watchdog). Such a proposed regulator could investigate and fine brands/retailers if they breached a statutory fair-purchasing code in their dealings with garment factories/suppliers, particularly those in the global South. As we have found that the UK Modern Slavery Act 2015 is not functioning effectively (in particular, it is not working to control retailers’ unfair purchasing practices), establishing a watchdog/ fair purchasing regulator either as part/provision of the existing Modern Slavery Act or as a new and independent Act, is crucial in efforts to eliminate modern slavery and exploitation in the global supply chains.

Key Suggestions for Improvements on The Modern Slavery Act 2015

As you see, our research into the contents and provisions of the UK Modern Slavery Act 2015, as well as evidence gathered at the factory level, suggest that the Act has failed to achieve its aim to tackle modern slavery in the global supply chains. Therefore, we have the following suggestions for improvements:

As the UK Modern Slavery Act is disclosure-based legislation, it is important to consider due diligence provisions more seriously and find a mechanism to stop forced labour as well as unfair purchasing practices, particularly in the fashion and clothing sector.

The Act became problematic during a crisis (such as the Covid-19 pandemic). The Act remained silent during the Covid-19 pandemic when British retailers fueled massive job losses, forced labour, exploitation and starvation of workers in Bangladeshi garment factories via unethical purchasing practices such as sudden cancellation of orders already in the production line (Islam et al., 2022, 2023). Irrespective of the crisis or Covid-19 pandemic, unethical purchasing practices are common within global fashion chains[1]. Accordingly, I recommend that the UK Government introduce a fair purchasing regulator, a   'trade adjudicator' or an ‘Independent Watchdog’ across the industries, which could investigate and fine companies if they were found to breach a statutory fair purchasing code in their dealings with suppliers anywhere in the world. My recommendation is that to eliminate slavery in the global value chain, The Committee should either consider an explicit provision for an ‘Independent Watchdog’ across the industries under the UK Modern Slavery Act or urge the UK Government to introduce a new Act on ‘garment trade adjudicator'[2] (similar to the legislation on ‘Grocery Adjudicator’ within the UK food and grocery retailing sector[3] and the EU directive on Unfair Trading Practices in the Agriculture sector, recognising imbalances of power in food/agriculture supply chains[4]). I firmly believe it is crucial for the UK Modern Slavery Act to include a specific provision aimed at eliminating unfair purchasing practices across various industries, as these practices are linked to slavery and exploitation within the global supply chains, resulting in an adverse impact on vulnerable communities such workers and marginal farmers in the global south.

In line with our research findings, I am concerned about the contents and provisions covered under the Act. The Act does not mandate a third-party or independent auditor for companies to perform periodic or ongoing factory audits in their supply chains. I recommend introducing a provision for companies to have a third-party or independent auditor.

It is important to consider how policymakers should introduce an independent watchdog to monitor UK retailers’ purchasing practices. If only suppliers overseas (and not UK retailers) are subject to audit or surveillance, the Act may have assumed that the retailers are 'good actors' and that suppliers are the 'bad actors' who only need surveillance/audit. Our research found that fashion retailers operating in the UK market are also responsible for poor working conditions and slavery in their production factories in the Global South. We found that exploitation and the aforementioned unfair purchasing practices of retailers partly contributed to forced labour.

The £36m revenue threshold for publishing modern slavery statements is arbitrary. This may imply that entities below this threshold are not only exempt from disclosing ant-slavery actions but also from addressing human rights negligence in their global supply chains. I recommend that all companies (including medium and small-scale entities), regardless of their revenue levels, should produce annual modern slavery statements.

I observe slow progress (this could be due to Covid-related disruptions) in developing a provision for public sector entities. As many public sector entities procure significant amounts of products produced overseas, it is important to mandate these entities to produce annual modern slavery statements regardless of their sizes.  Scotland seems to be excluded from introducing potential provisions for reporting requirements for its public entities. I recommend that all public sector entities in Great Britain be mandated to produce annual modern slavery statements.

There is significant concern among civil societies over the lack of traceability of the products produced overseas. The Act lacks adequate provisions for disclosing factory locations (including factory addresses and working conditions) by retailers operating in the UK. I recommend that the Act include a provision for traceability of factory locations and working conditions, as this is considered the cornerstone of supply chain transparency. This would help everyone concerned easily trace whether the production is slavery-free or not.  Therefore, I recommend that retailers disclose factory locations and conditions regardless of whether they are first-tier, second-tier, or third-tier suppliers.

To achieve the regulatory aim of eliminating slavery in the global supply chains, The Committee should shift its focus from companies’ risk management to eliminating workers' risk of becoming the victims of slavery. Along with a clear provision for disclosure of production locations (manufacturing or agriculture or mining/Tier1, Tier2, Tier 3) where the risk of modern slavery exists, it is important to introduce a provision for significant penalties for non-compliant actors.  German Supply Chain Due Diligence Act 2023 is a useful reference for a penalty provision (also see critical piece by Islam, 2023). At the same time, The Committee should address the fundamental limitation of the UK Modern Slavery Commissioner, which does not have enforcement and penalty mechanisms which could hold retailers accountable for violation of human rights in factories they buy from in the Global South.

27 March 2024

References             

Islam, M. A. (2023). ‘Rana Plaza: ten years after the Bangladesh factory collapse, we are no closer to fixing modern slavery’, Conversation, Open Access: https://theconversation.com/rana-plaza-ten-years-after-the-bangladesh-factory-collapse-we-are-no-closer-to-fixing-modern-slavery-203774

Islam, M. A., Abbott, P., Haque, S. & Gooch, F. (2023). ‘Impact of Global Clothing Retailers' Unfair Practices on Bangladeshi Suppliers During Covid-19’. Research Report, January 2023, University of Aberdeen. Open Access: https://doi.org/10.57064/2164/19814, also viewed at: https://aura.abdn.ac.uk/bitstream/handle/2164/19814/Impact_of_Global_Clothing_Retailers_Unfair_Practices_on_Bangladeshi_Suppliers_During_COVID_19_VOR.pdf

Islam, M. A., Abbott, P., Haque, S., Gooch, F. & Akhter, S. (2022). 'The Impact of Covid-19 on Women Workers in the Bangladesh Garment Industry', Research Report, January 2022, The University of Aberdeen and the Modern Slavery and Human Rights Policy and Evidence Centre (Modern Slavery PEC), UK. Open Access:  https://modernslaverypec.org/assets/downloads/Women-Bangladesh-garment-industry-report-final-smaller.pdf

Islam, M. A. & Van Staden, C.J. (2022). ‘Modern slavery disclosure regulation and global supply chains: Insights from stakeholder narratives on the UK Modern Slavery Act’.  Journal of Business Ethics, 180, pp. 455-479 1-25, Open Access: https://link.springer.com/article/10.1007/s10551-021-04878-1