After nine previous articles in this series on how Canadian directors and CEOs can address modern slavery in their businesses and supply chains, I want to take the opportunity to address the question that I am regularly asked by business leaders and in-house counsel, "Where do we start?"
I always respond to this quintessential question by offering the quintessential answer: You start at the top of your business – whether it be the Board of Directors, the C-Suite or the General Counsel. The leadership of your business will be, and must be, the catalyst for this initiative.
The next question is always, "And so what should we do first?"
My answer is always that it isn't just one thing that needs to be done. The path forward is beyond a "tick the box" exercise.
In my view, there are four steps of every strategy to address forced labour, child labour, modern slavery and human trafficking (collectively referred to as "modern slavery") in a business and its supply chains:
- Set the Business Principles
- Conduct Risk Assessment and Due Diligence
- Operationalize the Principles within the business and its supply chains
- Advance the Principles and Remediate
There will be tangible actions to be taken to address the challenges within each step.
In this edition, we examine step 1: Set the Business Principles. We will examine steps 2 through 4 in subsequent articles in this series.
Set the Business Principles
To start, the Board of Directors, in fulfilling its fiduciary duties, must act "honestly and in good faith with a view to the best interests of the corporation". Given that duty, the Board must ask and answer the question "Is it in the best interests of our business to tolerate or utilize modern slavery in our business and its supply chains?". If the Board concludes that the answer to that question is "No", we move to Action Two.
The Board, working with the most senior leadership of the business, should then work on the development of governing principles for its business to address the relevant modern slavery issues. They can be as simple as "Our business does not tolerate or utilize modern slavery in our business or our supply chains." Or, they may refer to various relevant international standards and guidance documents such as the United Nations (UN) Guiding Principles on Business and Human Rights and/or the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.
The Board and the business leadership team needs to be current in order to meaningfully fulfill their duties. I recommend that they build their own awareness to this issue through education about modern slavery generally; modern slavery in their industry; modern slavery in the jurisdictions in which they operate; as well as relevant modern slavery risk factors and modern slavery value-creation opportunities. Within that context, the leadership team can then engage and discuss their current knowledge of modern slavery within their business and supply chains with a view to better articulate one or more meaningful governing principles for their business.
The governing principles are the key foundation upon which the business will build all of its efforts to address and eradicate modern slavery in the business and its supply chains. The governing principles should also be introduced and communicated externally to all stakeholders such as customers, suppliers, lenders, investors and shareholders.
The governing principles must carefully and accurately reflect the position of the business and must be vetted for a number of issues including legal risk. We see examples of governing principles that are too aspirational and soft, and others that may be too finite and unintentionally commit the business to a standard that is beyond what is practically possible. Some key words of counsel that I always offer: "Say what you do, and do what you say."
Before the business can begin to proudly publicize its new governing principles internally and externally, it must assess the risks that modern slavery may exist within the business and/or its supply chains and conduct the necessary due diligence for verification and next steps.
I'll discuss that topic in the part 11 of this series: Conducting Risk Assessment and Due Diligence.
More in this series
For further information, please read the other parts of our Guide to addressing modern slavery in your business and supply chain for Canadian directors:
How we can help
To find out more about how Gowling WLG can help your business expertly organize and manage due diligence and other governance, risk, compliance and supply chain issues, please contact the author Stephen Pike.