February 15, 2021
The UK has joined a number of other states to announce measures aimed specifically at preventing businesses from being complicit in human rights violations stemming from forced labour in the Xinjiang region of China. Factories in Xinjiang operating in a number of sectors have come under increasing global scrutiny in recent months due to a large number of credible reports of forcible transfer and enslavement of Uighur Muslims. The purpose of these measures is to assist businesses in ensuring that they are not implicated in these violations through their (often complicated) supply chains.
While the measures and additional guidance have been welcomed by many, they also present businesses with additional legal and regulatory requirements and challenges.
On 12 January, the UK Foreign Secretary (in coordination with the Government of Canada) announced a package of measures ‘designed to send a clear signal to China that these violations are unacceptable’. These include:
- a review of export controls as they apply to Xinjiang, to prevent the export of British goods that may contribute to human rights abuses in the region;
- the introduction of financial penalties for organisations failing to meet their statutory obligations to publish modern slavery statements;
- guidance for UK businesses setting out the risks faced by companies with links to Xinjiang and the challenges of effective due diligence there; and
- guidance for public bodies on using public procurement rules to exclude suppliers where there is sufficient evidence of human rights violations in supply chains.
UK businesses concerned about possible links to the region, including imports, would be well advised to urgently establish the extent of this and seek advice on possible remediation in light of the new measures as their precise scope becomes apparent.
Many companies have lobbied for clearer direction from national governments regarding business in Xinjiang, and called upon other entities to examine their supply chains to ensure they are not unknowingly supporting forced labour. On 14 January, the US announced a ban of all imports of cotton products and tomatoes from Xinjiang, and other countries appear likely to follow suit.
The situation in Xinjiang is one of many examples of the risks faced by businesses in every jurisdiction, should they fail to adequately monitor their suppliers’ practices. In July 2020, an investigation into widespread labour abuses in garment factories in Leicester, England, implicated online fashion retailer Boohoo, knocking £1 billion off its market value in a single week. Such revelations require immediate and costly remediation, and cause immeasurable damage to corporate reputations and investor confidence.
The new measures being introduced globally highlight the importance for businesses of:
- monitoring and assessing risk in their global supply chain;
- performing due diligence on suppliers; and
- ensuring that their modern slavery policies and procedures are fit for purpose.
On Wednesday 21 October 2020, we held a webinar discussing the complexities of managing ESG risk in supply chains. For those of you who could not join, or who wish to listen again, you can watch a recording of the webinar here.
Disclaimer
Dentons US LLP published this content on 15 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 February 2021 15:30:03 UTC.
