Out-Law / Your Daily Need-To-Know

Out-Law Analysis 5 min. read

Modern slavery risk and the mining sector

In the UK and globally increased focus is being given to the issues associated with modern slavery and supply chain transparency more generally. Like many sectors, those operating in the mining sector face modern slavery risk, both in their own operations and their supply chains.

The Global Slavery Index identifies mining, along with garment manufacturing and agriculture, as one of the sectors most at risk of modern slavery. Its latest report in 2018 pointed specifically to risks associated with gold mining in the Democratic Republic of the Congo (DRC) and Peru, coal mining in Pakistan, and diamond mining in Angola.

The mining of minerals in Africa is a particular risk area, with the use of child labour in the mining of cobalt in the DRC receiving significant press coverage in recent years. Recent civil action in Canada against the mining company Nevsun for allegations of human rights abuses and modern slavery at its Bisha gold, copper, and zinc mine in East Africa highlights the risks further.

The consequences of failing to effectively manage modern slavery risk can be significant from a regulatory and reputational perspective. While unrelated to the mining sector, the coverage in the press and the public outcry following the revelations that a Boohoo supplier was paying workers just £3.50 an hour highlights the reputational risks and increased public scrutiny for organisations that do not exercise sufficient due diligence and oversight of their supply chains.

This increased public scrutiny comes at a time where governments around the world are seeking to strengthen their modern slavery and supply chain legislation. Some governments, including the UK, have also taken the step to sanction those involved in global human rights abuses and are prepared take action against those who do business with these sanctioned individuals and organisations.

Legislative position and developments

In the UK the Modern Slavery Act 2015 requires relevant companies to publish an annual slavery and human trafficking statement – otherwise known as a modern slavery statement. This statement must outline the steps taken by the company during that financial year to ensure that slavery and human trafficking did not take place in its business or supply chains.

ensuring relevant staff are effectively trained on how to spot and respond to indicators that modern slavery is taking place.

Over the last year the UK government has set out plans to strengthen the UK’s approach to tackling modern slavery.

In September 2020 the government responded to the 2019 transparency in supply chains consultation. In its response the government committed to mandating areas that modern slavery statements must cover; and that organisations will have to state clearly when they have taken no steps within a particular area.

Under the current law, while there has been guidance on the content of modern slavery statements, the structure has been voluntary. As a result, there has been an option not to report on the areas where companies have taken no action, rather than to explicitly acknowledge this lack of action in their statements.

The current guidance for statements recommends a focus on six key areas: structure and supply chains; policies on modern slavery and human trafficking; due diligence; risk assessment and management; action taken to address modern slavery; and training. Reporting on these areas will be mandatory under the proposed reforms.

In January 2021, the government confirmed its intention to introduce fines for businesses that “do not comply with their transparency obligations”. The government said the home secretary would introduce the necessary legislation, setting out the level of these fines, as soon as parliamentary time allows.

In March 2021, the government launched the Modern Slavery Statement Registry. Businesses required to produce an annual modern slavery statement are being encouraged by the government to publish their statements on this new online registry operated by the Home Office.

Publication in the registry is currently voluntary, but the government intends to legislate for mandatory reporting. The Home Office is currently sending letters to organisations it understands to be required to produce modern slavery statements asking them to upload their statement to the registry.

There has also been a private member’s bill, tabled in June 2021, which seeks to strengthen the provisions of the Modern Slavery Act. 

In addition to domestic supply chain legislation the UK government has also been taking steps to sanction those involved in global human rights abuses. The 2020 Global Human Rights Sanctions Regulations came into force in July 2020. The regulations give the UK government the power to designate persons – whether state or non-state actors – who are or have been involved in serious violations of human rights.

A designation has the effect of freezing the funds and assets of the designated person and of any company owned or controlled by them. Funds, assets and services from which a designated person may derive funds must not be provided to the designated person.

It is a criminal offence for a person, firm or company to deal with funds or economic resources owned, held or controlled by a designated person, or to make funds or economic resources available to a designated person, if they know, or have reasonable cause to suspect, that they are dealing with a designated person.

As of 30 September 2021, 78 individuals and entities have been listed for human rights violations across the world, including in Russia, Saudi Arabia, Myanmar, North Korea, Belarus and Ukraine. The sanctions regime has also been used to designate four Chinese officials and one Chinese state-run entity for alleged human rights violations.

Global position

In addition to the heightened focus given to modern slavery and supply chain due diligence in the UK, there are a number of international developments that highlight the increased regulatory attention being given to this issue internationally.

The Australian Modern Slavery Act 2018 requires entities based or operating in Australia which have an annual consolidated revenue of more than $100 million to report on the risk of modern slavery in their operations and supply chains, and the actions taken to address those risks.

In June 2021, the German parliament adopted the Act on Corporate Due Diligence in Supply Chains. The German act will require corporate groups with more than 3,000 employees to take decisive compliance measures to combat human rights violations in their supply chains.

Canada, California and France have also taken steps to introduce modern slavery legislation.

Practical steps for the mining sector

Practical steps those in the mining sector can be taking now include:

  •  conducting a modern slavery risk assessment covering their business and supply chains;
  • reviewing, and revising if necessary, supply chain due diligence processes to ensure that these are designed to effectively identify modern slavery risk;
  •  conducting an audit of existing supply chains in order to identify modern slavery risk;
  •  ensuring employment policies and procedures are robust and enforced; and
  • ensuring relevant staff are effectively trained on how to spot and respond to indicators that modern slavery is taking place.

As part of any risk assessment, due diligence or audit, particular focus should be given to labour providers and agencies, including those who supply contractors and sub-contractors. Training on modern slavery red flags should be provided to those on the ground as well as those with a responsibility for managing supply chains.

The focus of governments and the public on the issue of modern slavery is only going to increase in the coming years. The time for those in the mining sector to strengthen their supply chain due diligence and modern slavery compliance programmes is now.

Co-written by Alistair Wood of Pinsent Masons

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