Until now, anyone investing in a business was buying into a couple of simple facts:
- A study by Hult University found that 77% of businesses admit (anonymously) they are likely to have modern slavery in their business. That means 77% of YOUR investments in business are investing in modern slavery.
- Less than 6% of businesses have sufficient visibility of their supply chain to know if there is modern slavery. That means in more than 94% of investments, YOU don’t know what you are investing in.
- More than two-thirds of consumers would not buy a product if they knew there was modern slavery behind it. Let’s replace ‘consumers’ with YOUR ‘investors’. Logically the numbers cannot be dramatically different.
- A study by the SEC found that >80% of firms cannot even determine the country of origin of their products, let alone the conditions in workplaces in those countries. And just 1% could confidently certify themselves as conflict-free; let alone human rights compliant.
There is some way for us to go from 1% to >77%.
The field of impact and ESG investments is filled with investors and fund managers trying to be ethical about where money is placed. Trying to do the right thing is hard. It should be; the right thing always was, is, and will be.
The ‘E’ has proved to be tough, with even expert mistakes in tackling deforestation, for example. But the ‘S’, the Social Sustainability, in ESG has largely been ignored. A quick scan of ESG literature will amply demonstrate. Go ahead, Google it. The S is rarely even well-defined. Some people are now talking about human rights in the same terms as the EU taxonomy on Environmental Sustainability, with terms like Scope 1, 2, and 3. We are largely focused on human rights, which perhaps most accurately might be described as a subset, albeit a very large one, of social sustainability.
Instead of trying to fit human rights into the environmental taxonomy, just because, at slavefreetrade, we think of a company as a complex adaptive system that is nested within others. So, we treat human rights as figuratively comprising 3 or more concentric circles; each circle is a complex adaptive system. So if you look at these circles in order, with the company at the centre, this inner circle is the company and its own staff. The second circle is the people working in a connection with the company, but not in it. This equals value chains. The third circle is the communities and societies within which each company, and its value chains, are nested.
Why has the ‘S’ – why have human rights - been relegated? The principal reason is because it has been very, very difficult to know anything about what sort of impact business practices have had on humans and whether you are buying into it. It is also the case that the humans have been subsumed by product-centricity for centuries, and companies have been in thrall to products and their sourcing, their price and quality being the principal considerations, also for centuries but even accelerating since the 1970s.
Let’s paraphrase it this way: it is a lot easier not to know. Numerous studies have found that the number 1 reason companies don’t want to know, is because it is a very inconvenient truth. Since at least the trans-Atlantic slave trade, humans in value chains are an aside in the equation, and a cost to a company. We see thisi s changing.
But…..
- How is your due diligence looking if you are 94% of the time not in possession of enough information to know if you are investing in modern slavery or not
- Increasingly the due diligence burden of proof is falling on businesses themselves to know, and investors to find out before investing, for example, people’s retirement savings into modern slavery
- Legislative regimes are gradually cottoning onto this fact. In the coming 2-3 years, we predict investment prospectuses will be required to include modern slavery statements, AND with the burden of proof on companies to prove they DON’T have slavery
- In the same timeframe, we expect insurers will expect investors to know more about the ‘S’ in their investee’s supply chains, for supply chain risk and Director’s liability. How is your insurance looking for breaches in your supply chain when you could have done something about it?
Knowledge is power; it seems unwise not to wield it.
If you are an investor, an investment fund, or a fund manager, and you want to be ethical, taking care of the S in your ESG claims, there are a couple of really important things slavefreetrade does with organisations and their supply chains that you need to know about.
Fixing the ‘S’ in ESG is finally possible
We have spent the last 3+ years building what is the world’s most comprehensive human rights framework for organisations. We have built objective international standards drawn purely from the body of international human rights law – charters, treaties, conventions - into a huge matrix of subjective, contextual, but universal questions we ask employers and employees all over the world. We have combined that human rights framework with advanced hybrid blockchain and conventional technologies more complex than the Hubble Telescope. With this combination, we are able to secure through both primary and secondary source evidence, the working conditions in workplaces globally. Anywhere in the world. Anywhere in the supply chain. At any time.
We talk to workers in real time, all the time. And we aim to scale to tens of millions of them. And find out from them about their workplace conditions. But we don’t crush or close down business with problems, we work together to fix issues. As a diagnostic tool first and foremost, we are not about to let a business die after we see some cancer cells. We work with the company towards their wellness. Unless, of course, the company is not willing to fix the problem; the cancer cells will remain and grow.
Only good actors allowed in this club, thanks very much.
We let businesses see for the first time EVERY layer in their supply chain, every workplace, and an assessment of the conditions in those workplaces. Excuses for not knowing? No valid ones.
The 6% knowing something, and the 94% knowing nothing, is about to be the outdated paradigm. We are gunning for 100% knowledge of the supply chain.
And you know how confident we are in the results of our work? In the vast majority of workplaces, >95% confidence. Those are numbers you can quite literally take to the bank. Decades of experience in anti-slavery operations around the world mean you better believe we know what we are talking about.
It works like this: as an investor you can join our platform and your investees are treated as suppliers by our system. One of our Core Processes, Network Mapping invites and connects with every investee in your portfolio, and those who join also go through the same processes. And we do this layer by layer by layer. We talk to every worker in that investee’s workplaces. Your investees are required to import their supplier lists. And we talk to every worker in their supplier’s workplaces. And so on, down the line to the bottom. We maintain commercial sensitivity that restricts visibility to just one degree of separation. But we lower the barriers on transparency to provide a 100% view of human rights performance of every link in the value chain.
It was – and still mostly is - an enormous and blameworthy distance between Tier 1 and Tier 3 of a supply chain. The distance, complexity, and opacity, has masked and excused unethical behaviour for as long as supply chains have existed.
The new paradigm is that everyone is someone’s Tier 1. And our Network Mapping process discover it, maps it for you, connect with every supplier everywhere, and talk to every worker everywhere in real time, all the time.
Our hypothesis around this new network effect based on human rights transparency is that what were disaggregated supply chain actors become collaborative networked organisations (CNOs), with human rights as the fibres in that network. When the bottom line of the apex firm through, for example, a retail product that consumers are rewarding because of the efforts of the chain actors, becomes dependant on human rights performance of every actor in the chain, human rights becomes not just a topic of conversation. The bottom line becomes dependant on the human rights performance of the chain; everyone has a profit-seeking vested interest in continuing to be human rights compliant. In our very first pilot project, a UK-Colombia cocoa supply chain, this hypothesis is so far proven.
Please make sure you are not investing in slavery. Now that it is possible to know, there are no more excuses for not knowing.
If you are a fund such as for pensions and you can guarantee that no business you invest in is carrying the risk of human rights issues including modern slavery, what is that worth to you and your clients? It would be wonderful to see how many people saving for their retirement would like to know their pensions are propping upslavers.
Knowing is worth a lot.
If you are an investor and can swear hand on heart that you have done everything absolutely possible (by the ‘now possible’ standard), how are you looking about now to potential clients?
Invest in freedom instead.
Join slavefreetrade now, and we can tell you how to get that peace of mind. Do your best; you AND your clients deserve it.
