Why Brazil needs a new law on supply chain reporting and mandatory human rights due diligence

Brazil is losing ground on eradicating modern slavery from its supply chains. Lessons learned from the implementation of the UK Modern Slavery Act could be the starting point for future legal developments in South America’s largest country, says Caio Borges from leading Brazilian NGO, Conectas Human Rights.

Brazil’s fight against modern slavery

As the world’s 8th largest economy, Brazil plays an important role in the trade of global commodities. The country is the main global supplier of beef, with India and Australia as second and third, respectively. It is also the number one global supplier of coffee exports. According to the International Coffee Organisation (ICO), the country produced more than 54 million of bags of coffee in 2018. Brazil is also a notable exporter of orange juice, poultry, iron, soybeans and sugarcane.

Brazil has a prominent position as a supplier of raw material and manufactured products to the consumer markets of developing and developed countries. Anyone doing businesses with Brazilian counterparts should be aware of the risks associated with labor rights violations across different supply chains. However, these risks are increasing due to shifts in Brazil’s political and institutional environment.

Proposed legislative bills, if approved, would dilute the concept of “work analogous to slavery” (the Brazilian legal conception of modern slavery), by removing degrading work conditions and exhaustive working hours from the current legal definition. This measure has drawn the attention of UN rights experts, who called Brazilian government to take urgent action to halt measures that could reduce people’s protection against modern slavery and weaken corporate regulations.

The Brazilian system of inspection is currently underfunded and understaffed, to the point where the number of operations are at historically low levels. In 2017, only 341 workers were rescued and 88 operations were conducted, the lowest number since the early 2000’s, when the current policies began to take shape.

The country’s landmark disclosure instrument – the so-called “Dirty List” – remains vulnerable to legal attacks coming from sectors with a problematic track record of workers’ exploitation, notably agribusiness and civil construction.

Immediately after taking office, President Jair Bolsonaro abolished the Ministry of Labour, redistributing its competences and resources to two other ministries (Economy and Human Rights, Family and Women). This move has raised concerns about the continuity and coherence of policies against modern slavery, though it has not, so far, affected the publication of the Dirty List.

Learning from the UK’s Modern Slavery Act

To maintain its leadership in the global fight against modern slavery, and to strengthen standards of protection, Brazil should adopt new legislation on transparency in supply chains.

Building on the recent experiences of modern slavery reporting laws in countries like the United Kingdom and Australia, Brazil could enact new legislation that would at the same time fill the gaps in its own legal and policy framework while addressing key factors that prevent existing reporting laws from fully achieving its desired objectives.

In the UK, the passing of the Modern Slavery Act in 2015 marked a concrete step of more than a decade of sustained mobilisation and campaigning from civil society organisations and their allies in Parliament, private sector and research institutions.

Now that the Act has been in place for four years, key stakeholders in the UK are assessing its achievements and intensively debating how to move forward. The perception amongst key organisations that advocated for the Act and that monitor its implementation is that it succeeded in raising UK companies’ awareness of human rights conditions in global supply chains, but that more needs to be done to promote a transformational change in corporate culture.

In September, the UK’s Home Office commissioned an independent review of the Act. The reviewers’ interim report on the Transparency in Supply Chains (TISC) clause, which echoes many calls from civil society, found that there were significant weaknesses in the effective implementation of the law.

Its recommendations include stronger enforcement mechanisms, including sanctions for companies not in compliance, and a central, public registry for facilitating external oversight over the quality of companies’ reporting. Currently, this task of collecting, disseminating and analysing the reports is performed by independent organisations such as the Business and Human Rights Resource Centre.

Another key issue is the establishment of substantive requirements for reporting. The disclosure of meaningful information on the identified risks and impacts and the measures taken to address them is crucial to ensure that the reporting is not just a mere box-ticking exercise.

Additionally, the challenge is how to ensure consistency across sectors. The experience has shown that consumer-facing companies tend to provide more substantial information on their reports. Hence, mechanisms to re-calibrate the reputational (and legal) costs of poor compliance are indispensable to make the application of the law more uniform.

Implications for prospective legislation in Brazil

These and other thorny issues would need to be properly addressed in a future process of public and legislative debates on the adoption of a new supply chain reporting law in Brazil. Having strong credentials for its history of innovative design of policies and instruments to fight modern slavery, Brazil could be even more ambitious than the UK in drafting its own legislation.

Areas where further improvement would be more than welcome include full disclosure of the list of suppliers, if not for all, at least for critical sectors, defined in accordance with robust methodologies and criteria. This requirement could be progressive and coordinated, so as to balance with concerns on business confidentiality and guarantee of competitive advantages.

Critical and independent analysis of existing reporting laws has shown that excessive light-touch regulation does little to improve working conditions on the ground, or to change corporate policies and practices. To avoid a legislative failure, Brazil could consider coupling a transparency law with a full-fledged requirement to conduct human rights due diligence. The timing is very appropriate. There is a growing momentum worldwide for the adoption of mandatory human rights due diligence legislation.

The time is now for Brazilian government, civil society, business sector and academia to come together to creatively devise new legislation to enhance corporate accountability for workers’ rights in the supply chains and to pave the way for an inclusive, sustainable and rights-respecting development.

Caio Borges is the coordinator of the Development and Social & Environmental Rights at Conectas Human Rights, in Brazil. He holds a Master in Law and Development from the Getulio Vargas Foundation and is a PhD candidate at the University of São Paulo.