Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill [HL]

(Limited Text - Ministerial Extracts only)

2nd reading
Friday 10th May 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)]

My Lords, I join your Lordships in thanking the noble Baroness, Lady Young, for tabling the Bill, and I thank all noble Lords for their valuable contributions today. This debate is timely given recent developments in the European Union, and I share noble Lords’ views on the abhorrent practice of slave labour. I therefore welcome the opportunity to explain the Government’s current thinking on mandatory due diligence and why I am unable to support the Bill today.

I begin by noting that the Government are committed to tackling human rights and environmental abuses. The Government have consistently supported the UN guiding principles on business and human rights, which the noble Baroness referred to in her opening remarks. We are a signatory to the OECD guidelines on responsible business conduct for multinational enterprises, and for some time we have encouraged businesses to conduct due diligence voluntarily. Importantly, as the noble Lord, Lord Browne, mentioned, the UK also operates the national contact point, which provides a non-judicial mechanism for cases to be brought to when a company contravenes the OECD guidelines. The national contact point does important work and many of the cases that it mediates result in positive change.

Although the contact point does valuable work, the Government recognise that it is a non-binding mechanism and that harder legislative requirements also have a role to play. Some 13,000 statements have been submitted to the modern slavery statement registry under the Modern Slavery Act 2015, but the Government recognise that there is more to do. The Government have therefore committed to take forward an ambitious package to strengthen the Modern Slavery Act, which includes a proposal to mandate the topics covered in the modern slavery statement. This would mean that a company must publish details of its due diligence processes in cases where it has them.

Pressures on parliamentary time mean that these new measures have not been taken forward as quickly as many in this House would like. I understand that frustration, although I note that the Home Office has recently taken steps to update the modern slavery registry. I also urge noble Lords to consider that the Modern Slavery Act sits alongside a wider set of initiatives that are designed to tackle environmental harms and human rights abuses. Specifically, three initiatives are pertinent to this debate.

First, the 2013 timber regulations already require due diligence from organisations that place timber products on the market. Defra is building on these by taking forward new due diligence legislation in relation to specific commodities at risk of being produced following illegal land use and illegal deforestation. These regulations will be published shortly, and I encourage noble Lords to review them when they are available.

Secondly, noble Lords will be aware of significant reforms occurring in relation to public procurement and supply chains. Following a review of NHS supply chains, the Department of Health will be introducing regulations in relation to them. I note that the noble Lord, Lord Browne, drew attention to the case of Supermax, which the Government investigated. Since then, steps have been taken through the Procurement Act 2023 to strengthen the rules on modern slavery and environmental misconduct in relation to those supplying public authorities. Among other things, the Act will allow procuring authorities to exclude suppliers where there is evidence of modern slavery, even in cases where a conviction has not taken place. I appreciate, given his speech, that my noble friend Lord Deben has some concerns about this Act, and I will be happy to ask my colleagues in the Cabinet Office to take this up with him further.

Finally, the Government recognise that corporate transparency can be a powerful tool, and we are taking forward a process to assess the suitability for use in the UK of the IFRS Foundation’s recently published international sustainability disclosure standards. The IFRS Foundation’s initial standards focus on climate issues, but companies that choose to use the standards would also report on nature-related risks where they are material to their business, thereby raising greater awareness of potential environmental harms.

These initiatives demonstrate that the proposed Bill enters a crowded landscape, interacting with a wide range of existing and forthcoming legislation. I therefore worry that it would create confusion and cost for businesses, which would need to wrestle with multiple requirements articulated in competing ways. That is at odds with this House’s desire for a coherent legislative framework.

Turning to the proposed Bill, I start by observing that the evidence base for the success of mandatory due diligence remains extremely limited. A small number of jurisdictions have enacted similar legislation to the proposed Bill, but those pieces of legislation are relatively recent and their complexity can make them hard to implement, partially due the global nature of the supply chains that noble Lords have referred to.

Rather than introducing legislation to tackle both environmental harm and human rights abuses, the Government intend instead to observe how new developments unfold while taking targeted due diligence measures in relation to forest risk commodities and testing their effectiveness following implementation. For instance, Defra’s legislation will focus on a specific list of products that are connected to illegal deforestation. By contrast, the proposed Bill would require companies to make complex assessments for a potentially unlimited range of goods and services.

Moving on to the detail, I have several concerns about the Bill’s contents and I share many of the sentiments expressed on the Benches opposite by the noble Lord, Lord McNicol. Unlike the EU and German legislation, which applies only to the largest businesses, this Bill would apply to all 5.5 million companies in the UK. This would include 3 million sole traders and 2.5 million SMEs, many of which will lack the resources of the 8,000 larger organisations in our country to undertake the required checks. As a result, it runs a very real risk of creating an unlevel playing field in the UK economy, as well as creating real difficulties for suppliers in developing nations, which might struggle to provide the data required by companies in developed nations. I understand this all too well, having observed some of these difficulties just four weeks ago while undertaking—

[Lord Browne of Ladyton (Lab)]

I am concerned that the Minister or his officials have perhaps misunderstood this legislation’s provisions. It proposes that the threshold for these obligations will be set by regulations, which will emanate from a Secretary of State in government and be approved by this Parliament. You cannot just aggregate all the businesses in the country and say that they will all be subject to this, when the Government themselves will have the ability to make it cut at a particular point.

[Lord Offord of Garvel (Con)]

I thank the noble Lord for that point. I think that proves the point that there is complexity here. We have a very wide matrix of businesses in this country, which need to be legislated on quite separately. That is not what is currently in the Bill.

As I was saying, there is also the issue of suppliers in the developing nations having to provide data to developed nations. I saw that myself in Colombia and Bolivia recently, in the context of discussions on climate change and sustainable development.

The Bill would also impose an obligation to conduct reasonable due diligence, with Clause 3(3) listing a series of contextual factors that are relevant when determining what can be considered “reasonable”. As drafted, this list means that companies would find it incredibly difficult to know whether they have complied with the Bill. In practice, the application of the term “reasonable” could be debated in the courts for years, leading to an unsatisfactory situation in which companies within the Bill’s scope face significant legal uncertainty. When combined with the fact that criminal offences and substantial fines rest on this term, this undermines the goals the noble Baroness seeks to achieve, as it may incentivise well-run but risk-averse companies to terminate commercial relationships entirely rather than seek to remediate issues when they find them.

Clause 8(1) would introduce civil liability for businesses that fail to prevent human rights abuses or environmental harms in their operations, subsidiaries or value chains. The Bill attempts to give businesses grounds for defence where they have conducted due diligence, but I am concerned that this provision, when applied in practice, would shift legal responsibility to UK companies, with cases being introduced against UK companies in UK courts in the first instance. It would be preferable for claims against individuals and companies that are directly responsible for harms to be brought in the jurisdiction in which they occur.

[Lord Deben (Con)]

The reason for that, of course, is that the jurisdictions we are talking about are very often complicit in what happens. Therefore, if cases cannot be brought here, they will not be brought at all. Surely, Britain ought to be the place where you can stand up for what is right.

--- Later in debate ---

[Lord Offord of Garvel (Con)]

I thank my noble friend for that. Indeed, talking to Ministers in Colombia and Bolivia, we were talking very much about how we strengthen their legal position, and they want help from us to do that, so that is ultimately the direction of travel.

This issue is one of many that demonstrate that mandatory due diligence legislation is incredibility complex and requires detailed consideration and consultation, as I am confident that there is a wider range of business opinion on this issue than the organisations mentioned by the noble Lord, Lord Browne, and the noble Baroness, Lady Coussins. I thank the noble Baroness for prompting this important debate, but I urge noble Lords to wait for the forthcoming legislation that I mentioned and to support the Government’s intention to review the success of due diligence requirements as they are implemented over time.