Company: CDC Group
Category: ESG Research Report of the Year (shortlisted)
In the spirit of showcasing leadership and raising standards of responsible investment among all our signatories, we are pleased to publish case studies of all the winning and shortlisted entries for the PRI Awards 2019.
Project overview, objectives and why the research breaks new ground
The objective of the Modern Slavery Good Practice Note (GPN) is to provide practical guidance to the private sector on how to avoid becoming complicit in modern slavery. The GPN gives clear recommendations and tools that help identify and manage potential modern slavery risks, as well as guidance on how to tackle it when identified.
The GPN does not set new standards but integrates considerations into processes that many investors and companies already have in place, such as environmental and social due diligence and labour monitoring. It also builds a strong business case and effectively communicates:
- why action from the private sector is necessary;
- how to manage and address issues;
- the need for cooperation and collaboration with others.
The GPN’s target audience is companies and investors operating in emerging markets. On the investment side, targets include DFIs, banks, private-equity firms and other financial institutions that provide capital to companies in emerging markets. Within this group, the guidance is particularly relevant to environmental and social specialists, investment staff and compliance professionals.
For corporates, it primarily targets those operating in emerging markets. And within those, it targets a range of functions such as management, human resources, sustainability, and procurement. The GPN’s practical approach and ability to link current practice, existing tools and resources make it highly relevant for the private sector.
Modern slavery is an umbrella term comprising different forms of slavery, servitude, forced or compulsory labour and human trafficking. The GPN focuses primarily on forced or compulsory labour as the form of modern slavery that investors and companies are most likely to encounter. It explores specific situations and contextual drivers and highlights supply-chain risks, where risks tend to be greater. These can be unacceptable practices such as abusive and fraudulent recruitment (such as recruitment fees), withholding wages and document retention, some or all of which can leave workers in a situation of modern slavery.
The GPN was commissioned in 2018 by CDC Group, the International Finance Corporation, the European Bank for Reconstruction and Development, and the UK’s Department for International Development. Ergon Associates and the Ethical Trading Initiative produced the report.
The GPN needed to reflect the current understanding of best practice, and indicate that new approaches are evolving that provide companies and investors with guidance on options to understand, and act upon, indications of modern slavery. The research team adopted a qualitative research method over five phases:
- Global mapping and risk analysis: The team found examples of modern slavery to illustrate some of the challenges around detecting and addressing it. The report also gives advice on what companies can do in terms of due diligence. And how investors can assess the capacity of their investees to manage, mitigate and prevent modern slavery risks.
- Stakeholder workshop: The team hosted a workshop in Washington DC attended by a range of stakeholders, including governments, DFIs, investors, private sector participants and NGOs. The workshop helped to frame the structure, tone and content of the report – and helped to establish sources for information.
- Stakeholder interviews: The team interviewed 13 stakeholders to find out the most advanced thinking on how to address modern slavery risk, what were the best ideas for solving the problem, and establishing good practice approaches.
- Multi-stakeholder feedback: The team hosted a workshop to present the initial version of the GPN and gather feedback prior to finalising the report. The session was hosted in London and attended by a wide range of stakeholders, including DFIs, private-equity funds, private investors, corporates, academics, and NGOs.
- General feedback: The GPN was open for public comments for 20 days.
Each phase included engaging with experts and practitioners to understand the scope of existing tools and resources and identify the gaps to ensure the output was practical and usable. This broad engagement and feedback from stakeholders throughout the development of the GPN was paramount to ensuring a practical approach and subsequent impact of the document.
How the findings have been applied and the wider benefits to investors
Modern slavery and human trafficking is prevalent across the countries and sectors where private investors operate. Whilst there is increased regulation aimed at tackling modern slavery, the challenge of awareness and implementation remains. The GPN closes the knowledge gap on these challenges. It is published online, broadening access to the target audience, as well as the general public. It will be translated into Spanish, French and Arabic to ensure broader use and global coverage.
The note provided clear guidance to investors on how to address a systemic and widespread issue that affects over 40 million people trapped in some form of modern slavery today. This undervaluing of labour and infringement upon human rights inhibits the sustainable functioning of the financial system and it is the intention of the GPN to shine a light on the pandemic so it becomes impossible to ignore