Engagement in practice: slavery and supply chains
COVID-19 has unequivocally strained our social and financial systems. As responsible and long-term investors committed to inclusive capitalism, at the start of the crisis we therefore encouraged companies to give careful consideration to all their wider stakeholders – especially their employees, supply-chain relationships, the environment and the communities in which they operate – in formulating their response to these unprecedented events.
We did not stop there, though. Reflecting our longstanding interest in the topic rather than simply as a reaction to the pandemic, last year we worked with Rathbones* as part of a collaborative engagement of managers with a total of £3.2 trillion** in assets under management to challenge FTSE 350 companies that had failed to meet the reporting requirements of Section 54 of the Modern Slavery Act, 2015.
Not only did we want to highlight the importance of eradicating modern slavery throughout the supply chains of FTSE 350 companies, we also sought to raise the importance of eradicating modern slavery across global business. The initiative provided an opportunity for investors to better understand the nature of the companies they invest in, and how the board views the issue of modern slavery. A secondary objective was to encourage a greater degree of challenge on social issues, specifically making use of shareholder rights, as we feel that responsible investment currently does not focus enough on these concerns.
This specific activity was a light-touch engagement and a reminder to companies that we expect them to meet the requirements of this important legislation, but it was not our only action on this broader issue.
In the United States, we have been working together with Legal & General Investment Management America (LGIMA) to engage the Securities and Exchange Commission (SEC) on several important related points. For example, working alongside a group of institutions, we wrote to the SEC to encourage the introduction of a new set of rules that would see companies disclosing more consistent and reliable data on 11 areas including management of their response to COVID-19, human capital management processes, and supply-chain risks.
Swift and decisive action
Many of you will be aware that Boohoo Group*, an online fashion retailer, faced accusations of slavery within its supply chain last year. We engaged the company on numerous occasions in the second half of 2020 to discuss its response to address these criticisms of poor practices among some of its suppliers.
Boohoo subsequently announced its Agenda for Change programme, with a focus on improving supply-chain management, driving more responsible sourcing and transparency. As part of its social responsibility journey, the company identified a number of areas for improvement, with a detailed timeframe to monitor progress.
To date, it has strengthened personnel expertise around ESG issues and sustainability in key roles, including the hiring of Sir Brian Leveson (who chaired the public inquiry into the culture, practices and ethics of the British press). The firm published an initial report at the beginning of this year, and recently ended its relationship with hundreds of suppliers.
We believe this helps put the company on the right path to start rebuilding confidence in the group’s social responsibility strategy. We plan further engagement through 2021, with an ongoing half-yearly update, including discussion of its more detailed long-term sustainability agenda in the second half of 2021.
While an important improvement for this particular company, we also support plans for change in the wider industry.
*For illustrative purposes only. Reference to a particular security is on a historical basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
**The value of an investment and any income taken from it is not guaranteed and can go down as well as up; you may not get back the amount you originally invested.