ESG Considerations

Long and complex supply chains of business operators (particularly those in the manufacturing or fishing industry) often lead to less direct oversight of their operations, and therefore make it increasingly difficult to detect incidents of labour exploitation in the supply chain. In relation to Environmental, Social and Governance (“ESG”) considerations, labour exploitation in the supply chain falls within the realms of ‘modern slavery’ (although there is no  universally recognized definition, it is generally understood that the terms “modern slavery, trafficking in persons and human trafficking” are umbrella terms that refer to the recruitment, movement, harbouring or receiving of children, women or men through the use of force, coercion, abuse of vulnerability, deception or other means for the purpose of exploitation as defined by various legal instruments), which in turns falls under the ‘Social’ part of ESG considerations relating to labour conditions, occupational health and safety, and human rights related issues.

Some countries, such as the United Kingdom, have taken steps to hold corporate entities accountable for their supply chain by promulgating laws that impose a mandatory reporting requirement on companies and partnerships. Under Section 54 of the UK Modern Slavery Act (the “UKMSA”) which came into force in 2015, corporate entities are required to prepare and disclose a detailed slavery and human trafficking statement to address transparency in the supply chains of their business. Although there is currently no penalty imposed for non-compliance with the aforementioned requirement, civil proceedings may be initiated against a company for an injunction or specific performance; whereby subsequent failure to comply with the injunction may result in the payment of a fine.

Unlike the UK, Thailand does not have a statute which specifically addresses modern slavery in the supply chain. Instead, issues relating to labour exploitation in the supply chain are often regulated by the provisions of the penal code and other specific areas of law, such as labour law, law on fisheries and law on human trafficking, as well as in  non-binding measures created by the government. At present, Thailand’s corporate and commercial law as well as the law regulating corporate disclosure and transparency in relation to the capital market do not require companies to disclose a slavery and human trafficking statement.

The penal code serves as the general law prohibiting the act of treating a person as a slave and the human trafficking of a person, whereby engagement in such acts carry grave criminal penalties.¹ This is further reinforced by the Anti-Trafficking in Persons Act 2008 which imposes criminal liability on individuals and companies (including their representatives) for their involvement in facilitating forced labour and human trafficking.²

In relation to labour law, employers (including a person authorised to act on behalf of a juristic person and a person acting on the behalf of an authorised person of said juristic person) are liable for employment related violations or breaches of fundamental duties of the employer.³ In relation to employment relationships consisting of subcontractor employers or subcontracted workers, such employers are responsible for providing the worker with the same benefits and welfare as provided to contract employees.⁴ Furthermore, certain industries are regulated by industry specific laws. For example, licensed fishing vessel owners and operators are required to observe the conditions prescribed in the Royal Ordinance on Fisheries 2015 and the Ministerial Regulation on Labour Protection in Sea Fishery Work 2014 in relation to the employment of seamen.

Nevertheless, these laws do not appear to address the accountability of a company at the top of the supply chain towards those at the bottom (i.e. workers and seamen), as it only places the responsibility to comply with the prescribed conditions on a fishing vessel’s owner or operator, and not on the company that employs the fishing vessel owner or operator.

In respect of the laws regulating corporate entities, private limited companies and public limited companies share the same duty of submitting an audited balance sheet of its assets and liabilities (including its profit and loss account) to the Registrar.⁵ However, there is no such requirement for the balance sheet to contain details of its supply chain(s) or business. Furthermore, under the law on corporate disclosure in relation to capital markets, the Securities and Exchange Act 1992 (as amended) prescribes that listed companies are required to submit a financial statement and reports (such as an annual report or any other report prescribed by the Capital Market Supervisory Board) reviewed by an auditor on the financial performance and business operation of the company to the Securities and Exchange Commission Office.⁶ Currently, the information to be contained in the financial statements and reports prescribed by the Capital Market Supervisory Board does not include details on the company’s supply chain(s) and business, its internal policies on slavery and human trafficking, or any other measure to assess and manage slavery and human trafficking incidents.

In relation to non-binding measures, the Thai Labour Standard 8001-2020 (the “TLS 8001-2020”) is the latest set of standards on labour-related social responsibility of Thai businesses, created by the Department of Labour Protection and Welfare for companies of all sizes and in all industries to adopt on a voluntary basis. These standards serve as a guide for good corporate practices on labour management, improving the overall welfare of workers and to encourage the sustainable growth of the company. The TLS 8001-2020 prescribes, among others, the minimum standards relating to forced labour, remunerations, working hours and rest period, holidays and leave, discipline and penalty, employment of young workers, labour welfare, occupational safety and health and environment. Although compliance with such standards demonstrates a good level of compliance with the relevant Thai labour laws, such standards lack legal force and attach no sanction(s) for non-compliance.  

While such soft law measures are efficient due to their flexible nature, which allows companies to address the regulatory gaps that exist between businesses and human rights in a manner that would not be detrimental to the company’s personal agenda, such non-binding measures may appear to be weak on their own; therefore, they may need to be used in combination with other regulatory strategies in order to strengthen their effectiveness.

Nonetheless, despite the absence of an expressed legal duty to monitor and address modern slavery in the supply chain and business operations, some Thai corporate entities voluntarily comply with the reporting requirement under Section 54 of the UKMSA as a measure of good practice. This voluntary engagement suggests that Thai law should be amended in the future to require all companies to produce a mandatory modern slavery transparency statement in order to hold companies accountable for labor exploitations that may occur within its supply chain(s) and business operations. By holding corporate entities directly liable for the treatment of its workers in its supply chain(s), this will serve to strengthen the existing regulations established to protect and promote the rights of workers against labor exploitation.

This is intended merely to provide a regulatory overview and not to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contact any of the authors.

• ¹ Sections 312 and 320 of the Criminal Code B.E. 2499 (1965) Amended B.E. 2560 (2017).
• ² Sections 52, 52/1 and 53 of the Anti-Trafficking in Persons Act B.E. 2551 (2008).
• ³ Section 5 of the Labour Protection Act B.E. 2541 (1998).
• ⁴ Sections 11/1 and 12 of the Labour Protection Act B.E. 2541 (1998).
• ⁵ Sections 1196, 1197 and 1199 of the CCC and Sections 110, 112 and 127 of the Public Limited Companies Act B.E. 2535 (1992).
• ⁶ Section 56 of the Securities and Exchange Act B.E. 2535 (1992).