Environmental and human rights abuses in supply chains are costing the UK billions each year, a new report from the Fabian Society has found – as pressure grows on the government to introduce legislation that would both bolster supply chain security and boost the UK’s impact on the world in the wake of foreign aid cuts.

The research, shared exclusively with The Independent, finds that labour exploitation and environmental damage in the UK costs £4.4 billion per year, including from forced labour, poisoned rivers and other pollution events, and stolen wages.

The cost of tackling the abuses – often seen as a key blocker to action – has been found to be much lower: a human rights, environment and due diligence (HREDD) law would cost around £0.4bn, the Fabians find, with that total comprised of the compliance costs for businesses as well as funding for operating an independent regulator.

The £4.4bn figure is also likely to be a significant underestimate, the Fabians say, in part because it only considers supply chain harm in the UK alone.

Around £1 trillion of goods and services, including 42 per cent of UK food, is imported each year, and advocacy groups are calling on the government to do a better job at ensuring that suppliers – millions of whom are farmers living on extremely low wages in developing countries – earn a fair deal.

“Today’s weak regulation creates costs for taxpayers, responsible businesses, and the wider economy,” said Marcus Johns, senior researcher at the Fabian Society. “British Businesses that treat their workers and the environment well must not be undercut by imports or businesses that do not.”

“The Fabian Society’s report makes a compelling economic case for action,” added Dr Carley-Jane Stanton, climate lead at the Fairtrade Foundation. “At a time when climate change and the approaching super El Niño are placing growing pressure on global food supply chains, it makes little sense to continue allowing the environmental and social costs of production to be pushed onto the farmers and workers who are growing the food we all rely on.”

The Labour government launched a review into responsible business conduct policy as part of its Trade Strategy published last year – and the outcome of this review was expected to have been announced at the end of March, but it has so far not been made public.

Campaigners had hoped that it would result in a mandatory HREDD law would be introduced that would compel companies to measure and address problems in their supply chain related to human rights and the environment.

Martin Rhodes, the Labour MP for Glasgow North, has previously told The Independent that reforming supply chain laws will be critical if the UK still wants to continue having a positive impact on global development in the wake of aid cuts.

“With the reductions in official development assistance by the UK and globally, and the ongoing climate emergency, we should be viewing ethical trade including through mandatory HREDD as a cost-effective way to put our principles into practice,” he said.

Such a law would also, campaigners say, ensure that companies are better prepared for shocks to their supply chain, and reduce the risk of inflated prices or empty supermarket shelves.

Recent years have shown just how vulnerable our supply chains can be, with the Covid-19 pandemic, Russia’s invasion of Ukraine, as well as the escalating climate crisis all causing disruptions to food and energy prices.

Further shocks to the UK supply chain are expected in the coming months as a result of the super El Niño climate event. After the previous 2023/4 El Niño, coffee producers in Honduras reported a 22 per cent drop in productivity due to extreme weather, while tea producers in Kenya saw productivity fall by 14 per cent, according to the Fairtrade Foundation.

“HREDD legislation would mean that companies work with their supply chains to account for climate risks,” said Dr Stanton. “We know that producer organisations that have long-term sourcing relationships tend to invest more in climate adaptation efforts, which would mean that they would, in the long term, be better prepared for the El Niño.”

The Independent has approached The Department for Business and Trade for comment.

This article has been produced as part of The Independent’s Rethinking Global Aid project