Modern slavery: Five things businesses can do to up their game
By this autumn, all companies with a turnover of more than £36m and that operate in any area of the UK should have published a modern slavery statement. But, according to global register, Transparency in Supply Chain Report, less than half of companies that should have filed a statement have done so. Of those that have, many are failing to comply with the letter of the law, which requires businesses to provide a link to their statement on the company’s homepage, secure board approval and ensure the statement is signed by a director. The quality of statements has also been questioned, with NGOs criticising companies for failing to identify obvious areas of risk and raising concerns that many businesses are adopting a box-ticking approach.
So why are so few businesses getting it right? Lexington’s corporate responsibility team have identified 5 things businesses can do to up their game:
1. Understand what modern slavery is
Most people think slavery is a thing of the past. So, perhaps understandably, many companies – especially those operating only in the developed world – may not understand the relevance of the Modern Slavery Act to their business. But, with the UN estimating there were over 40 million victims of modern slavery in 2016 (10-13,000 of whom are in the UK) this is an issue that all businesses need to take seriously, regardless of sector or location. Indeed one in ten UK businesses found evidence of modern slavery in their supply chains last year and there have been several high profile instances of UK-based modern slavery in the supply chain of major UK companies, most notably Kozee Sleep (a supplier of beds to John Lewis, Dunelm Mill and Next), where retailers’ audits had failed to spot what was going on. The International Labour Organisation has produced a set of indicators to help businesses identify unfair working practices, which range from violence and abuse to debt bondage and the withholding of wages and identification documents. Knowing what stakeholders mean by ‘modern slavery’ is the first step towards responsible sourcing.
2. Understand your supply chain risks
Understanding your supply chain is not as easy as it sounds – especially for large corporates with tens of thousands of suppliers, who may themselves have complex supply chains. The Modern Slavery Act is new and Government and other stakeholders do not expect businesses to have the complete picture at this early stage. However, knowing where to begin is essential. A simple mapping exercise is a good place to start, identifying suppliers in high risk locations or sectors, such as those who produce high risk goods and those who use seasonal or migrant workers. Lists of locations, sectors and products that are considered by the US and the UK governments as high risk are publically available and this initial mapping is relatively easy to do.
3. Engage with stakeholders
Businesses are not expected to be experts in human trafficking and forced labour. Engaging with NGOs, governments and academics who can help companies understand the issues and the risks is important. Modern slavery is big business, with slave masters and traffickers earning profits of over $150 billion a year according to the ILO. It is not therefore surprising that criminals are continually adapting their processes and changing location to overcome barriers and exploit the vulnerable. World events and natural disasters affect migration patterns with new hot spots for modern slavery emerging every year. Staying on top of where the risks are and what modern slavery looks like as it continues to evolve is vital and engaging with experts will help you do that.
4. Read the Home Office guidance
Nearly 40% of supply chain managers admitted to not having read the Home Office guidance on modern slavery in a survey conducted by the Chartered Institute of Procurement and Supply (CIPS). It is therefore no surprise that many businesses are failing to meet the three basic requirements of the Modern Slavery Act: to provide a link to their statement on the company’s homepage, secure board approval and ensure the statement is signed by a director. These requirements may seem pedantic – after all, how the government is going to police businesses who fail to comply is unclear – but they are quite simple things to achieve so why take the risk?
The guidance sets out six key areas of suggested content and the best statements are structured to reflect that. The guidance was updated earlier this month, with language informing companies of their obligations amended to be significantly more robust. Whilst not changing the law, the updated guidance introduces a definition of child labour and encourages organisations with a turnover of less than £36 million to produce a statement. It also removes passages indicating that certain categories of information are not ‘compulsory’; encourages businesses to publish their statement ‘at most’ six months after their financial year end; emphasises the expectation that published statements will show year-on-year progress, and encourages businesses to keep historic statements online so stakeholders can monitor progress over time. Evidently the government is not impressed by the initial response from business and – if progress is not made – mandatory reporting may in time evolve into mandatory risk assessment and due diligence.
5. Develop a strategy
The government has been clear that businesses should set KPIs and show progress year-on-year. This means that instead of a static statement published annually, businesses need to develop a strategy to eliminate modern slavery, which covers everything from corporate human rights policies to risk analysis and due diligence to remediation processes.
It is important for businesses to be innovative in their approach. While technological solutions may be helpful as a starting-point in mapping the risk, businesses need to interrogate the data they receive, consider where to prioritise and drill down into their supply chains to engage with suppliers to discover bad practice and remediate accordingly. Technological solutions should form part of a whole management process, with worker surveys, apps for workers, employer empowerment, visits to suppliers and checks of their whistle blowing and grievance procedure all playing their part. Due diligence is now a continuous process, not something that is done solely in advance of a contract, and traditional audit routes do not often expose instances of modern slavery. Auditors need to be trained to go beyond box-ticking.
NGOs have been critical of companies for placing too much of the burden on Tier 1 suppliers, as it is unusual for instances of modern slavery to be found in Tier 1 suppliers of large companies. While a business may have greater knowledge of their Tier 1 suppliers, and its stakeholders may expect it to make greater efforts at its first tier, the government guidance states that companies should also engage their lower tier suppliers where possible. Offering training to Tier 1 suppliers on how to improve their own procurement practices is a sign of a responsible buyer.
Ultimately, identifying modern slavery in your supply chain demonstrates your strategy is working. So businesses should not be afraid of the reputational risk. Responsible companies are transparent and unafraid to tackle the issue head on.
If you would like more information on the Modern Slavery Act 2015 and how your business can move from compliance to leadership, please email Alice Wood on email@example.com.