Keeping Your Business Safe From Modern Slavery
It’s believed 41 million people are subjected to employment slavery throughout the world. Of these, 25 million are in forced labour, and as many as 16 million work in the global supply chains that we take for granted.
In the UK, almost 8,000 potential victims of modern slavery were referred to the Home Office in the first half of 2022. Referrals in the third quarter were up 38% year on year, suggesting record levels of slavery.
Background
The Modern Slavery Act 2015 sets out how modern slavery and human trafficking should be dealt with by organisations in the UK.
Broadly speaking, it’s likely that a business will be obligated under the Act if it:
- Is a commercial organisation
- Has a global turnover of over £36m
- Supplies goods and/or services
- Carries on a business, or part of a business, in any part of the UK.
The Act requires an anti-slavery and human trafficking statement for each financial year, setting out the steps a business has taken to ensure that slavery or human trafficking isn’t taking place in their own operations and supply chains. If an organisation has taken no steps to do this, the statement should say so.
Businesses are at higher risk if they have supply chains in countries designated high-risk because protections against breaches of human rights is limited. Certain sectors are also more susceptible than others, notably manufacturing.
New developments
In June 2021, the Modern Slavery (Amendment) Bill 2021 was published.
Although the Amendment Bill hasn't yet been passed by Parliament, it's likely to make proposals to strengthen the Act by making it a criminal offence if:
- A person knowingly or recklessly publishes a modern slavery statement that is false or incomplete.
- An organisation continues to source items from suppliers or sub-suppliers that fail to show the minimum standard of transparency following formal warning from the Independent Anti-Slavery Commissioner.
Under the Amendment Bill, an individual found guilty of committing those offences could be sentenced to two years in prison and/or receive a fine of 4% of the global turnover of their commercial organisation, up to a maximum of £20m
In April 2022, the Financial Reporting Council (FRC), in collaboration with Lancaster University, published a report which examined businesses’ reporting standards and practices.
It found that modern slavery statements are largely descriptive and superficial. Of the 100 major companies sampled, one in ten don't provide a statement (despite it being a legal requirement). Of the rest, the statement is being treated as a box-ticking exercise rather than something businesses need to embed within their culture.
The football World Cup in Qatar has helped to heighten mass awareness of modern slavery. In the build-up to the event there was significant media focus on allegations that slavery and human trafficking were used in constructing the event's stadia and infrastructure.
Challenges for business
While the proposed Amendment Bill won't necessarily create any new challenges for most businesses, the existing challenges remain.
The main risk is reputational. In February 2020, Nespresso received significant negative publicity following allegations of child labour in their Guatemalan coffee farms. Similarly, Primark has struggled to shake off an association with modern slavery and sweatshops, with allegations as far back as 2008. Once acquired, this reputation is hard to lose. By contrast, Marks & Spencer and Tesco have received positive publicity for their compliance with the Act.
Compliance comes by having a thoroughly detailed statement which describes exactly what a business is doing to combat modern slavery and human trafficking. Organisations should consider the findings of the FRC report and avoid box-ticking.
Business response
- Perform serious due diligence before engaging with new suppliers and throughout the duration of existing commercial relationships. What do third-party supply chains looks like? Have they mapped their own supply chains? What is their response to modern slavery risks, and how they would describe the conditions of their workers? Businesses must be satisfied that all third parties have substantial ethical standards.
- Inform your people. Ensure your own personnel are aware of the signs of modern slavery and human trafficking in a supply chain. This may include employees appearing malnourished and withdrawn, behaving unusually, being restricted in their movement (picked up and dropped off in groups), and having poor accommodation.
- Be wary of reliance on information provided by third-party suppliers. Consider unannounced spot checks and audits on suppliers.
- Don't impose unreasonable demands on suppliers. This can help minimise the chance of modern slavery and human trafficking by encouraging them not to cut corners.
Business benefits
- Positive business reputation. A good reputation makes for sustainable growth, and attracts the right investments, talent, and clients to your company.
- Improved brand recognition. Actively addressing inequality and injustice makes your brand synonymous with honesty and integrity, offering stakeholders a “feel good” factor when doing business with you.
- Increased sales through customer loyalty. Consumers are scrutinising organisations to make sure they’re treating people fairly and can be driven away by negligent practice. What’s more, many will draw attention to your business if it’s found to be acting irresponsibly, putting you at risk of reputational and financial loss.
- Increased ability to attract and retain talent. Colleagues are attracted to businesses that make safety and wellbeing – at every stage of the supply chain – part of their culture. They can be proud to work for companies that are proactive in making positive changes in their communities, encouraging staff commitment and retention.
- Embedded key ethical standards within businesses and organisational growth. Having procedures in place to monitor each part of your business, and its third parties, ensures that new projects and partnerships will always be approached in a legal and ethical way.
- Improved confidence for investors and future investment. Your investors have ESG targets to meet too, and will be more likely to do business with you if your values, behaviour and reputation is consistent with theirs.
- More responsive, sustainable and stable supply chains. Similarly, ensuring that modern slavery is kept out of your supply chain will help you find suppliers that champion good practice, and offer you choices in who you work with.