Even though companies have had six months to comply voluntarily with the new disclosure rules of the UK’s Modern Slavery Act 2015 (MSA), which came into force last October, recent research shows that 35 percent of the public statements published by firms on those websites surveyed gave no details of their risk assessment processes; and that over 65 percent failed to identify priority risks in terms of business relationships and supply chains.
Some of the glaring omissions in reports published so far include provision of oversight into the use of agency workers and outsourced services; these fall into the category of ‘business relationships’. In such cases workers are less visible and potentially at greater risk.
Section 54 of the legislation requires as of April 2016 that companies publish an annual slavery (defined as forced or compulsory labour) and human trafficking statement. This has to set out what they are doing to “ensure that slavery and human trafficking is not taking place in any of its supply chains and in any part of its own business”, including performance indicators. These statements need to be approved by the board and signed by a director. These due diligence statements as required by the Act apply to any business operating in the UK with a turnover of over £36 million. This makes up to 17,000 companies liable to its provisions. Government guidance encourages compliance within six months after year-end, so we can assume that most companies will publish their statements from September onwards. Of the MSA public statements surveyed so far, 40% failed to include a director’s signature.
With socially responsible investing (SRI) gaining more traction and tightening regulation now making supply chain ethics a financial as well as a moral concern, businesses should keep pace with requirements by mapping beyond their ‘first-hand’ suppliers and contractors, and looking into areas where risk of slavery is greatest. Companies should also recognise that there is a difference between training and educating employees to identify and report these abusive labour practices. Training is usually done through time-limited lectures, power-point presentations and short-term exercises. Education is a continuing process that takes place through consistent supervisor follow-up, experience-driven opportunities, team discussions, leadership engagement and an open and collaborative review when things go wrong.
Unfortunately, loopholes in the Act have already emerged. For instance, it does not require UK companies to investigate all supply chains overseas, such as those of subsidiaries. Furthermore, producers of goods that do not end up in Britain are exempt. For example, construction firms working on infrastructure for the 2022 World Cup in Qatar are thus exempt. Furthermore, if a British citizen is directly involved in abuse overseas, they will not be held accountable back in the UK.
In the current populist climate where a large section of the population is dissatisfied with UK Government and EU failure to police corporate tax avoidance and other legal but unethical practices, companies are advised to take a more proactive approach than that required under the Act. There is a greater risk of consumer and institutional investor backlash and brand damage if stronger measures are not taken by company boards to deal with this increasingly high-profile issue. A recent positive example is Nestlé. The company has been praised for its admission that a year-long independent investigation commissioned by the company into the seafood industry in Thailand, which is riddled with forced labour and human trafficking, found that slave labour was involved in the production of its “Fancy Feast” catfood brand.
With many CEOs being unaware of any relevant details of the further reaches of their supply chains, it would make sense for companies to carry out audits in order to avoid preventable surprises and the associated reputational and financial damage.