Technical
Liz Loxton 5 Sep 2018 02:03pm

Crackdown on company compliance with slavery

Companies that merely pay lip service to the intent of the UK Modern Slavery Act will find themselves out of step with public opinion and international law. Liz Loxton explores the issues

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Caption: Illustration by Studio Takeuma

Cocoa from West Africa, tea from Assam, mica from India and palm oil from Indonesia – all widely-used ingredients with a high risk of attracting operators who deploy forced labour and human trafficking.

Mass market and fast-moving consumer goods are particularly susceptible, but sectors that require low-paid labour in large numbers, such as construction and hospitality, are also in the frame. According to the International Labour Organisa - tion 25 million people globally are victims of forced labour, 18% of them children. “The numbers of people in slavery are horrifying and reckoned to be 13,000 in the UK alone,” says Jane Berney, manager, business law at ICAEW.

The complexity of international supply chains makes investigating and detecting slavery difficult, but that does not relieve companies from responsi - bility. Since the introduction of the Modern Slavery Act (MSA) in 2015, UK companies with turnovers above £36m have needed to produce a statement setting out the steps they have taken to eradicate slavery and human trafficking from their operations and supply chains. Of the 9,000 to 11,000 companies in scope, all should have published a first statement prominently on a corporate website by September 2017. By March 2018, only 5,600 had done so, according to CORE, a coalition made up of nongovernmental organisations (NGOs), academics, lawyers and trade unions that focuses on corporate responsibility.

Among the preponderance of short and vague statements, CORE found only 19% that had met minimum statutory requirements, such as being signed off at director level and on behalf of the board. “Many statements are bland and some companies are not complying at all,” says Berney.

Non-compliance

Professional advisers confirm that compliance with the MSA to date has in some cases been confined to paying lip service to its aims. Chris Stanley, a director at Anthesis Group, which works with organisations on sustainable supply chains and modern slavery statements, says most companies have focused on issuing policy statements rather than uncovering significant risks or occurrences of slavery.

“Few have set out in their statements the concrete measures and actions they are taking,” he says. Oliver Bridge, director in business consulting at Grant Thornton, adds that a lot of companies appear to be concerned with disclosure rather than with the spirit of the act. “We were expecting more companies to say they potentially needed to review or change part of their supply chain. Actually questions have been focused around compliance with the act,” he says.

Last year, the UK government published Transparency in Supply Chains etc: A Practical Guide, which sets out that companies need to explain the steps they’ve taken on eradicating slavery. If they have taken no steps, they are supposed to say so. The document also specifies that any incidences of slavery that come to light must be dealt with appropri - ately and remedies made available to potential victims.

Resource

There will inevitably be a resource issue at play. Michael Hibbs, an employment lawyer and partner at law firm Shakespeare Martineau, says company responses fall into three categories. Bigger global companies have tended to embrace the requirements within the MSA and have proved responsive when it comes to actively investigating their supply chains. Below that level responses have been more variable. “There is a group [of companies] doing just enough to get by in terms of making statements. Then there is a third group that recognises the issue, wants to comply, but hasn’t understood what it needs to do,” he says.

Given the interconnectedness of modern business, even companies that don’t fall under the scope of the act can’t afford to avoid the issue. Smaller companies that supply or aspire to supply bigger ones may find themselves asked to provide assurances. “We recommend to all businesses that they produce a statement.

They will be asked what they do to combat modern slavery if they want to tender for business with larger organisations. It’s becoming part of that due diligence,” says Bridge. The best thing that companies can do is conduct a robust audit of their entire supply chains and not merely the top tier, says Richard Life, partner at HRC Law and a commercial lawyer who specialises in the fashion industry, a high-risk sector.

“It’s easy for business to box-tick by doing this at a top level, but in order to be truly ethical, organisations must risk assess at every stage,” he says. The MSA expects companies will evolve their disclosures over time. Companies that expect legislation and enforcement to remain low-key are potentially overlooking the momentum building behind anti-slavery sentiment in the UK and internation - ally. The lack of a central repository for modern slavery statements has been a source of disappointment among pressure groups, charities, trade unions and businesses and seen as an obstacle to the greater transpar - ency the MSA was intended to bring.

However, a joint statement drawn up by the independent anti-slavery commissioner Kevin Hyland and signed by 35 organisations including Tesco, Marks & Spencer, the Co-op, the British Retail Consortium and Unicef, calls on the UK government to set up a central register to make the corporate statements more visible and the job of monitoring their regular appearance more straightforward. And a private members act, The Modern Slavery (Transparency in Supply Chains) Bill, which is due to start its journey through the House of Lords, would mandate that the secretary of state publishes a list of those companies that fall under the MSA’s scope. “Companies who have not taken this topic seriously need to look at their Modern Slavery statement and bring it up to date if they want to avoid being named and shamed,” says Stanley.

Collaboration

The bill, if passed, would also bring all public authorities within the scope of the reporting requirements, ending a focus solely on the private sector. It would require those companies that have not taken steps to eradicate slavery and human trafficking to explain why they have not done so and it would make six suggested categories of reporting set out in section 54(4) of the MSA compulsory.

A second private members bill, the Modern Slavery Victim Support Bill, is due a second reading in November and includes provisions to help victims out of slavery and reduce the risk that they will be pulled back into the same situation, a measure that has received broad support.

“The private members bill is a great step, equal if not more important than the initial act,” says Bridge. UK legislation is evolving alongside similar measures elsewhere in the world, says Anna Jakobsen, a senior manager in climate change and sustainability services at EY. “Regulations are being implemented globally, with calls for similar measures to the UK MSA to be promoted in all 52 Commonwealth nations, demonstrating that tackling this issue is high on international agendas,” she says.

Encouraging signs

Public awareness is growing too. There has been a steady increase in the number of calls to the modern slavery helpline run by charity Unseen. The number of calls received in the first quarter of 2018 increased by 706 compared to the same period in 2017 and online reports were up by 119.

“Governments, customers and civil society are putting pressure on companies and their boards to make combatting modern slavery a priority area,” says Jakobsen. “Any company that looks to take a minimal compliance approach to the MSA may soon find itself being behind both market practice, stakeholder expectations and the next legal development. We advise our clients to examine where in their business and supply chain they may be exposed to human rights risk, implement measures to address those risks and transparently report on their practices.

By doing so they can build stakeholder trust and benefit from the many opportunities that arise from getting these issues right,” she says. “As time goes on and more countries adopt similar legislation it’s going to become harder to avoid complying,” says ICAEW’s Berney.

“Going forward, statements can’t be bland. The NGOs interested in this are going to start exposing people, including companies that don’t make statements. There has been something of a grace period. But this is coming to an end,” she says.

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