The passing of the UK Modern Slavery Act and the inclusion of the Transparency in Supply Chain clauses has been hailed by many as a game changer. There are however, limitations, with the Act. Our guest blogger Laura Haworth sets out her thoughts on this. The blog will be followed by another one next month setting out the 7 things that business can do to make the Modern Slavery Act mean something .
Section 54 of the Modern Slavery Act (2015) states that a commercial organisation must prepare a slavery and human trafficking statement for each financial year of the organisation describing the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place within the organisation or its supply chain, or stating that the organisation has taken no such steps. The statement must be signed by the director or an equivalent and published on the company’s website. However, this regulation only applies to companies with a global turnover of over £36 million that are carrying on business in the United Kingdom.
1. It’s not specific enough.
One year on, research shows that companies are still unclear about what is required of them and for the Act to have any impact it needs to have more tangible statement requirements. This means asking who suppliers are, how they are being monitored, what has been found and how they are managing this to ensure improvements. They should also be documenting how they are staying away from a yes/no culture which fails to support suppliers in their journey or recognise the root causes which can lead to an issue. If we have minimum standards for crimes like stealing and domestic violence – should there be any reason why we can’t adopt these for something as detrimental as global slavery?
Furthermore, should we be content with the option of having a statement which simply states that a company does nothing to fight modern slavery? And who is actually in charge of checking these statements to ensure depth and implementation?
2. The damning of supply chain assessments and audit tools
These are by no means perfect but they do provide a level of solution through which to begin having meaningful engagement and to start to understand the issues at hand. When you have a 15,000 strong complex supply chain which changes on a daily basis it is impossible to know where to start. Supply chain tools help facilitate meaningful data which allows the pinpointing of risk.
3. The dangers of a yes/no culture
As previously mentioned, section 54 of the act states that companies are required to disclose their efforts to ensure there is no slavery or human trafficking taking place within the organisation or its supply chain. The Act suggests, among others, that the statement includes “the organisation’s structure, its business and its supply chains; its policies in relation to slavery and human trafficking; its due diligence processes in relation to slavery and human trafficking in its business and supply chains”. But having a tick box exercise whereby whole communities are impacted causes incredible knock on effects for those involved. We’ve seen examples of this in the private sector – in Cambodia, for example, where H&M shut down several factories, leading to worker protests and ultimately loss of livelihoods. Capitalism isn’t effective enough in these areas to ensure that something else will pop up in its place, and for many of these workers this has made poverty more severe. The only thing that CAN be ensured to pop up in its place is the same issues but in a different region. A yes/no culture can also reduce transparency and push issues further down as suppliers seek to conceal them so that they don’t lose their contracts. Businesses need to make a commitment to long-term relationships with suppliers and support continuous improvement wherever possible.
4. The ‘pass the buck’ mentality
For many companies the Act seems to uncover a subconscious ‘it wasn’t me’ mentality. As opposed to digging into slavery and how practices can be improved, many seem to be arguing around who should be responsible. Legislation would inherently cause this piggy in the middle situation as everyone is terrified of liability. And this is exactly what is wrong with the vague nature of the Act. There is no such thing as the responsibility lying with one single company. Many studies have shown examples of suppliers entering an arrangement with a buyer and it turns out that it is the buying practices which cause irresponsible conditions and further support slavery. What really needs to be recognised is joint liability and the need for the development of a strong supplier relationship whereby unmanageable demands are met with understanding and a joint workaround solution to be put in place. There is no point at which the sole responsibility lies with any one person. Everyone plays their part and businesses should collaborate pre-competitively to ensure minimum adversity throughout the supply chain.
5. The lack of depth and diversity
Firstly, many companies are only looking at first tier suppliers. It is well known that risk is more likely to be found the further down the supply chain that you go, and in some ways, you could be avoiding more risk by starting at the ‘bottom’ of the supply chain as opposed to the top. Not only this, but the majority of forced labour takes place in the realms of sub-contracting, homework, labour providers and domestic servitude, or in industries that are not naturally touched by supply chains – like nail bars and massage parlours. Supply chain analysis is not enough to completely eradicate the issues of slavery. It’s the tip of a very big iceberg and failure to recognise that makes the Act tang amount to the titanic.
Not only does the Act fail to put pressure on companies to look at several tiers of their supply chains, but it also fails to address the issues, needs and impact of small businesses. Just looking at the EU alone, small business represents 99% of all enterprises, and the UK government in the last decade has had a great push towards working with more SMEs. If we take out that 99% of SMEs, that leaves us with 1% of business. And once you add in the extra requirements of the Act – such as the global turnover of £36 million or more then who are we really left looking at?
Not only does the Act fail to put pressure on companies to look at several tiers of their supply chains, but it also fails to address the issues, needs and impact of small businesses. In the EU alone, small business represents 99% of all enterprises, and the percentage is even higher in the UK. The Act’s requirement to have a global turnover of £36 million effectively leaves out all SMEs in the UK – defined as those with a turnover of less than £25 million. This leaves us with less than 1% of business – so who are we really left looking at?
Another well debated failure of the act is its inability to hold companies located or purchasing outside of the UK to account. There isn’t much to say on this that hasn’t already been said, but to put it more bluntly – if companies like Starbucks and Amazon aren’t even paying tax in the UK, how can we realistically trust their due diligence efforts towards slavery in the UK and beyond?
6. The incredibly limiting belief that this needs to be taken slowly
Many are saying that the Act goes far enough for now as it is a ‘new requirement’ for many businesses. Yes, this is a new requirement, but it is not a new venture. Many companies, consultants and service providers have been working around this area for over 10 years and as such already know the dos and don’ts and pitfalls of trying to monitor, measure and eradicate slavery. True, these tools aren’t perfect, and you can bet that as soon as a solution is found then a new problem arises, but there is a very easily adoptable model in place which should allow most companies to hit the ground running. This is not an untrodden path and they are not alone on the journey. The Act has failed to hone the great expertise of the CSR industry.
7. The ‘west is best’ belief
I once got laughed out of an office for suggesting that big western companies should undergo audits themselves and share that information with their suppliers in order to increase transparency, encourage honest answers and to prove that no company is perfect and it is a journey we are all undertaking together. By failing to document stringent reporting requirements the Act inherently presumes that companies should not have to worry about their own practices because naturally they will be doing fine. This is a very unrealistic assumption and allows for the development of the aforementioned ‘pass the buck’ mentality. Bigger and richer does not always mean better, and its time we stopped treating big business with diplomatic immunity just because they can buy their way out of a lawsuit.
The reason why the act is failing to impact is because not only does it lack in punitive measures but it fails to adopt the lessons learned from over a decade’s worth of those who have been passionately working in the CSR industries tried and tested and tirelessly pushed forward methods. It is vague by nature and thus creates a vague response.