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Tackling Supply Chain Slavery

RiskGlobal sourcingEuropeConsumer goodsCorporate social responsibilityEthicsAsia PacificmanufacturingCSR PoliciesGovernance and Legal ComplianceLow Cost Country SourcingReputational RiskRisk MitigationSupplier AuditsTechnology and Telecoms+-
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The creation of a slavery and human trafficking statement is now compulsory for all UK businesses with a turnover of over £36m, as stated by the Modern Slavery Act. But, for businesses affected by the legislation, unless they engage with their supply chains there is a risk that slavery will never truly be eradicated.

 

Modern slavery, although widely condemned as morally indefensible, is rife in global industry. Social change charity, DoSomething.org, as well as the International Labour Organization (ILO), estimate that over 20 million people across the globe are currently trapped in some form of slavery, reinforced by countless exposés of the abhorrent working conditions present in Western supply chains.

 

In an attempt to encourage action and transparency, the UK government now requires businesses to outline what steps they have taken to ensure there is no slavery or human trafficking present in their supply chain, even if no progress has yet been made. Although this is a step in the right direction, the emphasis rests firmly on businesses creating a yearly statement, rather than ascertaining whether the statement itself is accurate. And herein lies the problem.

 

In 2015, guidelines were released by the UK government to assist firms in composing their first slavery and human trafficking statement as well as advising businesses as to how they could identify potential human rights violations. These guidelines, while well-intentioned, are somewhat simplistic.

 

To be effective large corporates with complex and diverse supply chains need to take a considered, tiered approach, using their resources efficiently to identify areas of risk. In November 2015, Nestle admitted to the presence of forced labour in its Thai seafood supply chain. Despite the company’s openness about its own investigation into the matter, others might not be so forthcoming if the law is not enforced.

 

High-risk suppliers should be recognised by matching a vendor’s activity or attributes against certain criteria. For example, businesses with supply chains in locations where slavery and poor working practices are more prevalent, such as South East Asia, Africa and Central America, will likely require more scrutiny. Similarly, the industry in which suppliers operate may increase the risk of human trafficking and slavery. Traditionally, industries which rely on the use of low cost, and often low skilled labour, such as textiles/clothing, agriculture and electronics should warrant particular attention.

 

This scrutiny should travel the length of the supply chain, including tier two suppliers and beyond. While a firm’s first tier suppliers may be reputable companies based in low risk locations, such as Western Europe, those businesses may source raw materials from other parts of the world, via processes that utilise slave labour. High risk vendors should be subject to regular due diligence checks, and where required, site visits.

 

For this legislation to be a success, and indeed for slavery to be eradicated, a number of steps need to be taken.

 

First the UK government should create an industry body responsible for monitoring the validity of the slavery and human trafficking statements submitted by businesses. That body should then select a cross-section of firms each year at random, auditing the statements against the actual activities undertaken by the company. At present, it is unlikely that any discrepancies will be detected, leaving statements vulnerable to exaggeration or falsification.

 

Second, firms themselves should provide training and incentives to overseas suppliers, adapting their procurement procedures to award those demonstrating compliance and social responsibility.

 

The Modern Slavery Act, and the government’s drive for greater transparency does present a commercial opportunity for businesses looking to position themselves as an ethical organisation; allowing visible differentiation which is likely to attract the morally responsible consumer.

 

Similarly, in wake of this legislation, overseas suppliers that are able to adapt and demonstrate an ethical stance, while preserving quality and price, are placed to benefit from greater interest from UK businesses.

 

Phil Bulman is a managing consultant at global supply chain specialists Vendigital

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Jon Webb
Posted by Jon Webb

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