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The UK Modern Slavery Act and corporate responsibility: progress and challenges

The central role that business plays in the drive to address modern slavery is now irrefutable. While statistics and definitions surrounding the issue are both unclear and often questionable, the continued revelations of labour exploitation across the globe to which large commercial companies are often connected has shifted the question of whether they bear some responsibilities for these conditions to what they need to do to both address and prevent them. This obligation has been reinforced in Section 54 of the UK’s Modern Slavery Act, which requires any commercial organisation providing goods or services within the UK and with an annual turnover of over £36 million to state the steps it is taking to ensure that there is no slavery within its supply chains or operations.

This ‘transparency in supply chains’ clause has been lauded as the first of its kind, and is in many ways an improvement on the California Transparency in Supply Chains Act of 2010 – legislation on which it partly premised. Unlike the California law which only applies to the retail and manufacturing industries, the UK version is applicable to commercial organisations across all sectors, and with a lower turnover threshold for compliance captures more companies under its reporting requirement. Crucially, the statement under the UK Act requires approval by the company’s board of directors and a signature from a director or equivalent, creating accountability at the highest level. This both reduces the likelihood of misleading accounts and augments the response to modern slavery which moves it beyond a tick-box exercise. The statement must also be produced annually, ensuring continued focus, scrutiny and (ideally) improvement.

The impact of the legislation so far

Several particularly forward-thinking companies had, prior to the introduction of the Modern Slavery Act in 2015, already begun to address issues of worker exploitation and human trafficking within their supply chains. This is especially the case for those in sectors historically subject to media exposés such as the fashion industry (which had a spotlight thrown upon it and many of its leading clothing brands after the 2013 Rana Plaza disaster). Most companies across all industries, however, had not moved beyond general policy and codes of conduct statements relating to forced labour. Section 54 of the Act is a way for leading companies to showcase what they are doing and for pressure to be applied to those who have not yet considered the issue or scrutinised their supply chains to any great degree.

Increased engagement with the issue of modern slavery in the past few years and the unprecedented move towards transparency has set UK companies on a path towards addressing forced labour and exploitation in a way that could really be impactful. Not only are large companies responding with a flurry of initiatives within their ethical compliance and supply chain management departments, but importantly, recognition of this as a priority issue is reaching board level. One recent report from the Ethical Trading Initiative and Ashridge Business School found that engagement of CEOs with modern slavery had doubled since the introduction of the Modern Slavery Act.

However, an analysis of the statements released by the UK’s largest companies provides a sense of the vastly different levels of engagement that they are having with modern slavery. Given the significant resource and highly complex nature of supply chains of companies with the highest turnovers, those in the FTSE 100 are ideally positioned to promote effective initiatives at the highest level and influence others to do the same. While many statements so far appear uninspiring and reveal a lack of real engagement with modern slavery beyond vague inclusion in general policy commitments and codes of conduct (which is expected in this first year of reporting), good practice is emerging from several companies across different industries. This includes comprehensive training across all company functions and suppliers in the first instance, recognition and action on drivers of forced labour such as recruitment fees paid by workers, and issues arising from the use of multiple third parties, recruitment agencies and labour providers. One significant advancement is in the growing collaboration on the issue between companies who would otherwise be competitors. This is beginning to occur within the fashion industry and spreading to others, enabling the sharing of good practice and even discussion around common source areas, suppliers and labour providers. Work with external agencies such as NGOs and the Gangmasters Licensing Authority is also crucial as companies recognise that modern slavery and human trafficking cannot be resolved ‘in-house’. Furthermore, in acknowledging that they cannot simply audit their way out of the issue, some particularly progressive companies are recognising and beginning to indicate that modern slavery can often be a symptom of fundamental structural and business model issues.

Many companies are still unwilling to acknowledge potential connections between modern slavery and their supply chains, but the general shift towards transparency which has been precipitated by the Modern Slavery Act is creating an unprecedented situation in which some UK companies are feeling comfortable and indeed recognising an advantage in acknowledging their vulnerabilities in an open forum. Marks & Spencer demonstrates this in its statement by providing the results of its own supply chain risk mapping, and highlighting modern slavery issues in certain commodities, countries and industries to which production of its goods are connected. The company even discloses and details ‘non-compliances’ which were found within its factories during its ethical audits. In a different but highly innovative and game-changing approach, the Co-op has teamed up with City Hearts, a charity providing support to previously trafficked victims, and has committed to providing employment a number of these individuals, encouraging their own suppliers and other companies to do the same.

Progress is clear, but many challenges lie ahead

The complexity of the issues which fall under the category of ‘modern slavery’, and the endemic and wide-ranging nature in which they are manifested within global supply chains makes the task of ensuring elimination of them an enormous one for any company or industry. The contexts surrounding situations of modern slavery and worker exploitation to which large companies are exposed (and sometimes drivers of) can vary from factories in which prices are so squeezed that wage undercutting and forced overtime by necessity occurs, the infiltration of rogue criminal agencies supplying trafficked labour unbeknownst to the lead firm, suppression of trade union or worker organising models, or widespread and historical use of exploited labour occurring in the production of commodities where there may be no imposition of the rule of law by government, or at worst, government complicity and state-sanctioned exploitation. Companies most advanced in their thinking then, are not viewing modern slavery issues as aberrations within their otherwise ‘clean’ supply chains, but as larger issues of human rights violations that occur within various socio-economic circumstances as well as exacerbated by their own practices and failures of oversight.

Companies and industries now not only need to recognise these issues, but will also have to balance the need to address them with the commercial and competitive needs of industries in which sourcing products and services at the lowest cost and with maximum flexibility are usually their main priorities. The work of those in the ethical responsibility sections of a company trying to improve labour rights within its supply chains is of little effect if the most important Key Performance Indicator of the company’s procurement department is the cheapest price above all else. 

Effective enforcement of labour standards in the UK

The reforming labour market enforcement system within the UK is now helping to tackle the issues of exploitation which have come to light and in many ways flourished in an environment in which third party agencies are prevalent and inspections and regulations are weak. The work of the Gangmasters Licensing Authority (which will transition into the Gangmasters and Labour Abuse Authority this year) has been commended for providing oversight and regulation on labour providers within certain industries in the UK, ensuring that they meet standards on pay, accommodation, transport and health and safety. The intention to expand this oversight into industries beyond agriculture, horticulture, shellfish gathering and food processing is a welcome move and will aid companies in their work to address exploitation in the UK, but significant resources are needed to do this effectively. Importantly, the newly appointed Director of Labour Market Enforcement will oversee the response of the UK’s varying and disparate inspectorates: the GLAA, Employment Agency Standards Inspectorate and the National Minimum Wage Unit. This will hopefully provide focus on ‘lower level’ labour violations such as wage undercutting, lack of sick pay or forced overtime, in addition to extreme situations of human trafficking and slavery.

Building on current efforts

The UK Modern Slavery Act has placed private sector responsibility in tackling modern slavery on the map in a hitherto unprecedented way, and the surge in initiatives in response to the Act is testament to that. However, true success in addressing and eliminating exploitation and forced labour in supply chains is reliant upon not only maintenance of current momentum but also on continued scrutiny of company actions and modern slavery statements year on year. This entails a central repository which provides ease of comparison for activists, organisations and investors who can critically engage with the statements and track progress. The Business and Human Rights Resource Centre and are collecting company statements, but without a published list of the approximate 17,000 companies thought to be captured under the Act to coincide with the legislation, it is extremely difficult to identify them all and as such determine who has and has not complied.

There is also a question as to whether what is ostensibly a piece of ‘light-touch’ regulation designed to encourage responsible corporate self-regulation is a sufficient and effective long term option in addressing such an endemic and complex issue as modern slavery. While the disclosure statement is now a legal obligation, a company is compliant with the law and faces no penalty even if stating that it is doing nothing to ensure that there is no modern slavery within its supply chains. While no company published under the UK legislation has done this so far- and reputationally it would certainly be considered a risky move for most companies- there have already been such examples provided by companies under the California Transparency in Supply Chains Act, with some declaring that they are not taking any of the suggested steps and showing no intent to do so in the future.

With no law to penalise companies, change is reliant upon a ‘race to the top’ – which may just involve those companies with the largest resource to do so – and risks allowing the issue of modern slavery to fall away, giving little impetus to companies who may not be at-risk reputationally to do anything about it.  Any significant change to conditions of modern slavery within supply chains will need sustained and focused attention for the foreseeable future and as such cannot afford for the current enthusiasm which we see amongst many companies to ebb away within a few years. With the current momentum and heightened political focus on this issue, now and the next years are a crucial time in which government can consider and evaluate the impact of its measures, NGOs, investors and other stakeholders can advise on how to give the legislation more ‘teeth’ (such as the application of penalties for businesses), and companies can acknowledge their part and responsibility in tackling modern slavery, investing time and resource and encouraging their counterparts to do the same.

Anne-Marie Barry 

Anne-Marie Barry is Lead Researcher at Stop The Traffik and Finance Against Trafficking. She works with businesses to address issues and risks around human trafficking and modern slavery within their supply chains and operations. She is also a trained volunteer First Responder for potential victims of modern slavery under The Salvation Army.