Modern slavery reporting: what you need to know about your risks

Thousands of UK and international businesses are busy considering how they are addressing modern slavery, as they approach the first deadline for making ‘slavery and human trafficking’ statements under the UK’s Modern Slavery Act 2015. While the bulk of the Act is concerned with toughening the criminal law on trafficking and keeping people in slave-like conditions, anti-slavery campaigners and many leading businesses, co-ordinated by ETI, were successful in adding a separate transparency clause requiring larger companies to report on what they are doing to address slavery and trafficking.

ETI's new Base Code Guidance: Modern slavery - practical guidance for brands and retailers.

The law requires that businesses with a UK presence, irrespective of where they are registered or domiciled, and with annual global sales of more than £36 million should make a modern slavery statement. This should be prominently positioned on their website and it is recommended that it cover:

• relevant policies
• processes for identifying modern slavery risks in their own operations and their supply chains
• the actual risks identified
• actions taken to reduce the risk and monitor performance.

Minimal is not enough

While the exact content of the statement is not mandated, it will be a bold company – particularly high-profile consumer facing brands – that chooses to say nothing or to make only a minimal disclosure. NGOs, ethical investing institutions and consumer watchdogs will all be monitoring what companies say they are doing.

Modern slavery means any form of servitude, bonded or compulsory labour, or human trafficking for the purposes of exploitation – in other words some of the most extreme forms of labour abuses. While nobody thinks modern slavery is everywhere, there is no room for complacency. High-profile instances continue to be uncovered by Government inspectors, NGOs and press investigations such as enslaved migrants on Thai fishing boats, and forced labour in the Malaysian electronics industry.  And in the UK, Europe and North America, migrant worker, often exploited by criminal gangs, can face conditions amounting to forced labour in a variety of sectors including agriculture, food processing, cleaning, deliveries and domestic work.

It’s notable that in most cases companies find themselves fire-fighting as they react to allegations and press stories. This can be very resource-intensive, and means companies have less time to scrutinise the whole of their operations or supply chains where there may be equally egregious abuses.

The difficulty for companies wanting to be more pro-active is that modern slavery risks are, by their nature, hidden. The workers involved are usually intimidated, powerless and unwilling or unable to report their situation. This means that the usual social audit mechanisms used by many companies are not particularly useful. Second, these practices are more likely to be found in distant tiers of the supply chain or among outsourced service providers or labour agents where companies have less oversight and weak leverage.

Policies, processes and priorities

Companies need to adopt a new set of responses if they are to meet both the letter and the spirit of the legislation. First, it is important to identify who is responsible for the statement and for gathering the right information.  Next, commitments and policies need to be reviewed, and if necessary upgraded, to ensure that they adequately address modern slavery issues. Here, it’s important to remember that modern slavery risks apply to a business’s own operations and broader business partners as well as supply chains. So in addition to supplier codes of conduct, consideration should be given to recruitment policies, employee contracts and agreements with contractors (e.g. cleaners, security guards, drivers).

Second, risk assessment processes may need to be developed or made more systematic. Appropriate due diligence can involve country or regional assessments, and should cover the full range of business functions where risks may lie. Companies should gather information from a range of credible sources. Often we find that there is good understanding of potential risks in the business, but that this knowledge sits in functional areas other than the ethical trade team, such as human resources, logistics or procurement. It’s a case of getting the right people together to pool their understanding.

Third, companies should prioritise their risks. There are a variety of factors that can be used, such as the seriousness of the issue for the workers involved, the importance of the country or supplier for the company concerned, or the ease with which the company can mitigate the risk. Companies cannot address all possible risks so the important thing is to have clear rationale for the priorities chosen.

On the basis of this, remediation actions can be developed to prevent, reduce or eradicate the threat. This might involve improvements in internal recruitment procedures, changes in buying practices, or training for staff or labour agents. However, in many cases, the risks identified are likely to result from complex socio-economic factors (e.g. migration flows), inadequate legal protections or cultural norms. It is very difficult for individual companies to challenge these so a collaborative approach involving other companies, local organisations, multi-stakeholder bodies, trade unions, NGOs and governments may well be necessary.

All this may seem heavy-going but, in practice, many companies will have existing policies and processes (codes of conduct, HR policies, supplier assessments, social projects) that cover many risks and form a solid basis to build on. And the legislation provides a strong hook to convince senior company executives of the need to take the issue seriously and also to broaden the input of those involved in the issue and the scope of coverage beyond traditional ethical trade supply chain actors.

ETI recently launched a new, one-day modern slavery workshop to help companies understand the impact of the Modern Slavery Act and examine the steps they should be taking.