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Breaking the Chain

09 December 2019 by Kerry Round

Breaking the Chain

Governance professionals have the very fortunate position to help guide boards and companies to endeavor for a supply chain free of modern slavery

I can’t help but wonder whether adding the word ‘modern’ to the universally recognised and abhorred word ‘slavery’ somehow makes it more acceptable. Whether to refer to something as modern suggests actually it’s all a bit more civilised these days, more state of the art, more impressive perhaps. When we hear about ‘modern slavery’, are we beginning to be de-sensitised to it? Do we read about the shocking discovery of 39 bodies in a refrigerated lorry in Essex and give it more than a passing thought? Do we ever as consumers thinkthat we may be indirectly responsible for or support slavery?

In reality, slavery affects us all, as consumers I suggest that there are actually few products that evade the risk of being touched by modern slavery at some stage of the supply chain. Do we know our tea from India is free from debt bondage (for example where a worker is forced to work to pay off a loan that they had to take out to pay for their child’s healthcare); that our latest piece of ‘fast fashion’ wasn’t touched by child slave labour; that the mango we enjoyed from Brazil wasn’t picked by someone suffering violence and intimidation by their bosses; that the person who cleaned our car did so of their own free will, that their passport wasn’t taken by their ‘employer’ and that their family were not threatened with death and violence if they tried to escape? Do businesses know who picks the cotton or where the factory is that makes the material that becomes the garment that is transported in shipping containers to this country for retailers to sell to us? Who has access to those shipping containers? Would retailers’ employees know how to spot the signs of modern slavery in their distribution centres or their suppliers’ factories?

The risks are not just overseas, last year there was a total of 6,993 recorded victims of modern slavery in the UK – a 36% increase on the year before. Victims came from 130 different countries, with the top three being the UK, Albania and Vietnam. Slavery is a ‘modern’ issue affecting a ‘modern’ society.

Dame Sara Thornton, Independent Anti-Slavery Commissioner said: “protecting victims and prosecuting traffickers is not enough. To stop this crime from happening in the first place, we need to do much more to tackle the systems and structures that allow modern slavery to thrive”.

What is slavery?

We know we can’t answer the question “what does a slave look like?” and we can’t really succinctly answer the question “what is slavery?” but the Modern Slavery Act 2015 (MSA) helpfully lists the following definitions within the term of Modern Slavery:

• ‘slavery’ is where ownership is exercised over a person
• ‘servitude’ involves the obligation to provide services imposed by coercion
• ‘forced or compulsory labour’ involves work or service extracted from any person under the menace of a penalty and for which the person has not offered himself voluntarily
• ‘human trafficking’ concerns arranging or facilitating the travel of another with a view to exploiting them.

A person today is considered enslaved if they are forced to work against their will; are owned or controlled by an exploiter or ‘employer’; have limited freedom of movement; or are dehumanised, treated as a commodity or bought and sold as property, according to abolitionist group Anti-Slavery International.

The role of the company secretary in Modern Slavery

To my mind, this is a very clear example of where the company secretary can take ownership of this subject and as the social conscience of the company, work with key departments within the organisation to examine the supply chain and the policies and procedures that affect it, develop training and awareness, to identify KPIs and to make the relevant disclosures each financial year.

S54 MSA puts the responsibility for Modern Slavery at the highest level by requiring certain organisations to develop a slavery and human trafficking statement (the Statement) each year, further it requires the Statement to be signed by a director. A clever bit of drafting which ensures the Statement achieves its rightful place on the agenda for the board. Whilst in practice responsibility may be delegated to the Audit Committee (or other) to review and analyse the detail, the approval of the Statement must be by the board and signed and dated by a serving board director.

Another little feature of s54 that I commend is the requirement that this Statement (which should be updated annually) must be placed on the organisation’s website and no more than one click from the home page, which gives significant weight to the profile of this Statement unlike, for example, the Gender Pay Gap Statement which can technically be hidden anywhere on the website.

Who must produce a Modern Slavery Statement?

Organisations are responsible for determining whether the legislation applies to them but broadly, a commercial organisation is required to publish an annual statement if all the criteria below apply:

• it is a ‘body corporate’ or a partnership, wherever incorporated or formed
• it carries on a business, or part of a business, in the UK
• it supplies goods or services
• it has an annual turnover of £36 million
or more.

At present public sector bodies are not required to produce a Statement which does seem off as councils often turnover well in excess of £36m and procurement of services is a key part of the council’s service. Many councils have chosen to voluntarily publish Statements and the government is consulting on extending s54 however I wonder how much of a priority it is for the current government.

What should the Modern Slavery Statement say?

What the legislation does not do, is say that organisations must hand on heart state that there is no modern slavery in their supply chain. It is with reluctance that I say this kind of guarantee just would not be possible with the complexities of a modern supply chain, but what companies are advised to do is:

• set out the steps that the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains, and in any part of its own business
• states that the organisation has taken no
such steps.

You do not need me to tell you that making a statement that a company has taken no such steps may have damaging consequences for its reputation and commercial success.

What else can the company secretary do in the war against slavery?

Use the legal framework that is in place. The law here makes these issues business critical and levels the playing field so that all organisations (that fit the criteria above) are required to produce a Statement are under the same scrutiny and to ensure that they take steps to ensure that slavery and human trafficking is not taking place in its supply chains, and in any part of its business.

Ensure clear reporting lines exist for Modern Slavery within your organisation.

Question whether all the right people within your organisation talk to each other and know all the relevant issues. Ensure that the Board (or Audit Committee if delegated to them) are provided with sufficient information so they can approve the Statement. Review all relevant policies to see whether they are still up to date and appropriate and whether the processes that are supposed to be supporting the policies are in place. Remember that Modern Slavery is actually a breach of human rights. Many organisations choose to have a combined Human Rights and Modern Slavery policy, rather than trying to manage these important areas separately.

Be familiar with your organisation’s supply chain management structure, responsible sourcing policies and buying practices. Appropriate supplier due diligence ahead of any commitment to a third party is absolutely essential. On-going review is essential in those higher risk areas. Buyers and other employees visiting supplier factories are well placed to feedback any concerns to the organisation.

Ensure your organisation proactively deals with any issues that may arise; effective whistleblowing procedures and incident management is essential. It’s a sensitive issue and must be treated as such.

Ensure there is framework in place to regularly identify risks of slavery both within your organisation and throughout your supply chain; carry out audits and have methods in place to take action over any suspected incidents of modern slavery including protecting the welfare of that person. Consider whether outsourced audits are appropriate, particularly for those higher risk supply chain areas.
Train employees and supply chain partners to an appropriate level within your organisation and in relation to the risk assessment.

Have a realistic plan for moving forward so that your Statement is not a static document but one which is telling an evolving story. Ensure the organisation sets clear annual objectives, monitoring progress and reporting on these key achievements.

An Ideal World

Article 4 of the Universal Declaration of Human Rights, 1948 states: “No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms” – yet according to figures published by the ILO in 2016, there are 5.4 victims of modern slavery for every 1,000 people in the world with women and girls disproportionately affected by forced labour. One in four victims of modern slavery are children.

The ideal is a world without slavery, whether this can be achieved or not is a question which extends beyond this article but what I do know is that we must challenge our own habits as consumers and that constant quest to ‘get a bargain’ or as a business that desire to ‘beat our supplier down on cost’ or give suppliers unrealistically short turn-around times. The impact of our behaviours could drive potentially desperate and already vulnerable suppliers to use extreme measures or non- regulated factories to produce the goods. The good news is that as governance professionals we also have the very privileged position to help guide our boards and our companies to strive for a supply chain free of slavery, modern or otherwise. 

Kerry Round, director at Round Governance Services 

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