News focus: What will the impact of the Modern Slavery Bill be?

Will Green is news editor of Supply Management
19 January 2015

The Modern Slavery Bill will require unprecedented transparency in supply chains. Will Green examines the implications for organisations

It has been predicted that the UK’s Modern Slavery Bill will become law by the end of this Parliament, and while the final details are still being worked out, there will be major implications for buyers.

According to the Home Office (HO), the “transparency in supply chains” clause will require “businesses above a certain size threshold to disclose each year what they have done to ensure that there is no modern slavery in their supply chains and own business”.

The clause is the first of its kind in Europe and is a “truly world-leading measure”, says the HO. “There are similar transparency requirements in California, but they only apply to businesses producing goods for sale, whereas this disclosure will apply regardless of what it supplies, whether goods or services”, the department says in a factsheet.

Discussions are taking place in government about where the turnover threshold will be set for firms to start reporting, but a mooted £60 million figure would capture around 10,600 companies.

John O’Brien, director of safeguarding at the HO, says: “We are talking actively about the detail with the government and partner organisations. Where will the threshold begin? What will firms have to report against? All that will come through once we have finished talking with the government and other stakeholders. Where you draw the line on turnover dramatically alters the number of companies.”

James Gregson, UK head of sourcing and procurement at Deloitte, says the bill will require a lot of firms to “step-up”.

“I think it’s going to put an enormous strain on a lot of organisations,” he says. “There’s been a trend for five to 10 years now of increasing transparency across the supply chain and procurement was slightly slow to wake up to what their regulatory requirements were going to be. There are still many organisations that look into those risk and compliance issues at the point of purchase, rather than through the lifecycle of their relationship with suppliers. That’s started to change and people have started to wake up to it.”

Giles Bolton, responsible sourcing director at Tesco, is more sanguine about the impact. “All the clause does is require companies to say what they are doing. In itself the clause won’t cost anything. The ambition is if you put people on the spot they’re much more likely to do something about it. The cost will come from how they decide to react.”

From the bottom up

Mark Robertson, spokesman for ethical supply chain data platform Sedex, believes it is important that firms are given time to prepare for the new legislation. “The implications will be far-reaching as it will require businesses to look much further down their supply chains to consider modern day slavery risks at all tiers, from the bottom up,” he says.

“It’s important companies are given adequate time to prepare for the legislation and supported with high-quality guidance. This should set out the type of information that might be included in a disclosure, along with signposting to tools and resources they need to comply.”

Philippa Foster Back, director of the Institute for Business Ethics, believes it is “not fair” that larger companies are held responsible for the entire supply chain, and firms in other tiers should help shoulder the burden.

“If every company had a responsibility to have this type of conversation, and the right to audit their prime contractors, and those within their prime contractors, et cetera, this would be a practical way of covering the whole supply chain. Then it wouldn’t only be the responsibility of say, Marks & Spencer or Waitrose right at the top to assess the whole supply chain, because I don’t think that is fair on them,” she says.

The HO denies the clause will create more red tape for firms, and while it will produce statutory guidance, “we will not tell business what a disclosure must include and we fully expect these disclosures to differ from company to company”.

“The intention is simply that it will require businesses to be transparent about the steps they are taking, so that consumers, campaigners and others can call for more action if they think it is necessary,” says the HO.

Cindy Berman, head of knowledge and learning at the Ethical Trading Initiative, says businesses must re-evaluate their procurement policies. “They need to address
the purchasing decisions and practices they have that drive, ever increasingly, suppliers to find cheaper sources of labour.”

The issue also raises ethical questions for consumers about their desire for cheap goods. Martyn Saville, an independent supply chain consultant, says: “The buying public needs to look in the mirror as they want, or maybe need, to buy goods cheaply. Look at the price of many entry-level electronics and cheap clothes. While there may be no correlation between cost and slavery in the supply chain, some corners are undoubtedly being cut.”

‘Stretched definitions’

Mike Flanagan, CEO at garment sourcing consultancy Clothesource, welcomes the bill but expects its definitions will be stretched by campaigners. “Whatever the government says about the details, we may find a lot of effort by activists who stretch definitions,” he says.

“This is not intended to put people in jail for low wages in a Bangladesh garment factory. This is about trafficking and gross exploitation, to do with forced labour. There are many things activists dislike that they will feel [the bill] is not dealing with.

“I think we’re entering into a phase where activists will push more because what they want to see – and I think it’s impossible – is people in Bangladesh paid the same as people in Britain.”

So what should buyers be doing to prepare for the new legislation? Gregson says it’s time to get “immersed” in the detail of the requirements. “Ultimately they are going to have to be a lot better equipped in reporting supplier information than they have been in the past,” he says. “That’s still a relatively new challenge for a lot of organisations. They need to think about what sort of investments they need to make or changes they need to make in their operating model to cope with the changes in their reporting requirements.”

Robertson says buyers and suppliers need to establish tools, protocols and policies to audit effectively at all levels and to establish mechanisms to protect workers.

“Audit procedures need to work alongside other assessment strategies and auditor training to ensure indicators of modern slavery are picked up,” he says.

He adds buyers should ensure due diligence includes areas of greatest risk, including subcontracted facilities and the firms that provide labour, both foreign and domestic.

“Supplier relationships built on engagement, trust and empowerment are central to managing [the risk of using] modern day slavery,” he says.“Buyers should build the capabilities of suppliers to identify and address risks of forced labour.”

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