Driving modern slavery up the agendaOctober 2016
By Adam Woodhall — Business accepts that slavery is unacceptable, so how is the UK’s Modern Slavery Act (MSA) raising the bar in holding companies to account? Following in the footsteps of Wilberforce who lobbied for legislation in the 19th century, the then-Home Secretary, now Prime Minister, Theresa May sponsored the Act through Parliament in 2015. A significant section of this world leading legislation, ‘Transparency in Supply Chains', is focused on the corporate sector, with the first reporting marker being the end of September 2016. What is the background to this legislation and how have businesses have responded to it?
Whilst there has been considerable progress over the last 200 years since the UK banned slavery, there are still an estimated 45 million affected. Modern slavery has become a catchall term to describe human trafficking, forced labour, debt bondage, sex trafficking, forced marriage and other slave-like exploitation.
The MSA is also a representation of something wider and broader: it is becoming increasingly accepted that businesses are accountable for the wider impact of their supply chain, and the fact that they are often very long, complex and opaque is no excuse for not taking responsibility. As Anna Turrell, Senior Public Affairs Manager – Sustainability for Nestlé UK & Ireland, says, the MSA “is an important and welcome step in driving transparency and accountability across government, business and wider society”.
The momentum is clearly behind this effort, because not only are the MSA’s reporting requirements now pending, but Theresa May chose to use her first speech at the UN General Assembly in September to press world leaders to take action. Furthermore, the UK government also announced a plan that will be drawn up with input from the heads of MI5, MI6 and GCHQ, along with senior police.
Turning to the Act itself, and how it relates to business, the theory behind it is that rather than creating a big stick, the government’s desire is to create a 'race to the top,’ thus delivering a virtuous loop. This approach began pre-2015, with NGOs lobbying government and government answering with the MSA. Nestlé’s Turrell comments: “Whilst the legislation itself is broad and less prescriptive than some might like, it provides a useful entry point for organisations starting out on their human rights journey”. This has led to business responding, and in turn, raising the profile with their customers and suppliers as corporations begin to compete to demonstrate their good practices. This gives the NGOs and government the opportunity to highlight good and poor performers, and the loop continues.
The main tangible output expected in the MSA is for commercial organisations with over £36m turnover to publish a ‘slavery and human trafficking Statement’. The Act recommends that companies cover six areas in their Statement. The early reports regarding the Statements were not encouraging; in January 2016, the Chartered Institute of Procurement and Supply claimed that businesses were ‘woefully unprepared’. What has been the reality since then?
PwC reviewed over 130 MSA Statements; their research showed that around 70% of Statements missed out at least one of the recommended areas. Of those that cover all six areas, most were found to be about 1000 words, with risk assessment and performance generally sketchily reported. The Freedom Fund, the world’s first private philanthropic initiative dedicated to ending modern slavery, stated that “Many companies appear not to have grasped the spirit of the Act [as]… some statements appear to be based on a common template and use identical language. This persists despite guidance for companies on how they can report effectively under the Act.”
What is the report of those who have been helping companies? Jessica Cresswell, senior consultant at Carbon Smart, observes: “For most businesses the MSA is a daunting requirement, especially for those with large, global supply chains. The first question is always: where do we even begin?” She counsels that “throwing a lengthy questionnaire at a few hundred suppliers and hoping for the best” is not going to help.
The issue: leadership
How much of an issue is this? PwC suggests that many companies are ‘starting small’. The Freedom Fund observes that there are Statements which provide detailed information, highlighting especially those from Intel, Marshalls Paving and Ford. According to Business & Human Rights Resource Centre’s enhanced registry of statements, 680 Statements were produced by mid-September 2016.
As with most advances in society, the ‘Adoption of Innovation Curve’ applies, with a small number of enthusiastic innovators and early adopters—the Intels, Marshalls and Fords—and a large number in the early majority (most of the 680) that wait for their enthusiastic compatriots to demonstrate leadership. Then there will be ‘laggards’, who generally avoid change.
Considering the Act was drafted to create the race to the top, the current situation is to be expected: a few leading enthusiasts and a majority taking initially limited action. Furthermore, the 680 Statements submitted so far mean that modern slavery will have gone up the agenda for all those businesses. As Turrell from Nestlé observes, the MSA legislation; “has helped to raise the profile of these issues across our business operations in the UK, including amongst our business leaders, and across or our wider value chain, amongst our suppliers and customers.”
Compelling business case
What are those who have engaged with numerous companies putting forth as best practice going forward? The PwC report suggests that: “If modern slavery is seen purely as a compliance issue, this may limit the resources made available by senior management,” continuing that “the team leading the response needs to set out a compelling business case, e.g. explaining impacts on employee engagement, supply chain efficiency and brand enhancement.”
As Cresswell observes, “The legislation itself is a fantastic opportunity for UK businesses to collectively confront what is going on in their supply chain and raise the standard of transparency and due diligence, because, now more than ever, it is totally unacceptable that the phones we use and the clothes we wear are made by people forced into slavery.”
For further info, see the article at Ethical Performance on modern slavery at a recent event by The Crowd.