Modern slavery in the supply chain
- Date: Tuesday 21st January 2020
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Modern slavery and migrant smuggling hit headlines last year following the Essex lorry deaths. Professor John Manners-Bell, Chief Executive of Transport Intelligence (TI), speaks about the importance of visibility of supply chain practices.
The global, complex and multi-tiered nature of modern supply chains has increased the risk for multinational manufacturers and retailers of having workers employed illegally. Whilst most multinationals understand that out-sourcing of production does not give them the moral right to outsource responsibility for the conditions in which their suppliers’ workers are employed, the lack of visibility of lower tier suppliers has made oversight of employee conditions all the more difficult. However, legislation in the past few years in a number of jurisdictions, has sought to compel supply chain ‘owners’ to undertake audits of their supplier base in order to ensure that their operations are free of what has been termed ‘modern slavery’.
It has been estimated by the International Labour Organisation that worldwide there are in excess of 24.9 million people forced to work under threat or coercion, so-called ‘modern slavery’.
In the emerging world, forced labour is particularly prevalent in the agriculture and manufacturing industries, meaning that there is a risk that consumer electronics, food products or clothing, sourced from these regions and sold in the West, could have been produced by suppliers employing modern slavery practices. 15% of forced labourers work in the manufacturing sector whilst 11% work in agriculture and fishing.
Although the risk may be considered small (in Asia, for example, the ILO estimates that four people per 1,000 falls within this definition) legislators have been keen to ensure that economic owners of supply chains undertake appropriate due diligence. However, this is not always straightforward. One of the consequences of the unbundling and outsourcing of manufacturing processes has been the fragmentation and increased complexity of supplier networks. This is especially pronounced when outsourcing to production locations in emerging markets takes place as remoteness and lack of familiarity with the market decreases supply chain visibility.
In 2015 the UK Modern Slavery Act was passed which required that companies with more than £36m in revenues must prepare a ‘slavery and human trafficking statement’, also known as the Transparency in Supply Chains Clause (TISC). The UK’s approach is to be quite flexible as to the form which this statement takes. Whilst some companies are very brief in their submission, others, such as automotive company Ford for instance, lay out more precisely the processes which they go through to ensure their supply chains are free from modern slavery.
As an independent review of the legislation claimed, ‘Through the Act, the UK became the first country in the world to introduce pioneering transparency in supply chains’ requirements, leading to thousands of large businesses taking action to identify and eradicate modern slavery from their supply chains.’
In order to meet the terms of its commitments, companies must send a letter reminding their suppliers of their responsibilities.
Logistics industry response
However, whilst it is easy to introduce legislation, ensuring compliance is less straightforward. In the future, it will become more difficult for international companies to avoid compliance. Other countries are following the UK’s example and introducing their own legislation such as the French 2017 ‘Duty of Vigilance’ law.
Whether modern slavery laws are presently effective or not, it is obvious that more legislation is likely throughout the world over the coming years. In addition, it is to be expected that unless industry is able to show that it has embraced the concept of responsibility for the practices employed throughout supply chains, existing legislation will be expanded, and regulators given additional powers of sanction on non-complying companies.
In order to demonstrate the seriousness with which industry is taking the matter, many companies have created multi-stakeholder consortia which deal with modern slavery directly or indirectly.
Supply chain ethics
The issue of ethical labour practices in the supply chain – whether or not they conform to a definition of ‘modern slavery’ or not – is now high on the corporate agenda. Businesses are driven by a combination of a desire to ‘do things right’ but at the same time by the fear of reputational damage and the impact that that will have on sales, brand and share price. There is no doubt that a company with a clear policy on ethical sourcing is likely to benefit from a strong management, engaged work force and a clear strategic vision. New legislation is proving a major catalyst for change as well, as this provides a clear directive for companies to address issues which, for commercial reasons, may have been ignored.
Consumer response is also a major driver for change. Many companies believe that amongst the younger generations particularly there is an increasing desire for information concerning the conditions in which a product was manufactured, both in terms of its green credentials and labour conditions. This may not manifest itself overtly (although there is a niche customer segment for whom this is the over-riding concern), more in an implicit trust that the retailer or manufacturer will employ ethical policies. If it is shown that the trust has been misplaced, then the consequences will be severe. Customers still want cheap products, but at the same time ones which have been produced in an ethical way.
Standing in the way of the implementation of ethical labour policies are many challenges. It would be imagined that very few Western retailers or manufacturers would deliberately turn a blind eye to the issue. However, resistance can come indirectly due to a combination of things, including; competing commercial priorities, lack of resources and lack of supply chain visibility.
In some cases, of course, they may be the victim of criminal activity by the suppliers themselves, perhaps as a result of the weak governance which may exist in a developing country. This issue can only be addressed by a combination of corporate pressure by an alliance of Western manufacturers and retailers; international pressure from other governments and also work by NGOs. For instances, organisations such as the World Economic Forum have initiated programmes in supply chain ethics as well as corruption, actively encouraging engagement by the governments of emerging markets by demonstrating the benefits of complying to global best practice.