Modern slavery – look closely at your supply chain

These days, one might have hoped that slavery in the UK is confined to the history books. Unfortunately, it remains very much a live issue across many UK industries and none more so than in the construction sector, where reports of suspected modern slavery cases were higher than in any other sector during the first national lockdown.

Investors are starting to take notice. Led by CCLA Investment Management, a group of investors (total £7tn in assets) have recently initiated a Find It, Fix It, Prevent It initiative designed to eliminate modern slavery in supply chains to the construction sector. Engagement with targeted construction companies is planned for the third quarter of 2021.

The government has also made it clear that even in the midst of a pandemic (or perhaps because of it), it is taking the issue of modern slavery seriously.

Government proposals

Towards the end of 2020, the government published its long-awaited response to its consultation on transparency in supply chains. Among the tougher measures is a commitment to “mandating the key topics that modern slavery statements must cover”, with civil penalties for non-compliance anticipated in “due course”.

Since publishing the proposals, the government has already taken action. In March 2021, it launched a new online registry for modern slavery statements, the purpose being to enable more informed scrutiny of an organisation’s approach to supply chains, with the comparative quality of statements available for all to see.

The amplified scrutiny means organisations should be prepared to demonstrate they are investigating supply chains effectively

The heightened awareness around modern slavery is highlighted by an investor statement from the group led by CCLA: “There are few, if any, businesses that can claim with any degree of certainty to operate slavery free supply chains”.

The well documented Boohoo scandal is testament that the risk is real. A supplier was found to be paying its factory workers £3.50/hour (while the UK minimum wage was £8.72 for workers over 25). Boohoo’s value fell by more than £500m – losing almost a fifth of its value.

Notwithstanding the increased public attention, fear of negative press and, hopefully, an overriding moral duty, the amplified scrutiny means organisations should be prepared to demonstrate they are investigating supply chains effectively.

How can you enhance your supply chain due diligence?

• Know your supplier: Confirm with your suppliers what steps they are taking to ensure their supply chains are slavery-free, for example by asking them about their hiring practices. Getting to know your supplier could include site visits and audits, or even random spot checks. Identify any risk areas through risk-mapping their operations and ensure that these are set out in your modern slavery statement, as well as the steps taken to address them.
• Supplier contracts: Review current contracts, and as part of future negotiations on renewals or on fresh contracts include a specific prohibition of modern slavery in all supplier contracts. You should also include a mechanism for information about personnel and recruitment practices to be provided to you on request, as well as a provision requiring the supplier to include a similar provision in its own supply contracts.
• Training: Encourage suppliers to provide both managers and their staff with training to understand how to spot signs of any potential slavery violations.
• Grievance procedures and whistleblowing policies: Ensure that all your suppliers have robust policies and procedures in place to encourage staff to report concerns.
• Complex supply chains: Be alert to intricate and often complex supply chains, noting that your modern slavery obligations in relation to a supplier of a supplier, for example, are not alleviated simply because of the contractual distance between the entities.
• Immigration compliance: Particularly since Brexit, organisations should be alert to migrant workers being at a higher risk of exploitation and should ensure workers are aware of their rights.
• Minimum wage checks: Ensure that all UK workers, within your own organisation and within your supply chain, are being paid at least the national minimum wage.

While some of the above may sound intrusive, an open and transparent dialogue should be embraced to encourage a willingness among suppliers to address issues.

Depending on the risk profile of your organisation, approaches will differ but the above should provide a starting point for organisations of all sizes.

Implications for employers

The combination of stricter health and safety measures, economic uncertainty and the increased likelihood of job losses has unfortunately provided fertile ground for modern slavery malpractice.

In light of increased investor attention, construction companies would be well advised to take stock and identify, review and address any modern slavery risks.

Large organisations should lead by example, rather than pushing the modern slavery risk onto less resourced suppliers.

Charles Urquhart is a partner and Jasper Dymoke an associate in the employment team at Clyde & Co