Firms act on modern slavery

2nd November 2016


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Author

Andrew Todd

Gordon Miller finds out how the UK construction sector is tackling human rights abuses in its supply chain

It took just one section of one piece of legislation to shine a statutory spotlight on a contemporary variation of an oppressive practice ostensibly abolished in the 19th century. Section 54 of the Modern Slavery Act (MSA) focused on transparency in supply chains, in particular the issues of human rights and forced labour in companies’ global affiliations as well as their direct workplaces.

Introduced on 29 October 2015, s 54 requires all companies with an annual turnover of at least £36m to publish an annual statement outlining the steps taken to ensure there are no instances of slavery and human trafficking in their business and supply chain, or declare that no steps to confirm the existence of slavery or trafficking have been taken. It is estimated that s 54 covers 12,000 firms in the UK. First affected were those with a financial year ending on 31 March 2016. These were required to report by 30 September.

A business priority

In the construction sector, which accounts for 10% of the UK’s gross domestic product, the transparency in supply chains (TISC) requirement is particularly significant because many firms have complex and lengthy production and distribution processes.

But complex supply chains and faraway suppliers are no excuse for inaction, as Kevin Hyland, the UK’s independent anti-slavery commissioner, says: ‘Managing supply chains cannot be overlooked and international borders are no excuse. Any person in slavery anywhere in the world is unacceptable. I am sure that no board member would say otherwise, and yet there are 45 million people in modern slavery worldwide.’

The TISC clause poses significant challenges for companies. Often there are so many links in the supply chain that the original source is difficult to trace. Even if firms can ‘map’ their supply chain, how do they ascertain the working conditions and human rights of all the workers who ‘handle’ their products? Non-governmental organisations (NGOs) can help. Several NGOs working in the human rights arena, such as the Ethical Trading Initiative, the Institute for Human Rights and the Business & Human Rights Resource Centre, work with companies to help them to identify suppliers. They also provide resources to help companies manage suppliers and to challenge those suspected of engaging in exploitation.

The adage ‘you can’t manage what you haven’t measured’ applies if companies are to manage suppliers effectively. Supply chain software is increasingly sophisticated to help organisations map, measure and monitor global threats. Some commentators argue that ‘big data’ is essential to help eradicate the scourge of human rights abuse in the workforce and to enable businesses to continuously improve human rights. BSI Supply Chain Services and Solutions has a suite of intelligence and risk management tools to help organisations identify, analyse and manage global supply chain corporate social responsibility threats and areas of supplier non-compliance. These include its geographic risk intelligence solution SCREEN and the web-based risk and audit management tool Supplier Compliance Manager.

Being open

Critically, transparency and openness are necessary to begin the process and improve. Too many organisations believe transparency exposes them to risk – to their competitive advantage and share price to name two. Professor Jacqueline Glass, of Loughborough University’s School of Civil and Building Engineering, believes this perception is changing. ‘The implementation of the MSA has legitimised the conversation,’ she says. ‘Prior to the Act, [many] large companies didn’t want to discuss the subject for fear of creating risk in their supply chains. The legislation has opened a conversation people are very keen to have.’

For others the potential damage to their reputation is the single biggest risk if modern slavery, forced labour or human rights abuses are found in their supply chain. Ron Reid, a partner at legal firm Shoosmiths, says: ‘A company’s response to the MSA is an issue that will be judged in the court of public opinion, not the law courts.’

The MSA has been criticised for lacking ‘teeth’, largely because it is not punitive to those who ignore it. Hyland disagrees: ‘The lack of penalty is not a weakness. We need to see a change in culture, with consumers understanding the evil of modern slavery and businesses understanding their moral duty to respond.’

As anti-slavery commissioner, Hyland is prepared to celebrate success and work with anyone who discloses that they have found abuse in their supply chain and puts in measures to provide workers with good jobs in safe conditions. ‘We must ensure that all employees are respected and not used as a commodity,’ he says.

Best practice

The challenges are significant, beset not only by externalities, such as criminal motivation, but by complexity. Consider that many construction products are composites that will have been sourced from several global regions where neither ethical, responsible sourcing is practised nor basic human rights respected.

Factor in also what a firm can do if it discovers that a supplier is using modern slavery or forced labour. Is it responsible business practice to terminate the company’s contract? The supplier may be based in India and employ several hundred people locally that depend on the work for their family’s livelihood. Rigorous due diligence before engagement and contracting is therefore critical for all parties.

Monique Villa, chief executive of the Thomson Reuters Foundation, which promotes socio-economic progress and the rule of law worldwide, says: ‘To meet the growing requirements you need a robust, risk-based approach when hiring new suppliers and third parties to ensure a proportionate level of due diligence is performed when doing business with certain industries or countries that may be classed as high risk.’

The due diligence needs to be sufficiently robust for boards to have the confidence to act on the recommendations. One way to guarantee this is to ensure the due diligence conforms to international standards. BRE, the science and research centre working primarily in the built environment, has developed its Ethical Labour Standard in consultation with the construction sector. Dr Shamir Ghumra, director of the centre for sustainable products at BRE, says: ‘The standard has been developed to provide organisations with a framework to verify their systems and processes in relation to the MSA and continuously improve their ethical labour sourcing practices.’

More than 120 organisations helped BRE shape the standard and trial its use, testament, Ghumra says, to the willingness of the construction industry and firms in the wider built environment to do the right thing. ‘These are organisations with complex international supply chains, so the ability they have to effect real change on a global scale is significant.’

Working together

Ghumra says cross-sector collaboration is vital because, within construction supply chains, the end labour source, say a quarry on the Subcontinent, is the same one used by many UK-based companies – although many intermediaries may ‘touch’, repackage and add value to the materials and products along the way.

Stuart Croucher, group commercial services director at construction industry supply company Travis Perkins, says the sector ought to collaborate to find solutions to modern slavery. ‘We need to avoid duplication, repetition and reinvention, and we all need to learn from those who have pioneered in this arena,’ he says.

Marshalls, an external landscaping, interior design, paving and flooring products business, imports sandstone from India. More than ten years ago it acknowledged a need to understand, measure and monitor the environmental and social footprints of its operations and products. Today, it has mapped a significant proportion of its business impacts. The firm does not pretend it has been easy or that it has ‘cracked it’, but says the benefits of social and environmental engagement have been considerable.

Chief executive Martin Coffey maintains that there is a cast iron business case for a human rights programme: ‘It takes into account risk mitigation and legislative compliance, but is much more to do with further driving and embedding sustainability specifically regarding human rights; working effectively and creatively within the UN system; selectively extending our area of influence; and ultimately creating competitive advantage for our business.’

Ultimately, as Hyland states, the modern slavery and broader business human rights agenda is a leadership issue that the construction sector has a moral responsibility and legal requirement to address. And s 54 has provided the necessary spur for action.

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