Modern Slavery

Business ethics briefing

18 October 2019

Tags: Human rights

This briefing looks at modern slavery in the context of business and business ethics. It considers the different terms brought together under the umbrella of ‘modern slavery’; the ways in which it is a challenge for organisations, and what companies are doing to minimise their risks in this area.

Speed read

This briefing explores the umbrella term 'modern slavery'. It outlines key red flags organisations should be aware of and sets out good practice measures that organisations can put in place to combat modern slavery in their operations.

What is modern slavery?

The UK Government defines modern slavery as

a term used to encapsulate both offences in the Modern Slavery Act: slavery, servitude and forced or compulsory labour; and human trafficking.¹

The 2018 Global Slavery Index estimates that over 40 million people are currently enslaved worldwide.²

Elements of modern slavery happen everywhere. For example, in the UK alone, there are an estimated 136,000 people enslaved, and only around 5% of these are actually identified. Some key modern slavery statistics for the UK are highlighted in Figure 1 below.³

Figure 1: UK modern slavery statistics for 2018
Contacts to the UK Modern Slavery Helpline	7,405
Number of potential victims identified	7,121
Number of modern slavery cases raised	1,849
Number of referrals made to law enforcement, support services and safeguarding teams	2,281
Estimated number of people enslaved in the UK	136,000⁴

Modern slavery ruins millions of peoples' lives infringing on fundamental human rights. From a business point of view, any association has the potential to damage reputation in a serious and potentially permanent way. It creates the image of an organisation that cannot be trusted and puts profits before the welfare of its workers and other stakeholders from those who were enslaved, especially if they manage to obtain the necessary support and guidance to do so from NGOs or other charitable organisations. Companies may also face backlash from consumers if they are found to be implicated.

Box 1: Modern slavery in the news
In 2019, members of a gang behind the biggest modern-day slavery network ever exposed in the UK were jailed. The organised crime group targeted desperate and vulnerable people with the promise of work and a better life. Having been inserted into the supply chains of high street supermarkets and businesses, victims were made to work long days at rubbish recycling centres, farms and turkey-gutting factories. Police believe more than 400 victims were put to work in the West Midlands, and given as little as £20 a week by their captors.⁵

Organisations are putting in place measures to help victims of modern slavery. HSBC recently announced that, under a new scheme, victims of modern slavery will be able to open bank accounts without traditional identification documents.⁶ And last year, Co-op announced that it will start offering four-week paid work placements to victims of modern slavery and human trafficking, which is part of their Bright Future programme.⁷

Modern slavery legislation

There is a growing movement at the level of national governments to crack down on modern slavery. The UK passed its Modern Slavery Act in 2015.⁸

While it is a wide-ranging piece of legislation, covering more than just business concerns, it does oblige businesses with an annual turnover of £36 million or more to disclose the steps they are taking to combat slavery in their supply chains under the Transparency in Supply Chains Provision (TISC).⁹ As a result, organisations of this size are required to publish a Slavery and Human Trafficking Statement annually.

This threshold may sound straight-forward, but stakeholders have reported a lack of clarity over which companies are covered by the Act as other criteria also apply. In addition to having an annual turnover of at least £36 million, an organisation must be commercial, supply goods or services, and carry out all or part of its business in the UK in order to be covered by the Act.¹⁰ This does not mean that smaller firms should ignore the Modern Slavery Act and its requirements as customers and other stakeholders might be looking to them for supply chain assurance.

As part of its review of the legislation, the UK Government is considering whether the Modern Slavery Act should apply to the public sector. Many public sector organisations, including councils and universities are already publishing their own statements. Some companies that fall below the £36 million threshold are doing the same, partly to build trust with their larger clients.

At present, there is no official register of companies who are required to report. This makes accountability a challenge, and the numbers outlined in Figure 2 below demonstrate that companies are not addressing the issue of modern slavery as well as they should be.¹¹

Figure 2: UK Modern Slavery Statement statistics
Registered companies required to comply	16,691
Companies required to comply for which a statement was found	12,778
Companies required to comply for which a statement was not found	3,913

Companies have been required to report since 12 months after the legislation came into force and are breaching the legislation if they do not report each year. This is the case regardless of whether there has been a penalty awarded or not. Government best practice also suggests that modern slavery statements are published within 6 months of the end of the organisation's financial year.

As well as setting a scope that is not entirely clear, the current legislation gives companies an opportunity to determine the contents and quality of their statements. As a result, an organisation could state that it has taken no steps to tackle modern slavery in its operations and still be compliant with the legislation.¹²

By contrast, Australia's Modern Slavery Act (2018) is stronger, mandating which specific areas companies should report under, and holding statements in a central registry.¹³

The UK Government encourages all organisations to develop an effective response to modern slavery and say that

a failure to comply with the provision, or a statement that an organisation has taken no steps, may damage the reputation of the business.¹⁴

However, given the lack of governmental action on this topic, media revelations and resulting negative changes in public opinion currently act as greater drivers for companies to put up a fight against modern slavery and demonstrate that they conduct their business ethically.

How to prevent modern slavery

The supply chains of large organisations are often complex with many tiers. However, this is dependent on the nature of the supply chain as vertical supply chains, such as that of cocoa, are relatively easy to map. Even so, businesses can take a number of steps in order to mitigate the risk of their products or services being made by slaves or forced labour, and protecting the exploited has to be the main driver for organisations.

Producing a comprehensive Modern Slavery Statement that reflects the actual steps taken by an organisation and incorporates deliverable actions is one such step, but does not mean that an organisation’s efforts to eradicate modern slavery in its operations are complete.

While having a comprehensive statement is a good place to start, it should reflect genuine activities that are embedded in a company’s day-to-day operations which are aimed at increasing transparency and accountability. As an example, Twinings recently published a list of its Indian tea plantations to improve transparency and working conditions in an industry that is currently rife with slavery and abuse.¹⁵ That said, companies may not want to reveal everything they are doing in detail in order not to alert traffickers to their counter measures.

Box 2: Corporate modern slavery statements
Pentland’s Modern Slavery Report from 2018, entitled for fairness and freedom, has sections outlining how the company works, key risk areas and what the company is doing to tackle modern slavery. The report also details how the company is putting its related policies into practice in different locations and what they will be focusing on next. In the section called “Our focus for 2019", specific actions for the year ahead are written out in bullet-point form. This level of detail means that the company can easily be held to account for its progress.¹⁶ National Grid’s statement entitled Modern Slavery: Our Statement on slavery and human trafficking 2019 introduces readers to the company’s business, values and operations. It outlines the company’s policies and how an open culture is promoted.¹⁷Due diligence processes and risk assessments are then explained in detail. How effective these measures are, key achievements and next steps conclude the report. As part of their risk assessment, National Grid have actively engaged with their operations in potential high-risk areas and survey staff annually to engage how confident they would feel speaking up.

Clear leadership and commitment from the top that modern slavery is unacceptable and must be eradicated should be demonstrated beyond the signing of the company’s Modern Slavery Statement. This comes down to acting responsibly and demonstrating that ethics goes beyond the law on this matter. Anyone with a modern slavery concern, whether it relates to themselves or someone else, should feel supported through their organisation’s Speak Up channels and company-wide training to be able to raise these concerns safely. Network Rail’s Code has its own section on modern slavery which provides guidance to employees on warning signs to look out for.¹⁸

Monitoring, which is the way most companies check their supply chains and how their business is performing more generally is an important deliverable action. Effective monitoring includes unannounced site visits, worker interviews as well as detailed document reviews. It is vital auditors are trained to recognise the signs of modern slavery and human trafficking. It is also important that worker voice is not taken for granted, so interviews should be conducted in a way that allows workers to speak freely without direction from management or others.

Organisations can be implicated in modern slavery both directly and indirectly. This could be through their own operations, their global supply chains and their involvement with business partners. The use of agency-supplied temporary labour increases an organisation’s risk.

Companies also risk employing exploited workers in the construction, maintenance and servicing of their facilities, particularly in cases where these functions are outsourced to third parties.¹⁹ Areas such as catering, cleaning, security, and hospitality are all vulnerable to exploitation. In an attempt to tackle this issue, companies have worked to improve transparency in their supply chains.

According to the 2018 Information and Communications Technology (ICT) Benchmark Findings Report, Intel ranks first among technology companies, ahead of Apple and HP, when it comes to implementing policies to prevent modern slavery. This has been achieved by taking measures such as introducing unannounced audits, disclosing a list of suppliers and providing evidence that any recruitment fees suppliers’ workers paid were reimbursed.²⁰ The Clean Clothes Campaign provides another example of this in the garment industry. The Campaign sets a voluntary commitment to improve working conditions for garment industry workers by setting specific standards for its signatories.²¹

Risk assessments

Businesses may inadvertently increase the risk of modern slavery in a number of ways. The use of short-term contracts, temporary labour and unusual spikes in demand generated by unforeseen circumstances can create pressures that increase the risk of modern slavery occurring. By only incentivising procurement through the profit margin, businesses also increase the likelihood of modern slavery. Organisations need to develop a metric for procurement that considers environmental, social and corporate governance (ESG) as well as modern slavery.

Completing a risk assessment should be the first step a company takes to mitigate this risk. For example, if a company is deciding where to locate its garment factory, the risk of forced labour should be one of the key deciding factors. Sports company Adidas, for instance, has a strict initial assessment process of potential suppliers which includes forced labour and migrant labour concerns. It estimates that only 50% of potential suppliers pass this initial assessment process.

This risk assessment should be a continuous process, applied with the same rigour to current employers and suppliers as potential ones. Clothing company Gap, for example, identified that many of its source factories in the Middle East and South East Asia employ migrant workers. As a result, it has developed and implemented stringent policies in order to minimise any risk of exploitation while continuing to work in those areas.²²

Via the Responsible Sourcing Tool, companies can find useful information on how to build stronger policies that protect workers, as well as better understand the risks of different sectors and markets. This website has been created to

introduce users to the issues and risks associated with human trafficking and encourage users to explore the issues in more depth.²³

The anti-slavery charity Unseen also has its own scheme to help businesses achieve this.²⁴

Attention to the production process is important if modern slavery issues are to be handled effectively. This is achieved through a lasting commitment to worker voice, monitoring and the traceability of products and materials. Traceability represents the extent to which a company maps its own supply chain, and is vital in establishing where products are being produced and who is producing them. As an example, Marks & Spencer not only has a process by which they track their Tier 1 suppliers globally, but they also disclose the exact location and statistics from each factory on an interactive map available on their website.²⁵

Box 3 below highlights common red flags that individuals and companies need to keep in mind, but this list is far from exhaustive. A more comprehensive list of red flags, which explains in greater detail what each of these red flags entail, is provided by the Gangmasters & Labour Abuse Authority (GLAA) on their website.²⁶

Box 3: Some red flags to look out for
Recruitment fees Debt bondage Lack of employment contracts Confiscated identity documents Special accommodation provision Excessive working hours Restrictions on freedom of movement Unsafe working conditions

There are also a number of independent tools that can be used by individuals to communicate modern slavery concerns. The Safe Car Wash app enables users to flag fearful workers, a lack of protective clothing, workers living on site and other potential risk factors.²⁷ Similarly, the Salvation Army’s hashtag #askthequestion is another helpful tool, which lets anyone get in touch with companies to ask them what they are doing to ensure that their supply chains and wider operations are free of slave labour.²⁸

How to respond if modern slavery is identified

Companies also need to prepare for the possibility of modern slavery being discovered and need to decide how they would respond, when it happens. The key to this is being realistic about what can be achieved and create an action plan that is in line with the company’s values. It is recommended to consult guidance from GLAA rather than attempting to address this issue alone.

If modern slavery is discovered within the operation of the company, it is necessary to respond quickly and appropriately, and also with discretion, so as not to alert any criminals that have infiltrated the operation. The process of rectifying this problem includes targeting non-compliant factories, as well as committing to help those individuals who have been exploited or enslaved.

A company acting in accordance with best practice also has a duty to help initiate and oversee reform after discovering exploitation. This can be achieved through follow-up visits and site meetings with unions. Actions such as returning confiscated identification papers, or compensating those who have been working without pay under debt bondage, are critical. Organisations that can help to ensure that victims are kept safe include Hope for Justice, which is a global non-profit organisation aiming to end human trafficking and modern slavery by preventing exploitation and rescuing victims.²⁹

Box 4: Corporate response to modern slavery
In 2012, Apple faced embarrassment when working conditions in Chinese electronics factories were exposed. The consumer giant has since described the risks associated with migrant workers, such as excessive recruitment fees and debt bondage. According to the resulting report, suppliers are required to provide workers with employment contracts in a language they can understand and are prohibited from confiscating or withholding workers’ identification or travel documents. Apple suppliers are also prohibited from charging recruitment fees, and auditing processes are in place to ensure these requirements are met. Workers found to have paid fees are reimbursed, and in 2017, reimbursements totalling over $19 million were provided to more than 1,500 foreign contract workers.³⁰

It is important that companies do not simply terminate relationships with suppliers who are found to be exploiting their workers as a first step. Instead, it is necessary to set out corrective-action plans to root out the problem and enact a cultural change. The Ethical Trading Initiative’s report entitled Corporate Leadership on Modern Slavery provides a number of case studies of how different organisations have worked to combat common characteristics of modern slavery within their businesses. One of these case studies (p.33) looks at the ways in which two different companies have worked with suppliers to raise standards.³¹

However, if attempts are made to encourage a particular supplier to make changes and these suggestions are ignored, terminating the relationship should be considered as an appropriate course of action. As an example, H&M in 2016 terminated a sourcing relationship with a Turkish supplier after discovering a Syrian migrant child working in its factory, responding to documented abuses against Syrian refugees in the Turkish textile industry. H&M stated that it had terminated the partnership with this supplier immediately following the discovery and involved its NGO partner to get their support on remediation activities.³²

Conclusion

The UK Modern Slavery Act addresses challenges related to modern slavery within any organisation. However, following the current guidance and writing a Modern Slavery Statement are not sufficient on their own.

Commitments to eliminate modern slavery in any of its forms should be based on a platform of strong governance from those at the top. It is essential to set out a number of concrete commitments to recruiting processes, supply chain transparency, training programmes and employee engagement. These standards should be cascaded down each tier of the supply chain as effectively as possible and fed back to the top of the organisation, so that efforts to combat modern slavery do not simply become a tick-box exercise.

The UK Government has not yet demanded that organisations use a specific layout or highlight certain content in their modern slavery statement, but is currently reviewing the recommendations of the independent review of the Modern Slavery Act and TISC. Following this review, it is expected that organisational requirements and penalties will increase. It is also possible that other types of organisations could be required to provide a statement in the future. As of now, however, it is up to organisations themselves how they wish to present relevant information and how much detail they provide.

Organisations are, however, obliged to include in their modern slavery statement all the relevant steps they have taken. The Government’s TISC guidance includes some core recommendations like:

Add appropriate links to relevant publications, documents or policies for your organisation, if able to do so.
Write the statement in simple language so that it is easily accessible to everyone.
Provide the statement in English and any other languages that are relevant to your organisation and its supply chains.
Specify which actions relate to which country so readers can understand the context of any steps taken to minimise risks.³³

Beyond the Modern Slavery Statement, the IBE believes that organisations should also:

Create an open and supportive culture where employees feel safe and supported in raising their concerns, and consider reporting to the Modern Slavery Helpline directly.

Train the organisation’s employees and Board to recognise signs of modern slavery. The Business & Human Rights Resource Centre (BHRRC) provides useful guidance on this.³⁴
Report on modern slavery internally in a manner that is open and transparent so that an accurate picture of the situation can be formed and addressed accordingly.
Prepare upfront how the organisation will respond to a situation in which modern slavery is identified. Make sure this plan is achievable and in line with the organisation’s values.

Disclosing the organisation’s process of mitigating risks and the discovery of failings are pivotal in the stamping out of modern slavery in global operations. Transparent reporting ultimately unveils information on the nature of modern slavery practices and can therefore help facilitate its elimination.

Anyone tasked with creating and overseeing a company-wide programme to address modern slavery concerns should go beyond its own company’s current policies to consider what is being done across different industries in order to tackle the issue of modern slavery on a larger scale.