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It is estimated that over 40 million people are victims of modern slavery globally, with 16 million victims of forced labour in the private sector. As companies chase ever lower input prices and higher profits, the risk of exploitation and enslavement of workers increases across an organisation’s operations and supply chains.
For the last two years many firms have examined the Top Fortune 500 Companies globally in-bound across 12 industries with their assessments based on the six key areas that government guidance recommends companies to cover in their Statements. They used a simple scoring methodology which assigned points under each of the six areas as defined in the guidance.
These reviews found that 42% of Statements were non-compliant, failing to meet one or more of the legal requirements to be:
+ Published on the company’s website with a prominent link on the homepage
+ Signed by a named director or above
+ Available Statement in date
Of the 58% Statements which were compliant, scores ranged from 14% to 80%; demonstrative of a wide range in the quality of Statements produced.
The top three highest scoring companies this year were all in different, consumer-facing sectors; potentially driven by higher public scrutiny and the heightened measures taken to mitigate reputational risk: Travel & Leisure, Technology & Telecommunications and Retail & Consumer.
Three lowest scoring industries were: Pharmaceutical, Financial Services and Logistics.
In addition, the UK government recently conducted an independent review of the Modern Slavery Act, with a key focus on transparency in supply chains. This review is in response to a compliance rate hovering around the 50% mark and to the frequently poor quality of existing disclosure Statements, many of which fail to even meet the basic legal requirements. The review makes over twenty specific recommendations relevant to businesses. The take-home message is that modern slavery should be taken more seriously and defence against it should be centrally embedded into business operations and reporting processes.
Organisations should be aware that the Home Office is considering a range of options to drive compliance and strengthen reporting, including the development of an enforcement body and more punitive sanctions for corporate compliance failings.
The average score for the Statements’ ‘structure’ was 43%. Most companies provided some description of business purpose, operations and location of operations, but there was generally little disclosure on supply chains. This is likely to reflect, in part, the lack of visibility that many businesses have beyond their tier 1 suppliers. More remote parts of global supply chains are in some cases more high risk but major brands often lack insight and influence. This is a challenge acknowledged by many businesses we speak to around modem slavery and human rights.
Only a minority of companies have developed specific modern slavery/human trafficking policies. The majority have instead leveraged existing policies (such as HR, procurement, codes of conduct, third-party supplier policies) to acknowledge the requirements of the Act. There is nothing wrong in this, as long as the policies provide for an adequate response on the part of the business. We also know of a number of companies looking to develop specific modem slavery or broader human rights policies in order to bring greater focus to this aspect of their business.
Modern slavery risk in supply chains is a function of a number of factors, including; the sector in which a business operates, the geographies into which its supply chain extends, the visibility of its brand and level of influence it could be expected to exert on a supplier, based on size of spend and the proportion of the supplier’s output it takes. While 67% of companies’ Statements refer to risk assessments of their operations and supply chains, only 4% give a detailed description of the findings. Rarer still is any discussion of specific actions they have taken as a result.
Companies should consider disclosing the results of the risk assessment to provide greater transparency for stakeholders and customers and more evidence that a systematic review of risk is leading to practical real-world changes and outcomes.
While 65% of the companies stated that they have a whistleblowing helpline, only 24 companies stated it was available for members of their supply chain. Companies should consider extending helplines across their supply chain, given that this is where modern slavery related issues are most likely to occur
Key Performance Indicators
Across all areas analysed, companies demonstrated the poorest disclosure on KPls related to their modern slavery approach. Only 16% of Statements gave information on current progress against KPls with the worst performing sectors being Financial Services, Logistics and Pharmaceuticals. Setting KPls and future targets would help drive company ambition and progress towards eliminating modern slavery