Five ways the Modern Slavery Act will impact on procurement
With modern slavery reported to be an issue in every country around the world and in a huge range of industries, from electronics and automobiles to seafood and textiles, the Modern Slavery Act 2015 now requires larger UK organisations to demonstrate how they are tackling the issue.
The directors of organisations turning over more than £36 million have to publicly show their compliance with the Act, which means the onus on procurement teams will continue to increase as the months progress.
Time is ticking away because big organisations with a year end of March 2016 are expected to produce a statement, within six months, detailing what they are doing to tackle modern slavery and human trafficking in their supply chains. Those with a later financial year end have a few months longer to comply, but the deadline for all larger organisations to show what they’re doing, and publish this on their websites, is approaching quickly.
This is placing an expectation on procurement to take all necessary steps and make its actions on modern slavery highly visible.
Penalties for individuals or organisations found to be involved in slavery could include prosecution, imprisonment and the confiscation of assets such as ships, vehicles and aircraft.
Here are just four of the ways that procurement in larger companies is likely to evolve following the introduction of the Modern Slavery Act:
Not knowing is unlikely to be regarded as acceptable. Team and individual understanding of the risks of modern slavery will inevitably increase, as they come under the spotlight. Anyone dealing with suppliers is likely to be expected to understand the risk areas. According to the 2014 Global Slavery Index, these are extensive. It says there are an estimated 35.8 million people living in some form of modern slavery around the world. The ILO (International Labour Organisation) claims that illegal profits from forced labour amount to more than $150 billion a year. Importantly, it is not just an overseas issue, with the UK alone reporting 1,746 cases of slavery in 2013.
Procurement teams with extended supply chains are likely to start by prioritising those areas seen as highest risk. According to CIPS, the risks of modern slavery are most pronounced where there are inadequate laws and regulations, weak or non-existent enforcement and poor business and government accountability. It also points to regions or countries where there are high levels of poverty among workers, where there is widespread discrimination against certain types of workers, such as women and ethnic groups and where there is widespread use of migrant workers. Other red flags could inevitably include conflict zones and certain high risk industries, for example where raw materials are mined or used.
A Modern Slavery ‘champion’ could be a pivotal player in procurement teams of larger organisations, according to CIPS. This will ensure that every organisation has at least one individual responsible for understanding and keeping up to date on the risks. The ‘champion’ would work with their colleagues and senior management to take necessary actions and update policies and contracts.
One starting point for anyone engaging with suppliers on human rights and related issues is the CIPS Ethical e-learning course which among other things looks at forced labour in supply chains, where the risks lie and how to eradicate them. Team champions could be an asset to their businesses, helping colleagues to identify the risk areas most relevant to them and then ensuring they receive the training and support to understand and address these.
Audits, evaluations, shortlisting and performance management processes are likely to be impacted by the Modern Slavery Act. This will start with ensuring that existing suppliers and new suppliers understand the organisation’s approach to modern slavery and alter supply contracts to reinforce this. It is possible that those at the head of the supply chain will support and encourage ‘whistleblowing’, not just in their own organisations but through the supply chain.
These are only four areas likely to change the way procurement is run as the Modern Slavery Act rolls out in UK businesses. However, there are likely to be more as procurement plays a pivotal role in helping to stop slave labour in the UK and across the globe.