The food sector braces itself for crackdown on modern-day slavery

Large businesses across multiple sectors are about to be required to publish a statement on what, if any, anti-slavery and human trafficking precautions they have in place.

In October, supply chain regulations in the Modern Slavery Act 2015 will come into effect, and many companies will be required to issue this statement annually, including a prominent link on their website homepage.

Any lack of action will reflect poorly on the company and brand. Now is the time for business leaders to ensure that their company has active policies in this area to guard against forced or compulsory labour at any point in their supply chain.

But which sectors are most at risk, and what are the implications of these new obligations for large businesses with complex and international operations?

Food sector most at risk

Intricate chains of contracting and subcontracting, both within the UK and abroad, mean many companies can be unaware of – or deny knowledge of – the conditions under which their goods are produced. Nevertheless, this new legislation will now place a spotlight on how larger companies monitor their supply chain, not just their immediate suppliers, but along the entire route.

Until now, most supply chain audits have centred around ensuring the quality and compliance of the product. In the cut-throat world of global commerce where price is key, few companies have taken the time to investigate their supply chains from a human rights perspective unless specific sustainability or ethical claims have been made for the product, such as Fairtrade.

However, some leading global brands including those which have previously received adverse media coverage such as Nike, Coca-Cola and Primark, already have strong corporate social responsibility and ethical trading policies that include steps taken to avoid forced labour in their supply chains.

Sectors vulnerable to forced labour will be those where there is a predominance of low-paid unskilled labour. This has been increasingly evident with news reports concerning the conditions of garment workers in Bangladesh, technology workers in Asia and the plight of fishermen in Thailand.

The area of food production and processing, where turnover is usually high, profit margins are increasingly squeezed and supply chains criss-cross the globe, is particularly at risk. This particularly affects those taking supplies from jurisdictions where the level of labour protection is lower than the UK, from coffee and cocoa workers in South America to rice and tea pickers in east Asia.

Third party agencies

A specific vulnerability across many jurisdictions and industries, including the UK, is in hired labour through third party agencies. This is prevalent in industries such as construction, agriculture, food, textiles and electrical goods.

Practices can range from holding on to the passports of migrant workers to excessive fees paid to agents, meaning workers then have debts to repay. Subsequently they have limited leverage to leave their employers or complain about working conditions, as well as ambiguities in contracts concerning overtime and leave, putting workers at risk of exploitation.

The government is expected to publish information on the size of companies that will be affected and the kind of information that this statement should contain in the next few weeks. The turnover range that has been consulted on is from £36m (which could include around 12,000 businesses) to £1bn (which could involve just over 700 businesses). This will apply globally to companies carrying out “any part of their business” in the UK.

The buck stops at board level

The intention is that scrutiny will come from the top, with the requirement that any statement should be signed off by the board. This will be a very public display of the responsibility and transparency the company adopts within its supply chains. Companies affected will need to disclose the steps they are taking to ensure that slavery does not occur anywhere in their operations.

More detailed information on the format of the statement under the act is expected to be published over the summer. It is anticipated that it will include details on an organisation’s structure, its business and supply chains, the training available to staff and its policies in relation to slavery and human trafficking.

Any statement should also include details of the companies’ due diligence process to guard against forced labour and, most importantly, a risk assessment of its business and supply chain. This will help identify where there is risk of slavery and human trafficking and the risk management steps the company has taken to reduce that. This statement is likely to be the headline reference for any adverse publicity, so will be scrutinised by the business and competitors alike, as well as members of the public and press.

The application of individual corporate responsibility means it is unlikely that companies will ever be held fully accountable for the failings of their third party suppliers. However, the risk of damage to their brand if standards are not met should mean, as a minimum, an incremental increase in scrutiny and application of standards throughout. Nevertheless, if a company is actually doing very little there is currently no specific obligation to do more.

This may be an opportunity for companies to showcase their diligence standards throughout their supply chain. Taking responsibility for choice of supplier should further help increase quality controls as well as ethical standards. The horsemeat scandal of 2013 illustrated how the length and complexity of supply chains makes enforcement of checks and transparency harder to achieve.

Companies at risk of being caught by the turnover requirement should take steps now to consider their supply chains and their risk management of them. If the new act does help to disrupt even some of the human trafficking networks and activities, it will be a success.