Retail

A pragmatic approach to the Modern Slavery Act

The UK Modern Slavery Act brings ethical business practices and supply chain integrity into focus. We consider how retailers in particular can respond to its requirements.

Practices of modern slavery stretch to all parts of our global economy. According to the Global Slavery Index, more than 35.8 million workers are estimated to be exploited by private individuals and enterprises worldwide, including 8,300 here in the UK. 

There are a number of recent cases that have made headlines, including:

Consumers and customers are quick to punish companies that do not prevent Modern Slavery practices in their businesses and supply chains.

What is the Modern Slavery Act?

In the UK, the modern slavery issue has been brought further into focus by the Modern Slavery Act (March 2015), which aims to combat slavery and human trafficking in the UK.

Who does it affect?

Businesses which:

  • carry on a business / part of a business in the UK
  • have a group annual turnover of more than £36 million
  • supply goods or services.

What are the requirements?

For financial year ends from 31 March 2016 onwards, such businesses need to:

  • produce a slavery and human trafficking statement covering steps taken to ensure modern slavery is not occurring in their own organisation or supply chain
  • produce a statement to be signed by a director (or equivalent), published through a prominently-displayed link on the company website.

Failure to provide a statement will lead to a court injunction, with an unlimited fine if no action is taken.

Retail supply chains and transparency

Retailers are at the forefront of a rising consumer focus on ethical working and supply chain practices, with a number of successful brands such as M&S and John Lewis concentrating on building up and solidifying their reputation with ethical sourcing. 

Retailers are particularly susceptible to instances of modern slavery due to the complexity and opacity of their multi-tier global supply chains.

They also employ typically labour-intensive manufacturing processes and have a reliance on flexible and casual workforces, with substantial use of migrant workers.

Gaining a holistic understanding of risks in retail

An honest and in-depth evaluation of modern slavery risks to your business is critical in order to understand areas of weakness, and to be able to prevent, detect and correct instances of modern slavery.

While some areas may be more easily addressed by current policies and practices – for example, Tier 1 suppliers who retailers directly engage with – areas we have found to be less commonly considered include:

  • franchisees and other entities holding a commercial or brand arrangements
  • customer service and call centre staff
  • supplementary services, such as in-store cafes, and the supplies that come with them (eg, food preparation and sourcing)
  • lower-tier (particularly second, third and fourth) suppliers, in particular where visibility of labour practices is low and assurance is more difficult to obtain
  • non-core procurement and supplies, such as store and head office cleaning and facilities management
  • transport and logistics suppliers, including shipping crews/drivers and warehouse staff.

In evaluating appropriate policies and procedures against risks identified, key areas to consider include:

  • senior management guidance on the level of assurance and control over business and supply chain practices (compliance versus best practice)
  • employee training and awareness of modern slavery requirements, and the extent to which this is delivered through the business
  • supply chain audit procedures and whether these effectively address assurance over modern slavery.

As well as putting appropriate measures in place, businesses need to consider how these can develop and improve over time.

The challenges businesses often face with regards to modern slavery include:

  • lack of awareness about key risk areas in the business
  • sufficient challenge and ideas in designing practical, cost-effective controls and solutions
  • difficulty gaining assurance over sufficiency and effectiveness of policies and procedures in place, including in the context of substantial business changes (for example, M&A scenarios).

Further help and information

Managing the 3Rs in business – risk, responsibility and reputation – has never been more under the microscope in the UK than it is today. Managing businesses through an increasingly demanding legislative and regulatory environment is key to success as much as the quality of products and services themselves.  

For more information on how you can manage, mitigate and eradicate such complexities and address the risks in your business, please get in touch with Oliver Bridge at oliver.w.bridge@uk.gt.com or call +44 (0)20 78652229.