Eradicating modern slavery

Time to review your post-pandemic supply chain?

When the Covid-19 pandemic hit in 2020, businesses around the world found themselves frantically re-wiring their supply chains to ensure production could continue in some form.

Having to urgently source new suppliers, in a world where travel restrictions hindered direct inspections of premises and workers’ conditions, unfortunately seems to have impeded pre-pandemic efforts to eliminate slavery and forced labour across the globe.

Now that restrictions are being loosened and/or removed, it would be wise for businesses to review their supply chains and consider if they are doing all they can to ensure good working conditions and rates of pay for those who are, ultimately, working for them.

A report from the University of Sheffield, looking at the impact of Covid-19 on global garment supply chains, has found that workers in Ethiopia, Honduras, India and Myanmar were severely affected by the pandemic. They reported a sharp decline in earnings and working conditions as well as increased risks of forced labour since the start of the pandemic.

The report also found that many companies fell short of their commitments to good practice including sourcing sustainable goods from manufactures with fair working conditions, pay and no use of exploitation. Professor Le Baron, from the Department of Politics and International Relations at the University said:

“It appears many companies in the garment industry accessed emergency funding during the pandemic, but also provided little to no evidence that they honoured the social responsibilities most brands we recognise have to the workers in their supply chains at the same time”.

Earlier this month it was confirmed that leading fashion brands Zara, Sketchers and Uniqlo are being investigated by French prosecutors further to allegations that they have profited from exploiting forced labour in the Chinese Uyghur community to manufacture their products. These brands are included in a number of those being called out on social media and facing boycotts due to alleged links to forced labour in China.

Some businesses have had to near-shore parts of their supply chain as a result of the pandemic, which theoretically should reduce modern slavery risks due to heavier regulation in UK and Europe. However, even UK supply companies have been accused of falling foul of expectations. Last year, growing online fashion brand Boohoo was embroiled in modern slavery allegations after an investigation found workers at one of its Leicester suppliers reportedly undertaking excessive hours in high-risk conditions amid the Covid-19 pandemic, and often on illegal low pay.

And it is not just the fashion industry under scrutiny. Supermarkets have been warned of a growing risk of modern slavery as suppliers desperately try to tackle the ongoing labour crisis. A study this year by the Focus on Labour Exploitation (FLEX) charity found seasonal farmworkers exploited by employers, pressured to sign zero-hour contracts, made to live and work in degrading conditions, and prevented from changing employers. A study by De Montfort University suggests that the recent deadline for applications for EU settled status is likely to exacerbate matters as many workers who have not applied will lose their right to work, leaving them vulnerable to exploitation.

Some legal commentators have condemned the Modern Slavery Act 2015 as “not fit for purpose” because the steps which companies are required to take, and publish, are not assessed against any set standards so “even if companies are taking ineffective measures, they still fulfil government requirements”. However, even the UK Government has come under criticism for repeatedly sourcing PPE for the NHS from companies in Malaysia facing modern slavery allegations. In light of this, a crackdown on current practices and strengthening of existing legislation may seem unlikely.

Many businesses are well aware, however, that it is consumers who are the most important arbitrators and they are becoming increasingly socially responsible with sustainability creeping higher and higher on the list of expectations for many. Investors are applying pressure to those running the companies to make sure that policies and practices keep up with consumer demands in this respect.

The investigations being carried out further to concerns of unscrupulous practices have far-reaching consequences beyond the commission of offences under the Modern Slavery Act 2015. Such investigations may uncover other offences such as fraud, tax evasion, health and safety breaches and immigration offences to name but a few. Economic and reputational damage to a brand following such allegations is likely to last long after the headlines. Shares in Boohoo plunged by 14% in July 2020 after the report alleging workers making clothes destined for Boohoo were being paid as little as £3.50 per hour was published.

Accordingly, now more than ever, companies need to be particularly conscientious to make sure that poor treatment and underhand methods are not slipping through the complex net of the supply chain.

How to address the challenges of modern slavery in supply chains?

Generally, businesses need to focus on raising standards, ensuring a fair wage is paid and that no one is forced to work. This can be a challenge but the following are some suggestions of meaningful action to help achieve this:

• Refuse to work with suppliers who refuse or fail to provide information requested;
• Approach with caution any particularly low bids when evaluating a tender: can workers be being paid and treated fairly with such low rates?
• Consider a transparent approach: Boohoo plans to publish the names of all factories it uses worldwide;
• Never base decisions on price alone: the risk of labour exploitation should be equally important.
• Be aware of geographic risk areas: certain countries have weaker labour safeguards and additional safeguards. However, suppliers from all countries come with a risk, as Boohoo is now aware, so don’t assume a company adopting responsible practices simply because it is close to home.
• Make sure you act upon your policies and follow up any concerns and implement change where required;
• Carry out regular audits of supply chains and workforce processes;
• Provide training and increase awareness amongst decision makers so they can appreciate the importance of responsible practices and detrimental effect of involvement in modern slavery.
• Provide training to staff to ensure they can spot the signs of modern slavery and report them. Some businesses are offering training to first and second tier suppliers in order to extend awareness;
• Implement an effective whistleblowing system so that concerns can be raised without fear of retribution;
• Consider linking bonuses for Board members to environmental, social and governance performance and targets. Businesses with high level support to meet challenges of slavery and sustainability in the supply chain have been shown to be more likely to actually eradicate poor treatment and behaviour;
• Cancel contracts with suppliers who are failing to meet required standards. This would be a tough decision as it may put some workers in a worse situation as they may lose their job. However, the message it will send is important.

If you have any questions or concerns around your organisation’s Modern Slavery strategy, or wider supply chain or logistics issues, please do not hesitate to contact Corinne Hough, or Matthew, or speak to your usual Weightmans advisor.