When retail supply chains go wrong

When the Modern Slavery Act came into force in March 2015, it was hailed as a giant step forward in the war against modern slavery. It not only criminalised modern slavery, it also imposed a requirement for large organisations (i.e. organisations with a global turnover of £36 million) who carry out business in the UK to produce a modern slavery statement setting out the ways in which they tackle modern slavery in their supply chain. 

The requirement to produce a modern slavery statement is not particularly onerous – arguably an organisation who is required to produce a statement could simply state it takes no steps to tackle modern slavery. But the government’s aim behind the requirement to produce a statement was to force organisations to shine a light thorough their supply chain to uncover and tackle any incidents of modern slavery. Further, although the act itself does not yet impose any sanctions on businesses that do not comply with their duty to publish a modern slavery statement, the government’s hope was that organisations would be spurred on to comply so as to avoid any negative publicity drawn from non-compliance.

Although some major retailers and eCommerce companies have taken steps to produce comprehensive modern slavery statements, compliance generally amongst businesses (including online retailers) has been largely underwhelming. In fact, it is estimated that 40% of relevant UK businesses have not published a modern slavery statement at all, and of those that have published a statement, many are of a poor quality.

As a result of this relatively low level of compliance, modern slavery sadly still very much exists in many retail supply chains and a number of high profile retailers have recently come under fire for not doing enough tackle this scourge. For example, in 2016 students at Georgetown University in the United States demanded that the University end its contract with Nike when it refused to submit to watchdog audits of its supply chain.

What is government doing now?

Whilst the government has not yet published a name-and-shame list, supply chain provider Segura published a list of 34 retailers in 2017 that had not yet published a statement. This included major retailers (some of which operate online) such as Hotel Chocolat and Blue Inc.

Due to this widespread non-compliance, in 2018 the government moved forward with writing letters to the CEOs of approximately 17,000 UK companies, which had not yet published a statement, warning them that they will begin naming and shaming at the end of the 2017/2018 financial year. Although at the time of writing, this threat has not been carried out, it is only a matter of time before a centralised list is published.

The government has also commissioned an independent review of the act in 2018, for which a report was published earlier this year. The panel considered how to increase compliance and transparency under section 54, and produced the following recommendations:

  • Companies should no longer be able to publish a statement saying that they have taken no steps;
  • The six areas of reporting (as set out in the Home Office guidance “Transparency in Supply Chains, etc. A practical guide”) should become mandatory;
  • The government should set up a central repository for statements;
  • Sanctions for non-compliance should be strengthened; and
  • The government should bring forward proposals for a body to enforce sanctions.

Therefore, whilst it has always been important for retailers to provide comprehensive statements to avoid negative publicity and to verify that modern slavery does not exist in their supply chain, it looks like they may soon be under a legal obligation to provide more comprehensive information. This, in turn, will force them to take more comprehensive steps to shine a light through their supply chain.

What should online retailers being doing now?

In light of the upcoming action and potential naming and shaming, eCommerce companies should be doing all they can to put in place comprehensive modern slavery statements.

Although the act does not currently state what needs to be included in the statement, the guidance provides more detail as to what should be included.

In particular the statement should include information about:

  • The organisational structure of the business and supply chains
  • Policies in relation to slavery and human trafficking
  • Anti-slavery due diligence processes in business and supply chains
  • Effectiveness in combatting slavery and trafficking measured against performance indicators
  • Relevant staff training

Of course it goes without saying that the statement should reflect steps actually taken in practice and not just steps that an online retailer aspires to take. Therefore retailers need to ensure that the processes and training set out above are actually carried out.

Therefore it is imperative that all eCommerce businesses should at a minimum be doing the following:

  • Implement policies aimed at combatting modern slavery such as supplier codes of conduct as part of procurement policies;
  • Implement appropriate vendor due diligence when on-boarding vendors and put in place a process for regularly auditing vendors and others in the supplier chain. Retailers should also ensure their vendor contracts contain robust anti-slavery provisions;
  • Implement grievance and/or whistleblowing procedures for all personnel (including supplier personnel) to encourage incidents of modern slavery to be reported;
  • Ensure that all employees receive appropriate training and ensure training is sufficiently targeted in order to have the intended impact, for example for employees who may encounter victims directly;
  • Set achievable targets to address modern slavery such as training targets to ensure staff engagement or audit targets to ensure supply chain vendors remain under scrutiny; and
  • Think carefully about the impact of their own business practices on their own supply chain and whether certain measures can be taken to avoid suppliers resorting to practices akin to modern slavery in order to meet client demands (including around cost and timing).