71 percent of companies believe there is a likelihood of modern slavery occurring at some point within their supply chains. But how are companies addressing this risk? We draw on the findings of a recent study to highlight the key factors that enable an effective response.
Added on 01 August 2016 by Matthew Gitsham,Nadine Page,Quintin Lake
In October 2015, complying with the UK Modern Slavery Act became a legal requirement for at least 17,000 companies in the UK and around the world.
Modern slavery is a broad term that encompasses slavery, servitude, forced and compulsory labour and human trafficking. The International Labour Organization (ILO) estimates that globally there are 21 million victims of forced labour, which it defines as all work or service that is extracted from any person under the menace of any penalty and for which said person has not offered him/ herself voluntarily¹. Of these, it estimates that 10.7 million are victims of labor exploitation in private enterprise in the agriculture, manufacturing, construction, mining and utilities sectors, generating US$43.4 billion in illegal profits per year².
The issue of modern slavery presents a significant strategic dilemma for companies in a wide range of sectors, particularly with regard to their supply chain strategies. Companies operating in an increasingly competitive global market – with complex supply chains across different sectors, countries and business models – face multiple risks and challenges. They face commercial risks in bringing products to market at agreed quality, costs and timeframes, with the ability to respond quickly to changes in demand and the market. For this they rely on effective and reliable global supply chains.
However, our research found widespread agreement that modern slavery is endemic. 71% of companies who took part in the research believed there is a likelihood of modern slavery occurring at some stage in their supply chains – particularly in high-risk countries or sectors and at the lower stages of the chain.
The complexity and demands of supply chains, together with the often hidden nature of modern slavery, makes it difficult to identify and address. This presents reputational and strategic risks for the business, not to mention the human rights risks to workers themselves.
From our interviews and survey with companies, we found that modern slavery is widely perceived to be present in supply chains and that there are a number of important drivers and catalysts prompting companies to get engaged. Companies perceive modern slavery in different ways and are undertaking a range of practices and activities, depending on their level of experience and where they are in their journey. There are a number of enabling factors that enhance their ability to take action.
Risk to their reputations and brands was agreed by almost all of the retailers and suppliers we surveyed as the main factor driving them to address modern slavery, though companies interviewed all felt that addressing risk to workers was significant too. Most companies we interviewed felt that mitigating risks to workers was ultimately mitigating risk to the business.
There are a significant number of both drivers for and barriers to companies working towards the elimination of modern slavery in their supply chain. This can create tensions in the business, with factors such as resources, commercial priorities, cost and buyer practices all pushing back against corporate values, the risks to workers and even the reputational risk brought about by NGO and media pressure.
The full 360º Ashridge Journal article focuses on some of the key implications for companies in terms of leadership, key skills and competencies, and creating a strategic, aligned response.
What do companies need to do?
Boards and senior leaders need to understand how modern slavery could be a risk for their organization, as well as the complexity of the issues and their role in driving a strategic response.
Get the right training on modern slavery issues and what a good response looks like. The Ethical Trading Initiative (www.ethicaltrade.org), Stronger Together Initiative (www.stronger2gether.org), and Gangmasters Licencing Authority (www.gla.gov.uk) are all great to start with.
The organization’s response needs to be aligned throughout. Build a team of leaders across procurement, HR, legal, risk and commercial to ensure that priorities and KPIs are not conflicting.
The skills needed to manage modern slavery and other CSR issues are changing. How is the organization attracting, retaining, and training key individuals?
Individuals whose roles directly relate to the organization’s modern slavery response (CSR, commercial, procurement, HR, legal and risk) all need to develop their skills – be it greater commercial awareness or the ‘soft skills’ required to build relationships of trust and transparency with suppliers.
Relationships and trust with suppliers are essential factors. Companies need to take a long-term approach, and work with suppliers to address modern slavery challenges.
Mindsets need to shift in relation to collaboration and organizations need to actively build relationships and responses with key stakeholders, from industry peers to governments and NGOs.
Building on this foundation, the next phase of the research, being conducted this year, will explore how the UK Modern Slavery Act has so far shaped corporate activities. Specifically, it will further explore the role of leadership in building an effective response.
For further detail see the full article in the Spring 2016 360º Ashridge Journal.
See full article
A full copy of the report can be downloaded from www.ashridge.org.uk/modernslavery