Are you certain that your supply chain is free from slavery and human trafficking?

Know Your Supply Chain

According to research by The Guardian, Vauxhall, BMW and Audi are currently investigating their paint supply chains in India over concerns that child labour is being used to mine Mica. Mica is widely used across industry including the cosmetics industry, but in these particular cases it is being used to make the sparkly paint used on millions of cars worldwide.

There are a number of official mines which are monitored by the Indian government for ethical compliance with slavery and environmental laws but it is believed that there could be as many as 20,000 children some as young as 10 working in unmonitored illegal mines.

Globally there are an estimated 45.8* million victims of modern slavery.

These car manufacturers are now investigating their supply chains to determine which mines their paint producers are purchasing their mica from. No mean feat given that there will be any number of organisations in that supply chain and the mica can be mixed up with other materials in colour pigments.

Mica is also used in the cosmetics industry to add the shimmer to blusher, lipstick and foundation. L’oreal and Estee Lauder have all raised concerns about the use of child labour in mica mining in India. Lush is another firm committed to eradicating mica from its supply chain but has found it incredibly difficult. Some of these companies have utilized the work of the National Resources Stewardship Circle to identify child friendly villages.

Patio Stones, chocolate, fashion industry textile mills, tea, tobacco are other items identified on the list of child labour suspects. Gold mines are also associated with Human Trafficking.

The countries with the highest estimated prevalence of modern slavery by the proportion of their population are North Korea, Uzbekistan, Cambodia, India, and Qatar according to the Global Slavery Index 2016. The highest absolute numbers of people in modern slavery are India, China, Pakistan, Bangladesh, and Uzbekistan. These 5 countries account for over half of the estimated global number of people enslaved.

The countries with the lowest estimated prevalence of modern slavery by the proportion of their population are Luxembourg, Ireland, Norway, Denmark, Switzerland, Austria, Sweden and Belgium, the United States and Canada, and Australia and New Zealand.

Forced labour is not just limited to these areas however and the International Labour Organisation (ILO)highlights the Asia Pacific area as well as Developed Areas & EU as areas where forced labour generates the greatest amount of illicit profits. The ILO has useful resources on its website including a couple of ‘apps‘ to help organisations avoid slave labour and child labour

With the economic slowdown following Brexit, organisations may be looking to venture into new business partnerships, exporting to new jurisdictions, or simply reviewing their supply chain to reduce costs. For all these reasons organisations should review their procedures. It is not that organisations should refrain from operating in these high risk countries, but they should do so having appropriately assessed and managed the risks.

Clearly organisations do not want to be associated with the issue of child or forced labour. As well as striving to be ethical businesses, there are brand and reputational risks at play here.

For UK businesses there is also a legal incentive to prevent such issues under the Modern Slavery Act 2015 (MSA). This Act mainly applies only to organisations with a turnover exceeding £36m but we would advocate that all ethical businesses should adopt the government guidance to identify and eradicate human trafficking and slavery across its organisation and supply chain. Doing so will provide a clear commitment to staff, customers and suppliers that you are operating an ethical business.

Organisations should also consider the requirements of The UK Bribery Act 2010 and money laundering risks as these will often go hand in hand with slave labour and Human Trafficking (See our separate guidance).

Under Part 6 Section 54 of the MSA 2015 Commercial Organisations have a duty to publish an annual slavery and human trafficking statement signed by the Board. The statement should set out the steps taken by the organization to ensure slavery and human trafficking is not taking place in any part of its own business or any of its supply chains. The statement should include:

  • Organisational structure, its business and its supply chains;
  • Its policies in relation to slavery and human trafficking;
  • Its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
  • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place and the steps taken to manage the risks;
  • Performance measures demonstrating the organisation’s effectiveness in ensuring slavery and human trafficking is not taking place in business or supply chain;
  • Training available to staff on slavery and human trafficking.

Under the Act the Secretary of state can bring an injunction to enforce the duties placed on organisations. A failure to comply with such an injunction would then be contempt of court punishable by an unlimited fine.

The Act came into force in October 2015 but it is only since 31 March 2016 that the first organisations should have produced their statements. An organisation’s reporting date is determined by its financial accounting year. The first reporting date will fall on the first financial accounting year ending after 30 March 2016. For example a firm’s whose accounting period ends on 31 December each year, will need to produce their first statement as soon as possible after the 31 December 2016. A firm whose financial year ends on 31 March should be making their first statement as soon as possible now as their first reporting date under the Act was 31 March 2016. Those statements however should cover your activity over the preceding 12 months. You therefore need to be acting now.

Statements should be made public and there is a duty to have the statement published in a prominent place on an organisation’s website.

Under part 5 section 52 of the Act public authorities which includes district, borough and county councils have a duty to notify the secretary of state about suspected victims of slavery or human trafficking.

Under part 4 section 43 of the Act public authorities which includes district, borough and county councils and health authority’s have a duty to cooperate with the independent anti-slavery commissioner.

The government has issued guidance on transparency in supply chains. We have updated our guide and resources to reflect that guidance and provide you with the practical tools to implement it within your organisation. In particular we have updated our:

  • Policy guidance and template Fraud, Bribery and Corruption, and Code of Conduct Policies;
  • Due diligence guidance;
  • Risk assessment tools and guidance including our Taxonomy of fraud;
  • Executive Support guidance;
  • Staff Training templates;
  • Key messages for staff and suppliers (handouts)
  • An MSA Statement example/template;
  • Tools for internal audit to assess the effectiveness of your anti-slavery and human trafficking policy;
  • Template clauses for you to include in contracts and SLAs

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*Source – Global Slavery Index 2016

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