Leadership required to address the modern slavery challenge 

Addressing modern slavery is becoming a business-critical issue - for credibility with customers, investors, NGOs and the public - according to new research by Hult International Business School and The Ethical Trading Initiative (ETI). 77% of companies think there is a likelihood of modern slavery occurring in their supply chains, up from 71% last year, and it is perceived to be more widespread – in particular in the UK, and at the farthest reaches of the supply chain.

The Modern Slavery Act 2015 requires large firms who have operations in the UK to report on their efforts to ensure there is no slavery, forced labour or trafficking in their business or supply chains. All companies with global annual revenues of £36m or more have to produce an annual modern slavery statement which must be approved by the board of directors, and signed by a director or equivalent.

Reputational risk, resulting from public exposure to worker abuse found in the supply chain or company operations, was the biggest driver for company action on modern slavery, cited by 97% of companies participating in the research. The factors which underpin a company’s reputation such as the views of customers, investors, staff and the risk of litigation, have all significantly increased as drivers for action over the last year.

The research found that engagement of senior leaders is seen by all companies as crucial in driving effective responses and overcoming critical challenges, and most companies have made modern slavery training and awareness-raising for senior leaders a priority. 79% of companies cited senior leadership passion and engagement as a key driver of their modern slavery response. 

Modern slavery encompasses slavery, servitude, forced and compulsory labour, and human trafficking, and companies are increasingly scrutinising the practices of their recruitment and temporary or agency labour partners, among other key risk areas, as modern slavery is particularly prevalent where low-skilled, low-wage and seasonal labour are required. 

                                           
Key modern slavery risks that companies are focusing on 
For example, does a recruitment agency provide assurance that the appropriate checks have been made on the person they are supplying? Are wages being paid appropriately? Does the person have a right to work in the company? Has the person been required to pay a fee to gain employment?

The Modern Slavery Act is galvanising leadership action in progressive companies, and the research found that twice as many CEOs and other senior executives are actively engaging with addressing modern slavery since it came into force. 

Internally, senior leaders have a key role to play in formalizing objectives and KPIs, and ensuring that ownership and responsibility for the company’s modern slavery response is shared appropriately across the business. Most companies have prioritized training and awareness-raising for senior leaders because the board, CEO, and other executives are primarily responsible for signing off the company’s modern slavery statement, strategy, and budgets.

Cross-functional committees are one way that companies are increasing engagement and raising the level of awareness of modern slavery across the business, and their leadership impact is increased when chaired by the CEO. The complexity of the issue, and the steps required to address it, mean a company’s response needs to be strategic and managed across all aspects of its operations.

82% of companies believe that addressing human rights within their core business model is the most significant strategic indicator of corporate leadership on modern slavery. More advanced companies are starting to address ‘hidden’ costs such as the cost of recruitment in supply chain contracts, which contribute to modern slavery scenarios. Companies highlighted a strong need for industry or sector-led approaches, as many of these challenges need engagement from multiple stakeholders and industry leaders. 

This is where CEOs and other senior figures have a key role to play in engaging with external stakeholders, whether with industry peers, governments or NGOs. In many cases, they are using this external engagement to refine the company’s own strategy – i.e., what are others doing? Where can we lead? Where can we support? Leaders are driving the discussion on what can be done on a strategic, industry level to address modern slavery challenges.

Companies strongly believe effective engagement and action in partnership with governments, NGOs and charities, and other local stakeholders is critical for significant change, as many of the systemic, underlying challenges of modern slavery are linked to a lack of government policy or enforcement i.e. insufficient regulation or enforcement of standards to protect migrant workers.

Leading companies are making their supply chains and modern slavery approach more visible in public reporting because they see this as a crucial factor in addressing the issue. However, most companies say there is a real dilemma around greater transparency. Companies are extremely cautious about how much they should share publicly about the risk of modern slavery, or report on modern slavery cases found in their supply chains. They worry that campaigning NGOs and the media will exploit this to ‘name and shame’ the company publicly.


 



What is good practice in addressing modern slavery?



Ultimately, addressing the risk of modern slavery is about addressing the human rights risks to people – whether they are directly employed, agency workers, or working in the supply chain. Though there is much more work to do, it is encouraging to see the steps, leading businesses are taking, and as more good practice emerges it is hoped that more companies will be able to make faster progress for those who are most at risk.

Read more about the research, including full report and case studies, at www.ashridge.org.uk/modernslavery and www.ethicaltrade.org. 

Quintin Lake, Research Fellow, Hult International Business School



Further information
Quintin will be presenting at our upcoming webinar,Tackling modern slavery in supply chains which will take place on Wednesday 19 April. Find out more and register to attend this webinar (Free for CIRIA members) here.