Big Business and the Modern Slavery Act
With an estimated 30 million slaves around the world, the UK’s Modern Slavery Act passed earlier this year is a welcome piece of legislation. Heralded as the first of its kind in Europe and one of the first in the world, the new law significantly enhances the support and protection of victims, metes out severe punishments and provides greater law enforcement tools to those on the front line.
Also part of the Act is a requirement that companies above a certain size must disclose the steps they have taken to eradicate slavery from their supply chains and business operations. Such reports must be approved by the board and signed by a director, ensuring accountability.
No sooner had the ink dried on the statute than concerns were voiced. While the government has made it clear that large companies will be required to report, possibly as early October 2015, they have yet to clarify what they mean by large.
Human rights campaigners have put the champagne back on ice while the government decides between four different turnover thresholds to define ‘large’, ranging from £36m to £1bn.
When it comes to doing the right thing, surely size shouldn’t matter? The Modern Slavery Act should not become a triumph of legislative loopholes over good corporate governance, responsibility and leadership.
While no business sets out to incorporate slavery into its operations, it would be a brave CEO who would say with certainty that there was no forced labour in anywhere in its supply chain.
Companies are already carrying out due diligence on their supply chains in order to be properly protected from corruption risks and have adequate procedures in place for the UK Bribery Act. There is also a growing recognition that operations need to be scrutinised to ensure the integrity of IT systems and to minimise the threat to cyber security. Adding slavery and human trafficking should not be too burdensome.
Under the new EU Directive, businesses with over 500 employees will be required to report on a range of non-financial issues including their human rights impact. Quoted companies are already required to report on their human rights performance under the 2006 Companies Act. In other words, for a significant number of companies such reporting should already be on the ‘to do’ list.
Businesses increasingly recognise that reputations are damaged not just from negative human rights incidents, but also from poor conduct in other areas such as corruption, price fixing, low wages or working conditions.
Rather than looking at the legislation as a stick and hoping to fall below the government’s size threshold, board directors should see the anti-slavery reporting guidelines as an opportunity to enhance reputation and protect costs: prevention is always cheaper than the cure.