Taking a stance against modern slavery is not just an ethical imperative, it is a legal requirement, and a regulatory and reputational risk for companies with complex supply chains.
That was the message from a webinar hosted by Airmic with speakers from STOP THE TRAFFIK, a UK charity non-profit campaigning organisation, dedicated to working with communities and companies against modern slavery, servitude, human trafficking and the exploitation of people.
“Businesses are increasingly being held accountable for what they may or may not know,” said Natalie Taplin, business engagement project manager, STOP THE TRAFFIK. “You have to look under the hood to see what’s hiding there. You can’t say you didn’t know any more.”
Organised crime groups in the UK are involved in people trafficking and modern slavery. Taplin noted UK police’s “Operation Fort,” resulting in the jailing of members of a Polish criminal gang in 2019, which had run a UK slavery network with around 400 victims, in part by infiltrating a recruitment company.
The topic has risen in prominence in the UK since the Modern Slavery Act of 2015 clamping down from a legal and compliance perspective.
“The UK government is currently looking into enhancing its reach, and what was voluntary compliance before for some aspects will soon become mandatory,” said Taplin. “It’s becoming a must have rather than a should do, as a result of legislative pushes.”
Share price impact and reputational damage can be at least as damaging as regulatory fines and legal costs for companies found to be failing in their duties.
During the pandemic, for example, clothing retailer Boohoo suffered a dip in its share price and reputational fallout after it was discovered that factory workers in Leicester were paid less than the national minimum wage. Workers were compelled to continue working during lockdown in unsafe conditions, an investigation found.
Yet many risk managers in the UK still believe their firms are insulated from human slavery risks, warned John Ludlow, Airmic board member and former CEO.
“As a leader within the business it’s your responsibility to ensure the risk to your company’s trusted reputation is being effectively managed,” warned John Ludlow, who is a founding trustee of the Anti Modern Slavery Alliance, a charity of which STOP THE TRAFFIK is a member.
“Slavery was always out there but it felt like it was the other side of a glass window; abuse of people was something you were aware of within the ecosystem, but it felt beyond our reach. That’s got to change,” said Ludlow, who previously served as a senior vice president for business reputation and responsibility and global head of risk in the leisure industry.
It is estimated that 40.3 million people globally are held in a form of modern slavery, and a third of the profits are generated in developed countries, including the UK. The average price to buy a human being is just $450, emphasised Rebekah Lisgarten, STOP THE TRAFFIK’s director of operations.
“What we see globally is that the price to buy a person is very low, and the money that can be made is very high, which is what makes this such a desirable crime. And so we reach the reason why modern slavery is so prevalent – there is so much money to be made from it,” Lisgarten said.
“The estimates start at $150bn in a year. To put this into perspective, it’s more than what Apple, Microsoft and many other companies made last year. It’s three times the amount that three of the largest financial institutions in the world make,” she added.
Companies exposure to modern slavery risk can be grouped by supply chain, in the workforce, and among customers, Taplin explained.
While supply chain risks are as obvious as they are opaque, certain sectors are more exposed by their workforce or customers than others – such as retailers and banks, respectively.
Recent incidents have resulted in major share price hits and damage to brands, as well as regulatory fines and legal costs. In March 2020 Australian bank WestPac faced a $1.3m fine to settle Filipino money laundering and child exploitation allegations.
In 2019 a hand-written note, complaining about Chinese workers’ human rights violations, was found in a Christmas card sold by UK supermarket chain Tesco. “Tesco’s share price slid 0.9% in the week before Christmas – not inconsequential,” Taplin added.
Risks are pervasive even within a typical office environment. Office touchpoints include commercial cleaning contracts, refurbishment and repair works, recycling and waste disposal, deliveries, security and porters.
“The important message is be aware that the risk is beyond your supply chain. Slavery is endemic in a lot of industries and it’s important to consider these touchpoints when drafting a modern slavery statement, that the risk is beyond the supply chain and your own operations,” Taplin said.
Pointing to the example of Operation Fort and the Polish criminal gang, she underlined the importance of safeguards for temporary workers and staff trained to spot signs of abuse.
In the case of Boohoo, Taplin noted that an investigation revealed that corporate governance weakness was to blame, with inadequate monitoring of working conditions. Some 93% of its suppliers showed incidents of non-compliance in the company’s audits, on issues from minimum wages to unauthorised contracting.
Best practices should focus on training for staff, building typologies from evidence-based analyses to map criminal activities and parties involved, and monitoring to detect and disrupt, Taplin suggested.
Businesses should undertake regular due diligence to check for abusive practices within supply chains and investments. Red flags for modern slavery should be integrated into anti-money laundering controls, she said, while collaboration and knowledge-sharing with law enforcement also need to improve.
“We want to highlight the importance of collaboration and transparency,” Taplin said. “The idea is not to hold information within a silo but to share information and work together because this is a problem on a massive scale.”
She used the example of hospitality brand Whitbread, which owns Premier Inn, as a positive case study.
“Whitbread has been working with STOP THE TRAFFIK for five years, and we’ve developed a relationship with them from service provider to trusted partner. One of their aims is that a company needs to do more than make a profit, it needs to be a force for good.”
Projects undertaken include supply chain mapping, the development of a handbook targeted at suppliers, training programmes for procurement, human resources, management and operations staff.
“The win for Whitbread in all for this is that they’re ahead of the curve; they’re demonstrating what its like to be an industry leader; they’re focused on human rights as a while; and they have visibility over their risk,” she said.
“By delving into these aspects and their supply chain, and by having us work with them to map beyond tier one, they know what the risk is and they won’t be caught off guard. Because they’re proactive they also have remediation and prevention processes,” Taplin added.
To listen to the webinar in full, click here.