The recent Court of Appeal decision concerning forced Uyghur labour (see our summary here) highlights the importance for businesses of identifying exploitation and abuse in their supply chains. The case demonstrates that forced labour in the supply chain isn't only an ethical and reputational issue, but a concrete legal risk. But it's increasingly challenging for businesses to prioritise fair labour standards in their suppliers. Increases in basic trading costs (as well as the cost of living crisis hitting consumers' pockets) have put pressure on many retailers to use cheaper suppliers - while those same factors make abuse and exploitation more likely to occur. Amid these competing pressures, how can businesses identify and address the risk of exploitation?
There's no one-size-fits-all model, but businesses should ensure that they have taken the following basic steps.
- Sourcing information: The usual advice is to conduct a risk assessment first. But in practice it's very difficult to assess your level of risk accurately without having detailed knowledge of what forms abuse and exploitation may take, which locations have a high incidence of exploitative or abusive practices, what indicators to look out for, and so on. This is where businesses need to get specialist input. There is a wealth of information published by NGOs as well as statutory guidance published by the Home Office which can serve as a starting point, but many businesses will also need specialist legal advice. Another option is to use one of the burgeoning number of electronic platforms which help identify risks and monitor suppliers.
- Risk assessment: Armed with this information, a detailed risk assessment of the business' supply chain is the next step. This will usually include looking at factors such as:
- Location of suppliers, their factories and business operations, and/or their raw materials and whether they are located in jurisdictions which are able and willing to tackle exploitation.
- Type of labour used: highly-skilled labour is typically less likely to be associated with exploitation.
- Employment model: some practices such as use of agency workers (particularly through multiple intermediaries), self-employed contractors and overseas recruitment are often linked with exploitation.
- Industry and product type: some sectors and products have been frequently linked to exploitation and so merit especially close scrutiny.
- Due diligence: It's important to look at prior media coverage of suppliers to ascertain if they have been linked with abusive practices in the past.
- Risk mitigation: whether suppliers already have practices in place to reduce risks (e.g. regular social audits).
It's important not to be complacent or assume that your business is immune from these risks. Most (if not all) businesses will have some risk of exploitation in their supply chains.
Having conducted the risk assessment, it's usually a good idea to categorise suppliers into high, medium and low risk and prioritise addressing the high-risk relationships.
3. Take action based on risk assessment: The appropriate action will be highly fact-specific, but may include: reporting the supplier to regulators, terminating the supply contract, requiring remedial action as a condition of maintaining the relationship or imposing penalties (if provided for under the contract). Again, it's likely that legal advice will be needed at this stage.
4. Contracts: Businesses should also ensure that their supplier contracts address modern slavery risks, including:
- setting minimum labour standards
- disclosure, inspection and reporting obligations
- ability to terminate for breach
- obligations on the supplier to take remedial action where abuse or exploitation are found to have taken place
- a requirement on suppliers to mirror these terms in their own contracts with suppliers.
5. Ongoing monitoring: The risk assessment shouldn't be a one-off exercise, but instead be updated regularly to determine whether further action is needed. A senior manager in the organisation should have responsibility for this and for reporting to the Board regularly on supply chain risks.
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