Home – Know Your Vendors: Risks of Modern Slavery Demand Due Diligence

Know Your Vendors: Risks of Modern Slavery Demand Due Diligence

Posted on 02-24-2016 by Ulyana Androsova

 The passage of the UK Modern Slavery Act last October means that a large number of companies must now attest to the risk mitigation processes used to keep forced labor out of their supply chains. The annual Slavery and Human Trafficking Statement is required of any company or subsidiary that operates, in whole or in part, in the UK and has a minimum annual turnover, after taxes, of approximately $51 million at current exchange rates. In addition, these statements must be approved by each company’s board of directors and signed by a director.

 A Mandate to Eliminate Modern Slavery

While the Modern Slavery Act is the newest weapon in the arsenal to combat forced labor and human trafficking, it is not the only one. Legislators in California passed the California Transparency in Supply Chains Act in 2010, and the Act went into effect on January 1, 2012, requiring all retailers and manufacturers that conduct business in California—and that have annual global revenues in excess of $100 million—make a public disclosure about efforts to eliminate forced labor and human trafficking from their supply chains. The Act states that its purpose is “to educate consumers on how to purchase goods produced by companies that responsibly manage their supply chains, and, thereby, to improve the lives of victims of slavery and human trafficking.” Human rights advocates and NGOs focused on eradicating modern slavery believe that the Act incentivizes companies to become leaders in the fight against forced labor and human trafficking because they might otherwise lose public confidence and risk financial losses as a result. Meanwhile, no fewer than 91 bills addressing the issues of modern slavery and human trafficking are making their way through Congress, and other nations are sure to follow suit. Moreover, other organizations, like CNN’s Freedom Project, are working to raise public awareness on the issue and bring about an end to unethical practices.

 What Does a Greater Focus on Modern Slavery Mean to You?

It may be time to re-evaluate your due-diligence process, not only to improve your ability to comply with requirements to produce such public statements, but to also mitigate reputational and financial risks arising from greater public awareness of forced labor and human trafficking. It’s the public, not just government agencies, that is demanding transparency—particularly among Gen X and Millennial consumers. Here are 5 steps you can take to improve your ability to comply with laws and meet public expectations.

  1. Expand the scope of your due diligence to go beyond Tier 1 members of your supply chain. Third-party providers, subcontractors and more must be scrutinized to get to the bottom of modern slavery risks. This is particularly true where country, economic, political or industry factors increase the potential for forced labor and human trafficking, such as poverty-prone regions in South or Central America, hot zones of political unrest in the Balkans or the Middle East, or industries ranging from agriculture to extractives.
  2. Determine the red flags that you need to watch for and implement an on-going monitoring process to stay alert to forced labor and human trafficking risks.
  3. Establish a protocol for on-boarding third parties that provides clear expectations for ethical sourcing and includes thorough background checks and due diligence.
  4. Implement training requirements and policies to ensure internal employees and third-parties know the signs of modern slavery and the procedures for reporting red flags when they appear.
  5. Keep key stakeholders informed of risks and engage your communications team in helping to highlight your efforts to eradicate modern slavery in your business and supply chain.

 

You can learn more about the issues of forced labor and human trafficking by reading our eBook, Not My Cup of Tea, which takes a closer look at the problem as it relates to the second-most popular beverage in the world. Download it today.

 3 Ways to Apply This Information Now

  1. Check out this blog post about sweatshop conditions in the Fashion Industry.
  2. Request a free trial of Lexis Diligence® to see how this tool empowers your supply chain transparency efforts.
  3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts. 

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