The Modern Slavery Act came into force on 31st July, and court cases are already beginning to hit the headlines as individuals are found guilty of serious ethical offences. Large UK companies will soon face new legislation as well, with employers required to produce modern slavery statements from October. In this blog, we’ve considered the biggest sources of supply chain risk, and the potential consequences for companies that fail to comply with the Modern Slavery Act.
Who will be affected?
The Modern Slavery Act will affect any major companies that have a significant presence in the UK. For instance, many garment retailers will need to produce modern slavery statements, as well as major manufacturers and distributors. The new legislation can even apply to farms, ports and freight companies, far down the retail supply chain.
In the same light, large companies will be expected to consider every tier of the supply chain when producing their annual statement in accordance with the Modern Slavery Act. Many companies will routinely audit and monitor their primary suppliers, but secondary supply chain risk is a real possibility for those that do not look beyond this first level.
What penalties will individuals face?
An Argyll hotel owner was recently jailed for three years after being found guilty of modern slavery. Shamsul Arefin had trafficked workers from Bangladesh and forced them into conditions of modern day slavery, demanding large financial deposits, cutting their salary and forcing them to work excessively long hours in poor conditions.
How are victims of modern slavery fighting back?
At the other end of the UK, six Lithuanian migrants trafficked to work on egg farms in Kent are suing a gangmaster operation and its directors. This is thought to be the first case of a UK company being taken to court for claims relating to modern slavery. The victims allegedly suffered violence, having pay withheld, and being denied sleep, toilet breaks and even food.
A couple who supplied workers to a major sportswear retailer in Derbyshire have also been charged with modern slavery offences. They are due at Nottingham Magistrates' Court next month to face charges of knowingly requiring another person to perform forced or compulsory labour.
Why will clause 54 make a difference?
In both of the cases above, major retailers were found to be unwittingly supporting and indirectly profiting from conditions of modern day slavery.
A Guardian investigation in 2012 revealed that the Lithuanian trafficking victims were working in supply chains producing premium free range eggs for major supermarkets. The supermarkets’ suppliers now claim that they immediately stopped using the source following the police raid, and have since introduced new processes and audits to eradicate this supply chain risk.
Similarly, the sportswear retailer is thought to employ thousands of individuals at its Derbyshire headquarters, including many eastern Europeans recruited through a complex labour agency supply chain. The company has not been accused of any wrongdoing in relation to this case. However, once corporate obligations come into force under the Modern Slavery Act in October, pressure could build on retail companies to take more responsibility for such scenarios.
How will companies suffer?
New legal obligations will allow unethical manufacturers to be prosecuted, both by the UK government and by customers voting with their feet. In fact, Mike Flanagan recently told Just Style that public opinion would still matter more than legal niceties. If a company’s public reputation becomes badly damaged, they may lose their customer base and see profits take a big hit.
Segura’s software platform can help retailers to protect their brand reputation. We provide an ordering framework which makes it possible to trace orders through the secondary supply chain, even with complex sourcing and subcontracting practices in play. As a result, you can see exactly where orders have come from, and get real time alerts to support supply chain risk management.
