27th September 2018

Modern slavery: Why we’re looking at corporate risk the wrong way

Modern slavery is a pernicious and hidden crime. We’re only just beginning to understand the level of risk it poses to UK supply chains. But as our knowledge increases, corporate response to the Modern Slavery Act remains lacklustre. With many organisations in paralysis, the arguments for and against taking action can be distilled into three words: attitude to risk.

Risk to reputation

Most, if not all, major supply chains have weaknesses that can be infiltrated by unethical operators. But only the bravest CEO would publicly admit this. With an eye on share price, boardrooms see this kind of admission as a PR disaster waiting to happen.

You can understand the thinking. If no one else is admitting to risk, why should we? Better not to mention the toxic elephant in the room until everyone does.

But if this is issue is not even being discussed internally, it can lead to more damaging behaviours.

Hiding risk

Since the passing of the UK Modern Slavery Act, the majority of modern slavery statements have been light on detail. Reports have focused on policies, the effect of which can’t be measured, rather than mapping out human rights risks, as recommended by government guidance.

An even more worrying trend has emerged: some organisations are retrospectively watering down already published statements to remove any mention of risk at all. We can only speculate on the reasons for this. Was it discomfort that their statements revealed more than those of competitors? Was it fear that that the statement would be used as evidence against them? Or fear that they would be attacked by NGOs or the media?

But if industry continues this general whitewashing of risk, the problem will continue to fester. 

Wilful Ignorance of risk

A director, referring to his consultancy’s overseas operations, recently joked “We’re not looking too closely. Who knows what we’ll find?” It was a tacit admission that, in certain regions, labour agencies will continue to exploit workers. As they can do this with legal impunity, it is safer to remain disengaged.

If multinationals continue this behaviour in countries of weak jurisdiction, the time-worn narrative “this is how they do things over here” will continue. Corporations might make cosmetic changes to appease NGOs, but privately calculate that spending any more would be futile, even risky – as they could be undercut and replaced by less ethical operators.

With this kind of inertia the safety and wellbeing of thousands –or hundreds of thousands - of workers remains on hold.

Sanitising risk

Auditing is seen as a way of raising standards, and even managing risk, but research shows that it is typically ineffective in spotting slavery. There are also weaknesses in commercial models: because audit companies are often financially dependent on their clients, they may be less incentivised to report problems to the police or enforcement bodies for fear of losing business. Clients may also have conflicting priorities: rather than looking for problems, their ultimate goal could be ‘to pass the audit’, which is not the same thing.

Under this kind of system, vital information and data remain hidden. Even if, in the best case scenario, criminals are disrupted, they will be able to move quietly elsewhere.

Misunderstanding risk

Misunderstanding of the nature of modern slavery has led to confusion in many organisations. There is a belief that most victims are illegal immigrants; or that the problem is only prevalent in informal sectors. As a result, a standard business response has been to conflate anti-slavery activities with immigration checks.

But many victims have a legitimate employment status, and, last year, the largest recorded nationality of modern slavery victims in the UK was British.

The situation is already complex, but could worsen after Brexit, as many European Union workers in major supply chains will lose their automatic right to work status. Suddenly requiring visas, they could become more vulnerable to exploitation.

Passing on risk

In response to the Modern Slavery Act, some large companies have been defaulting to pushing risk entirely onto their less well resourced suppliers. Legalistic documents have been issued, asking companies to confirm that they have no slavery in their supply chains, with the threat of contracts being terminated if companies do not sign.

As slavery is in most supply chains, this is a redundant and time-wasting exercise. It creates only the illusion of security, with suppliers incentivised to hide rather than air problems.

The human risk

If all these activities are designed to save corporate scalps, they are myopic, short-term and belong in another century. They also gloss over the risk to human life, ignoring the entrapment, the squalid conditions, and misery endured by millions around the world.

Most people would be horrified to think that their day to day decisions could result in such inhumanity. But then again, most people operate in corporate eco-systems that do not reveal the full consequences of their actions.

As modern slavery becomes better understood, investors, lawyers, NGOs and enforcement bodies will be demanding greater transparency of companies. It will not be a question of if, but when and how action is taken. Those organisations that move early will create more resilient businesses. In the future, the far greater risk lies with those companies that hide or ignore risks, taking no action at all.

Emma is author of the latest CIOB report: Construction and the Modern Slavery Act - find out more about the report by clicking here.