Risk management must improve as some slavery reporting falls short

slave-labour

Companies must step up their risk management activities as reporting requirements around the new Modern Slavery Act come into force this year, with lobby groups claiming some of those already reporting are falling short.

Those companies reporting financial results from the end of March will have six months to issue statements under the new laws, which came into force last October and affect companies with more than £36m in group turnover and operations in the UK.

Some companies have already published statements voluntarily but analysis by one lobby group found many fell short.

The Business and Human Rights Resource Centre analysis of the 75 statements it holds on its public registry found only 22 met the requirement to be both signed by a director and available from the company's website home page.

Marilyn Croser, director of corporate accountability group Core Coalition, said while it hopes its guidance will help address the problem, if a pattern of non-compliance emerged the government must take enforcement action against companies.

"While the companies that have published reports under the Act are to be commended as early movers, it's clear that there is widespread misunderstanding among business about what's required," Croser said.

Institute of Risk Management CEO Ian Livsey said it would take time for best practice to emerge but he was encouraging firms to avoid generalities and be specific about their risk management plans, then put those plans into action.

"They're quite brief at the minute but I'm not surprised at that, because these are the ones that are doing it on a voluntary basis," Livsey told Post.

"The thing that worries me is that not many of these statements describe the process of risk assessment that they're doing."

He said the recent case of Nestlé and Jacobs Douwe Egberts, where the companies may have inadvertently used slave labour due to the source of unknown beans ending up in their coffee, highlighted the challenges faced on this issue.

"You see that people have got problems in their supply chain and I just see it becoming increasingly something that people will have to worry about in terms of resilience and reputational risk," he said.

"People are more willing to understand that you're putting it right; transparency is the key phrase here. Other sectors will need to realise that they have these kind of issues. My feeling is that exploitation does tend to happen more than we think."

Tom Stocker, partner at Pinsent Masons, said while the legislation around these statements had very few prescriptive elements, companies had to state what they doing in managing this risk.

"If you're not doing anything in this area then you're not going to be able to publish a terribly impressive statement," Stocker said.

"Lots of companies are looking at how can we start getting through some of the easy wins, so training staff and letting them know about the legislation and red flags, carrying out some preliminary due diligence on their supply chains, so things like issuing questionnaires.

"Companies are starting to put those processes in place with the aim of being able to issue a positive statement in six months' time; what you don't want to be is a company that finds they need to publish a statement come the year end and you've actually done nothing."

Forensic director at KPMG Nicola Cobb said some companies would be looking to see what others do before making moves themselves and for many it was a new issue.

"They've never thought about slavery as an issue for many, because they're not in the consumer goods space, which is historically where people think slavery might occur, so they really are doing this for the very first time," Cobb said.

She said mapping exact supply chains was a challenge for firms across the board.

"Of all of the companies I'm talking to, this is the bit they're struggling with, what do they see as high risk, what do they see as low risk, do they have enough intelligence," Cobb said.

"It's not just for the supplier that they're working with but all the way down the chain, do they really know what's happening and I guess, in a lot of cases, the answer is they don't know."

Livsey said aside from the ethical problem of having slavery in a supply chain, companies exposed to this would also face reputational and resilience risks as a result so it was important for companies to start working on it now.

"You've got the long-term viability statement issues, they're all struggling with cyber risk in our experience, but this (anti-slavery) is coming along," he said.

"I look forward in time and I don't see there being any less emphasis on modern day slavery in the supply chain than there is today, there's going to be more."

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