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How to Ensure Your Supply Chain Is Ethical - Fleximize

How to Ensure Your Supply Chain Is Ethical

Darren Hockley of DeltaNet talks us through how UK SMEs can ensure their supply chain is ethical, including potential red flags to look out for and a supplier checklist to bear in mind

By Darren Hockley

In 2015 the UK introduced a globally leading piece of legislation, The Modern Slavery Act. The Act combined previous slavery and trafficking laws and was intended to tackle the growing problem of modern slavery, an issue so far-reaching that The International Labour Organisation (ILO) estimates the number of modern slaves across the globe is near 25 million (13,000 in the UK alone).

As well as measures for managing modern slavery, Section 54 of the Act decreed that all companies with an annual turnover of over £36 million must release Modern Slavery Transparency Statements. These statements are annual accounts of the steps they have taken to prevent modern slavery and, under the Act, must be released by companies even if they have taken no action against it – this must be publicly declared.

Whilst certainly a step in the right direction in the UK’s fight against human exploitation, section 54 of the Act is not concerned with small and medium sized businesses. Nevertheless, UK SMEs should certainly take note. Not only do many SMEs make up part of the supply chain for large companies (and hence may be obliged to report on how they operate with respect to modern slavery in tender documents), but being able to demonstrate ethical work practices might well provide SMEs with a competitive advantage.

As public awareness of modern slavery grows, remaining diligent about ethical supply chain practices will boost the credibility of small and medium sized organisations and set them in good stead for any future legislative requirements. Not to mention, being linked to human trafficking and labour exploitation is extremely damaging for organisations of any size, and may ultimately affect their market position and, indeed, their profit margins.

What should SMEs look out for?

Although modern slavery takes several forms, SMEs will usually be concerned about two kinds existing in their supply chain: human trafficking and labour exploitation.

1. Human trafficking is when people are tricked, threatened, or coerced into situations that cause them to be exploited. They can be trafficked in their own country or abroad, so it’s important not to assume someone isn’t a victim just because they are the same nationality as you.

2. Labour exploitation is when people are forced to work for free, for low wages, or for a wage that is kept by their ‘owner’ or ‘employer’. This form of exploitation is more widespread than you might think – and it definitely exists within the UK.

Victims of labour exploitation are often housed in squalid, unsanitary, and overcrowded accommodation. They can be constantly moved between ‘jobs’ and may be forced to work long hours or double shifts. They can be threatened daily with verbal or physical abuse and regularly have their basic human and workers’ rights violated.

Red flags for vulnerable workers

Since supply chains can be complex, and often cross international borders, it’s important that supply chain managers and buyers are able to identify any high-risks that exist in their organisation’s supply chain. These red flags highlight the areas most vulnerable to slavery and human trafficking and, as such, should be subject to further investigation and due diligence. Red flags can include:

1. The location of the suppliers – the Global Slavery Index identifies certain regions and countries as having an increased risk of labour exploitation. These include India, China, Thailand, and Bangladesh. If part of your supply chain involves these countries, it's important to perform your due diligence to ensure that practices comply with the Modern Slavery Act. 

2. Labour hire practices – a variety of red flag practices can occur throughout the labour hire process, i.e. during recruitment, employment, and contract termination. These include:

3. Industry Sector – some industries are considered more at risk than others as they operate in countries that have minimal labour laws or because the work is seasonal and therefore temporary. These industries include agriculture, clothing and footwear manufacture, fishing, construction, retail, beauty and wellbeing, and hospitality.

4. Publicized labour standard concerns – an organisation which has previously been linked to unethical labour practices should always be considered high risk and investigated further. 

Supplier checklist

SMEs might decide to use self-assessment questionnaires to gather information from potential suppliers in relation to any red flags, but they should also check the following:

In addition to the above, be sure to study the value and length of the proposed contract – the higher the contract value and the longer the supplier relationship, the higher the risk. It is best practice to collate all this information to determine whether the supplier is high, medium, or low risk. SMEs may also find it helpful to implement a scoring system to ascertain risk level.

Once the risk level of the supplier has been identified and mitigated, a decision can be made about whether the supplier meets your ethical standards and whether or not to enter into a supplier agreement with them.

About the Author

Darren Hockley is the managing director of eLearning provider DeltaNet International. The company specializes in the development of engaging compliance and health and safety eLearning courses designed to mitigate risks and improve employee performance. Their in-house developers use a mixture of interactive video and 2D/3D animation to bring important legislation and best working practices to life.

Supplier checklist

SMEs might decide to use self-assessment questionnaires to gather information from potential suppliers in relation to any red flags, but they should also check the following:

In addition to the above, be sure to study the value and length of the proposed contract – the higher the contract value and the longer the supplier relationship, the higher the risk. It is best practice to collate all this information to determine whether the supplier is high, medium, or low risk. SMEs may also find it helpful to implement a scoring system to ascertain risk level.

Once the risk level of the supplier has been identified and mitigated, a decision can be made about whether the supplier meets your ethical standards and whether or not to enter into a supplier agreement with them.